Friday 11 September 2015

How has channel of distribution changed over the past 10 years?

Channels of distribution are the businesses that a good or service goes through on its way from a producer to a consumer. This can happen in different ways. The classical channel of distribution involves a producer, who sells their goods to a wholesaler, who then sells them to one or more retailers, who then pass them on to the consumer. Another model skips the wholesaler, instead selling goods directly to the retailer, who sells them...

Channels of distribution are the businesses that a good or service goes through on its way from a producer to a consumer. This can happen in different ways. The classical channel of distribution involves a producer, who sells their goods to a wholesaler, who then sells them to one or more retailers, who then pass them on to the consumer. Another model skips the wholesaler, instead selling goods directly to the retailer, who sells them to the consumer. Each of these models involves a markup at every stage. Wholesalers charge retailers more than they paid for the goods, and retailers do the same when they sell to consumers. The biggest change in channels of distribution in the last decade is related, unsurprisingly, to the advent on online sales. Companies like Amazon, already very profitable as online retailers, have begun to directly market goods (Kindles, original streaming content, etc.) to consumers, who purchase them directly with no middle man. Other online retailers, like Gap, Nike, and many others directly market their items to consumers. People visit their websites and purchase the items, which are then shipped directly to them. Amazon's presence as an online retailer is remarkable, but the channel of distribution--producer, retailer, consumer--is not unlike older models. Just as revolutionary is the direct marketing of goods to consumers by producers using the internet.

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