What Is a Marketing Channel or Channel of Distribution?

by Stan Mack
Making lucrative arrangements with distributors requires understanding distribution channels.

Making lucrative arrangements with distributors requires understanding distribution channels.

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Small and large businesses alike can benefit from developing an efficient marketing channel, which is the path a product takes from the manufacturer to the consumer. Also called a channel of distribution, a marketing channel involves a series of interdependent businesses, each of which is responsible for a particular stage in the development and distribution of the product.

Channel Members

Most marketing channels have at least three different types of channel members, which is the term for distinct businesses within a channel. A producer researches consumer demand and designs and manufactures products. Wholesalers buy from the producer and then transport and distribute the products. Retailers connect directly to the consumer, offering buyers customized information about the products and making the final sale.


The key advantage a marketing channel offers is specialization and division of labor. Each business in the marketing channel can focus on a particular type of task, which makes the channel as a whole more efficient. For example, a sofa manufacturer focuses on producing high-quality furniture, the shipping company focuses on the logistics of delivering the sofas and furniture retail stores focus on steering consumers toward the sofas that meet their needs. If the sofa manufacturer attempted to fulfill each role itself, chances are its efforts would be less efficient and thus more costly to the end consumer.

Efficient Distribution

Another issue solved by a marketing channel is the impossibility of accurately predicting consumer demand. For example, retail store owners use customer buying patterns to make decisions about what stock they will purchase from wholesale companies. The wholesale buyers, in turn, use the retail stores' buying patterns to determine what they will purchase from factories, which then decrease or increase production in response. In this way, marketing channels help economies produce the correct amounts of items and efficiently distribute them to various customers across the world.


Companies sometimes operate outside their main marketing channel as well. For example, a factory might have a retail store at its location or it might operate a website to facilitate customer purchases. Both these methods allow customers to purchase products at a substantially lower rate because there are no other channel members drawing a profit.

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