Channel selection refers to the process by which a business decides the most suitable path or route to move its products or services from the producer to the final consumer.
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Businesses consider several factors before selecting a distribution channel:
- Product Consideration
- Market Consideration
- Manufacturers Considerations
- Middle men Consideration
- Company size and resources
1.) Product Consideration:
- The nature and type of product influence the choice of channel.
- Perishable goods, fragile items, or products requiring after-sales service often use direct channels (e.g., dairy, electronics).
- Standardized and durable goods may go through longer or indirect channels (e.g., canned foods, furniture).
Example: A bakery delivering cakes directly to customers versus a furniture company using dealers.
2.) Market Consideration:
- Factors such as target customer location, size of the market, buying habits, and frequency of purchase play a major role.
- If customers are widely scattered, the business may use wholesalers or retailers.
- For industrial buyers or bulk purchasing, a direct channel is preferred.
Example: Consumer products use retailers; industrial equipment may be sold directly to factories.
3.) Manufacturer’s Consideration:
- The manufacturer’s own capability affects channel choice:
- Does the producer have the expertise, resources, or infrastructure to handle sales and distribution?
- Is there a need to control the brand image or customer experience?
Example: Large companies like Apple prefer tight control and may use company-owned outlets.
4.) Middlemen Consideration:
- The availability, efficiency, reputation, and cost of middlemen (like agents, wholesalers, or retailers) are crucial.
- If reliable and efficient middlemen are available, a business might prefer to distribute through them.
Example: Using experienced retail chains like Bhat-Bhateni or sales agents for rural distribution in Nepal.
5.) Company Size and Resources:
- Larger firms with more capital, skilled manpower, and distribution infrastructure can afford to use direct channels.
- Smaller companies with limited resources may rely on middlemen to reach the market efficiently.
Example: A startup may sell through Daraz or retailers, while Unilever can manage its own distribution system.