What Are the Characteristics of Marketing Channels?
Marketing channels, more commonly referred to as distribution channels, are networks of companies that move products from initial production through sale to the final customer. A traditional marketing channel includes a manufacturer that makes products, distributor that carries them to market and retailers that buy and hold inventory for consumers to purchase.
The distribution process is marked by transportation. Each time a hard good is sold to another trade buyer, it must be physically moved. Trucks, boats, planes and trains often are used in the transportation process. For large marketing channels, the ability to move products efficiently is critical to maintaining low operation costs and providing optimal profit margins.
As goods move through the marketing channel, they typically are held in distribution centers for indefinite periods of time. Manufacturers commonly have warehouses to store products once produced. When a wholesaler orders inventory, it is shipped to its distribution center. In some cases, retailers maintain their own distribution centers, so products may be moved directly there from the wholesaler. Even when products arrive at a retail location, they often go into a storage area prior to reaching the sales floor.
Inventory is the value of the physical goods owned by a company. As products move from one trade channel member to another, physical inventory exchanges hands. As manufacturers sell goods to distributors or retailers, they can remove inventory from their stock and accounting records while recording revenue. Wholesalers hold inventory until retailers purchase it. Retailers then maintain thresholds of inventory that meet customer demand. Maintaining efficient inventory management to reduce costs and avoid waste is an important operational process.
Supply chain management is a concept that evolved from logistics. It involves the collaborative efforts of marketing channel members to deliver the best value to the end customer. It includes logistics management, which is coordination of the flow of information as well as goods in a supply chain. Manufacturers, distributors and retailers often sync their computers to automate inventory replenishment and to send electronic invoices and information to buyers and sellers.