A retail distribution channel is the network of retailers, wholesalers, and other intermediaries a product passes through on its way to reach consumers. A retail distribution channel starts with the manufacturer or supplier and ends at the point-of-sale: a physical store, ecommerce website, online marketplace, mobile app, and so on.

Distribution channel vs. sales channel vs. marketing channel 

Distribution channel	Sales channel	Marketing channel
The path a product takes to get from the manufacturer to the consumer. Example: a chain of businesses working together to get a product from a factory to the shelf of a store.	The path a consumer takes to buy a product. Example: an ecommerce website, a brick-and-mortar store, an online marketplace such as Amazon.	The path used to promote a product to consumers. Example: a chain of people, businesses, etc. working together to distribute information about a product and its availability to consumers.

In this guide, you’ll find:

• The basics of retail distribution strategy
• Tips for creating a retail distribution strategy
• Types of retail distribution channels 
• Pros and cons of direct sales vs. indirect sales

Let’s get started.

Why You Need a Retail Distribution Strategy

A good retail distribution strategy is the foundation of any successful business—it’s your strategy for getting your product in front of customers and getting customers to buy your product. (“Retail” might make you think of big-box retailers, but remember it simply refers to the sale of goods or services to consumers.) 

If you want customers to discover and buy your product, you need a retail distribution strategy. An organized, well-thought-out strategy means you can focus on marketing, increasing brand recognition and visibility, reaching a wider audience, instilling customer loyalty, and optimizing your operations—without wasting time and resources in areas that won’t help your business in the long run. 

For example, let’s say your business sells sustainably sourced maternity wear. A good retail strategy would involve researching your current and target customer base, learning where they shop (which stores? which websites?), how they shop (what are their shopping habits, how frequently do they buy new clothes, how much do they typically spend, what do they value in a brand, what other brands do they enjoy, what makes them love a brand?), and using that information to develop a marketing strategy that aims to increase loyalty and deepen the relationship with your current customers—plus bring in new customers by demonstrating an understanding of what they need and value, and meeting them where they are. 

The goal isn’t to convince customers to shop in totally new channels—it’s to find out where they’re already shopping and reach them there.

In addition, you would research retail distributors in your market—big-box retailers, smaller retailers, ecommerce websites and marketplaces, and any other platforms where products similar to yours are finding success. Ideally, you’ll find distribution channels that have similar but not identical offerings—so your product would be filling a gap in the shelf space. 

You’ll need to know: What am I offering that my competitors aren’t? 
The more information you have, the more informed your retail distribution strategy. You probably don’t want to just put your products on as many platforms as possible—it’s easy to end up overextending your resources and stretching yourself too thin. Instead, you want to make intentional, data-driven decisions based on market research, consumer trends, sales history, and manufacturing/distribution/fulfillment capabilities.

Types of Retail Distribution Channels

There are many different paths products can take to reach customers—especially as ecommerce and other technologies continue to transform the way we shop.

Direct Sales

Direct sales (aka D2C or DTC, “direct-to-consumer”) is when a business sells products directly to consumers without middlemen such as retailers or other intermediaries. DTC brands source products from manufacturers/suppliers and sell them to consumers without involving third-party distributors. 

For example: a brand that sells products only through their online store (an independent ecommerce website) and/or their brick-and-mortar store.

Wholesale

Wholesalers are middlemen between manufacturers and retailers or consumers. A manufacturer makes the product, then a wholesaler buys the product in bulk at a discount price. The wholesaler can either sell the product to retailers—who will sell it to customers at a higher retail price—or directly to consumers, often in bulk.  

For example: Costco and Sam’s Club are wholesale warehouses that sell products in bulk at wholesale price (or a slight markup from wholesale price, but not as high as retail price). Buying in bulk, i.e. buying products in large quantities, means spending less money per unit.

Resellers

A reseller is an intermediary (business or person) that buys a product and resells it, either to a customer or to another business. 

D2C brands and wholesalers are both types of resellers—they’re buying products from a manufacturer or supplier and reselling them to retailers or customers. But where D2C brands and wholesalers buy products from suppliers (i.e. new, unused products), a reseller isn’t as limited. A reseller might buy products from a retailer, an individual, or any other source, and those products might be secondhand or used. They might purchase a product at retail price and sell it at a higher retail price to turn a profit. 

For example: a person who buys luxury items such as designer handbags with the goal of reselling them at a higher price.

Independent Distributors

An independent distributor is an intermediary (business or person) authorized to sell a company’s products to wholesalers, retailers, or directly to consumers. They generally receive payment or commission based on the amount of goods sold. 

For example: instead of working directly with wholesalers and retailers, a cosmetics supplier might contract independent distributors to manage those relationships. 

An independent distributor might also be a business owner authorized to sell a company’s products in their store. For example: the owner of an independent fashion boutique might be authorized to sell a cosmetics brand’s products in their store. 

(This type of reselling requires a retail partnership and authorization from the company—as opposed to a reseller who buys a product and resells it without authorization.)

Omnichannel

Omnichannel distribution is when a business sells products through multiple distribution channels, and those channels are digitally interconnected in order to share data—as opposed to multichannel distribution, where the distribution channels operate separately. 
Omnichannel distribution strategy is increasingly vital for any business to thrive in the fast-paced world of ecommerce. With an omnichannel distribution model, you can sell in various distribution channels (ecommerce website, online marketplace, retail partner, etc.) while maintaining a consistent, unified brand experience across channels. Your customers can switch seamlessly between channels, allowing for the added convenience of options such as Buy Online, Pick Up In-Store (BOPIS).

Direct Sales vs Indirect Sales

Of the retail distribution channels mentioned above, only direct sales (DTC) counts as, well, direct sales. The other channels are types of indirect sales. 

Direct sales or direct distribution is when a business sells goods or services directly to consumers without any middlemen or intermediaries. 
Indirect sales or indirect distribution is when a business sells goods or services to consumers with the use of middlemen such as retailers, wholesalers, or other intermediaries.

For example: Let’s take a look at Apple. Apple’s priority is direct sales: Apple stores and Apple.com. When you buy something in an Apple store, you are purchasing directly from Apple. 

But Apple also sells through indirect distribution channels such as Target and Best Buy. In that case, you’re buying an Apple product at a Target store, meaning Target is a third-party retail distributor. 

Which is better: direct sales, indirect sales, or a combination of both? The answer completely depends on your business. So, let’s go over some pros and cons of each method.

Pros of direct distribution

The main benefits of direct sales or direct distribution are revenue and control. When you’re selling products to customers without any intermediaries involved, you don’t have to divide up your revenue between a bunch of other parties. Your revenue is yours alone, which allows for greater financial flexibility and wider profit margins. 

In addition, you remain in total control of your business and brand. You don’t have to navigate restrictions set by retailers, such as product restrictions, price changes, discounts and sales, and set monthly order volumes. You’re in charge of your physical and digital stores, customer service and messaging, supply chain, order fulfillment, marketing, and so on. Your supply and distribution chain is shorter, making it easier to manage visibility and communication—you’re simply dealing with fewer people.

Cons of direct distribution

As you might expect, direct sales are inherently limiting. When you’re only selling through direct distribution channels, there are fewer ways for customers to find and buy your product. If for some reason they can’t purchase through your store or website, you lose that customer. 

Expanding your business beyond direct sales expands your pool of resources as well. A retail partnership means access to retailer distribution networks and other resources that can boost brand awareness and sales. 

The size and scope of your business (current and planned future) is a major determining factor for your distribution strategy. For some businesses, direct sales-only might work best. But for most businesses, direct sales-only is probably too limiting—it’s part of your strategy, but not all of it. 

Pros of indirect distribution

Some major benefits of indirect distribution are customer reach, scalability, and revenue. Adding new distribution channels means reaching a wider audience, generating brand awareness (plus brand legitimacy, if you’re connecting your brand name to a major retailer), and giving customers more options for buying your product. 

People know where they like to shop—it’s easier to reach them in channels they already use, such as retailers or online marketplaces, rather than drawing them to a new place. More customers = more sales = more revenue—though you do have to share your revenue with distributors, so it’s important to do your research and know what you’re getting into. 
Indirect distribution gives you access to new resources. When you partner with a retailer, you gain some level of access to their physical and digital infrastructure. Depending on the partnership, you might be able to shift some of your production and other operations into their network, allowing for greater scalability. For example, major retailers already have the infrastructure to produce and distribute products on a mass retail scale.

Cons of indirect distribution

The main challenges of indirect distribution are revenue sharing and less control. As mentioned above, sharing revenue with distributors cuts into your profits. And the more intermediaries in your distribution network, the easier it is to lose visibility and communication at some point along the chain. You might end up over- or understocking, over- or underselling, or taking the blame for customer service issues or other disruptions beyond your control. You also don’t have control over how a retailer prices or discounts your product, or how your products appear on their website or in their store. 
Finally, adding retail partners often requires scaling your fulfillment operations. Especially with major retailers, you must be able to manufacture, package, and ship inventory in quantities and timelines that meet their strict standards. Without the right fulfillment partner, you could end up overextending your business.

Conclusion

A strong retail distribution strategy is vital for your brand—and researching and finding the right retail distribution channels for your business is the first step. 

Still have questions about retail distribution? 

Connect with an EcomHalo Guardian—we’re here to help.