Selecting the right kind of distribution channel is a very important strategic decision for retail distribution companies. Making this choice requires considering various factors, and it should be efficient and objective. Having an efficient distribution channel impacts directly on the profitability of business and it must be remembered that no single channel can ensure optimum profit. So, many of the businesses opt for an integration of multiple channels so that a delay or break down of one distribution channel won’t affect the whole business.
The following are the factors that affect the efficiency of the distribution channel of almost all the best distribution companies and that include retail distribution as well.
Ability Of Channels
It is a well known fact that the most successful retail production and distribution companies have well established, and strong distribution channels to distribute goods over a large area. This is especially true in the age of digital shopping where all the major companies have their own online distribution companies to ensure timely delivery. But, you should know that a newly established distribution channel cannot do this; it requires time to straighten out the faults and gradually build from ground up.
After Sales Service
Similar to the ability of a distribution channel, the after sale service of the goods delivered is an important factor and it requires the same efficient distribution channel. It can either be provided by the manufacturer or licensed to any of the members of the distribution channel. The choice is made based on the ability to deliver services in a sustained manner.
The Financial Strength Of The Channels
The financial strength of the distribution channel is important in determining its efficiency as it is resource intensive activity. There are cases where the distribution channels finance the manufacturer in a sort of mutually depending partnership for the success of both. Some big online and offline retailers make it their priority to build an unbendable distribution channel as it is part of their customer service and reputation building. So, retail distribution companies must assess the financial strength of the distribution channel before making a choice.
The economic situation can affect the distribution channel of retail distribution companies. During a time of economic boom, the sales of products will be good and usually the distribution channel will be operating without much trouble. But in times of recession, there will be a fall in sales and can lower the profits of some members of the channel as lesser people are buying. This can put a strain on the distribution channel and can affect its efficiency.
are some of the factors affecting the efficiency of distribution channels of retail distribution companies.