## Distribution Channels

### What Are Channels?

Channels represent the distribution system through which organisations distribute their products or provide services to customers. They are pivotal for:

Reaching target markets
Maximising sales
Establishing competitive advantages

### Why Is Channel Analysis Important?

Channel analysis becomes critical when a business plans to scale up and expand beyond current geographies and markets. To reach new customers, the business must develop new channels or leverage existing ones. Without channel analysis, expansion strategies lack the delivery infrastructure to execute.

### Three Main Types of Channels

#### 1. Sales Channel

The intermediaries involved in selling the product to the end user.
Key question: Who needs to sell to whom for the product to reach the end user?
Example: Fashion designers use agencies to sell to retail organisations, so consumers can access them in stores.

#### 2. Product Channel

Focuses on the series of intermediaries who physically handle the product on its path from producer to end user.
Concerned with physical movement, logistics, and distribution.
Example: Australia Post delivers online purchases between eBay sellers and buyers — it is the product channel intermediary.

#### 3. Service Channel

(Referenced in the source as a third channel to consider alongside sales and product channels.)
Concerned with how support, installation, maintenance, or after-sales service is delivered to the customer.

### Sales Channel vs Product Channel — Key Distinction

	Sales Channel	Product Channel
Focus	Who sells	Who physically handles/moves
Role	Commercial intermediation	Logistics/distribution
Example	Agency → Retailer → Consumer	Manufacturer → Warehouse → Courier → Consumer

Worked example

### Example 1

Fashion Industry Example: A designer creates a new clothing line. Sales channel: Designer → Agency → Retail store → Consumer (the agency and retailer are sales intermediaries). Product channel: Designer → Manufacturer → Warehouse → Retail store → Consumer (each party physically handles the garment). Both channels must be designed and analysed separately.

### Example 2

E-commerce Example (Australia Post / eBay): A seller lists on eBay. Sales channel: Seller lists on eBay platform → Buyer purchases online (eBay is the sales intermediary). Product channel: Seller → Australia Post → Buyer (Australia Post physically moves the product). When expanding internationally, analysis would ask: 'What new product channel (courier/logistics) do we need? What new sales channel (marketplace/reseller) can reach new customers?'

⚠️ Common exam mistakes

Treating 'sales channel' and 'product channel' as synonyms — they are distinct: one is about who sells, the other about who physically moves the product.
Forgetting the third channel type (service channel) when listing all three in exam answers.
Stating channel analysis is always important — the textbook specifies it is particularly critical when the strategy involves scaling up and geographic expansion.
Confusing distribution channels with Porter's value chain — channels are external distribution mechanisms, not internal firm activities.

Reference:

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Distribution Channels — Types and Channel Analysis

Worked example

⚠️ Common exam mistakes