Learn It 15.3.2: Place

Channel Partners

While channels can be very complex, there is a common set of channel structures that can be identified in most transactions. Each channel structure includes different organizations. Generally, the organizations that collectively support the distribution channel are referred to as channel partners.

Marketing Channels for Consumer Products. Four marketing channels: Direct Channel, Retail Channel, Wholesale Channel, and Agent Channel. In the Direct Channel, producer flows to consumers, and consumers flow to producer. In the retail channel producer flows to retailer, retailer flows to consumers, and retailer flows back to producer. In the wholesale channel producer flows to wholesaler or distributor, who flows back to producer and flows to retailer. Retailer flows to consumers. In the agent Channel producer flows to agent/broker, agent/broker flows to wholesaler or distributor, wholesaler or distributor flows to retailer, retailer flows to consumers.
Figure 1. Marketing channels differ depending on channel partners.

Direct Channel

A woman at a farmer's market stand
Figure 1. A farmer’s market where growers sell to customers is a direct distribution channel.

The direct channel is the simplest channel. In this case, the producer sells directly to the consumer. The most straightforward examples are producers who sell in small quantities. If you visit a farmer’s market, you can purchase goods directly from the farmer or artisan. There are also examples of very large corporations who use the direct channel effectively, especially for B2B transactions. Services may also be sold through direct channels, and the same principle applies: an individual buys a service directly from the provider who delivers the service.

Retail Channel

Retailers are companies in the channel that focus on selling directly to consumers. You are likely to participate in the retail channel frequently. The retailer markets and sells the goods on behalf of the producer. For consumers, retailers provide tremendous contact efficiency by creating one location where many products can be purchased. Retailers may sell products in a store, online, in a kiosk, or on your doorstep. The emphasis is not the specific location but on selling directly to the consumer. Examples of retailers include a Dairy Queen restaurant, Amazon’s online store, and 7-Eleven convenience stores.

Wholesale Channel

From a consumer’s perspective, the wholesale channel looks very similar to the retail channel, but it also involves a wholesaler. A wholesaler is primarily engaged in buying and usually storing and physically handling goods in large quantities, which are then resold (usually in smaller quantities) to retailers or to industrial or business users. The vast majority of goods produced in an advanced economy have wholesaling involved in their distribution. Examples of wholesalers include Christmas-tree wholesalers who buy from growers and sell to retail outlets; restaurant food suppliers; and product distributors who sell to retailers.

Agent Channel

The broker or agent channel includes one additional intermediary. Agents and brokers are different from wholesalers in that they do not “take title” to the merchandise. In other words, they do not own the merchandise because they neither buy nor sell. Instead, brokers bring buyers and sellers together and negotiate the terms of the transaction.

Agents represent either the buyer or seller, usually on a permanent basis; brokers bring parties together on a temporary basis. Think about a real estate agent. They do not buy your home and then sell it to someone else. They market and arrange the sale of the home. Agents and brokers match up buyers and sellers, using their expertise to create a more efficient channel. Examples of these intermediaries include insurance brokers who sell insurance products from many companies to businesses and individuals; literary agents who represent writers and their written works to publishers, theatrical producers, and film producers; and export brokers, who negotiate and manage transportation requirements, shipping, and customs clearance on behalf of a purchaser or producer.