A distribution channel structure relates to the system used by a company to deliver goods and products to consumers. There is a mix of options, from direct direct to indirect distribution channels. There are four important factors have been identified as those that make up the structure of a company’s distribution channel. These factors are: consumer habits, product characteristics, market and company factors.
Consumer behavior patterns are considered when deciding on the most effective means of distributing a product. This includes factors such as how geographically dispersed the consumer is, the speed of consumption of the product, and the frequency of purchase for the product. There are short distribution channels when consumption patterns are fast. The more direct distribution channels are more efficient to meet the intensity of consumer demand. Consumers who are geographically widely dispersed generally have indirect distribution channels. Broker and wholesale channels are most often used to offer products to retailers and ultimately to the consumer.
Product characteristics include factors such as unit value, product complexity, brand quality position among competitors, and product perishability. Naturally, products that are highly perishable require a more direct distribution channel to consumers. Short distribution channels exist when a product has a high-quality position among competitors, according to the researchers. A high unit value of product produces shorter distribution channels.
A focus on mass market distribution and the speed of change of distribution technologies are a couple of the important market factors that shape the company’s decisions about the distribution channel structure. For example, products seeking mass market distribution produce long distribution channels if demand for the product is high. In contrast, short distribution channels tend to exist when frequent technological changes required in the distribution process occur.
Company size, product order size, market share, promotion budget, and product ranges are some of the business factors that determine the most efficient design and mode of product delivery. For example, there are short distribution channels when the market share and promotion budget are low. A large company size or a wide variety of company product offerings tend to create short channels of distribution.