A distribution channel is a procedure in a network chain that distributes products and services. A distribution channel may contain a producer, distributor, wholesaler, retailer, and consumer, depending on the distribution chain. Generally, items are delivered directly from the production to the wholesaler, who then delivers it to the retailer, who finally sells it to the final users.
However, in this day and age, items may not always pass via all distribution channels. For example, a producer may choose to sell directly to the final consumer rather than through distribution channels.
A Distribution Channel consists of the following components:
- Producer: Producers combine labor and capital to create goods and services for customers.
- Agent: Agents typically take payments and transfer title to goods and services as they move through distribution on behalf of the producer.
- Wholesaler: A person or company who sells big quantities of items to retailers at affordable costs.
- Retailer: A person or business that sells modest quantities of commodities to the general public for immediate use or consumption.
- End User: A person who purchases a product or service.