There are three main different types of distribution channels, indirect channel direct channel and multi-channel system. Normally, goods and services need to pass through several middlemen before they reach the consumer for using (Keegan and Schlegelmich, 2001). However, manufacturers sell goods and services to the consumer without intermediaries in some cases, which can be defined as direct channel (ibid). Direct distribution channel is used while a manufacturer explores an overseas channel in addition to communicate directly with the foreign parts in the local country (Caughlan, 2001). The channel included online store and retail store, which are more efficiently and exploring the market actively. Meanwhile, it could well-controlled the market and easy to find the needs of the consumer. However, it is difficult to control if the manufacturer is unfamiliarity the foreign market (Julian, 2008), and also cost a lot to monitor the goods in order to satisfy the consumer. Therefore, it is wasting time and more expensive.
The indirect distribution channel is used for the company if the goods has a large scale or complex (EB, 2010). In this situation, intermediary is the best choice for manufacturer selling the goods, like wholesalers, retailers, distributors and so forth (Keegan and Schlegelmich , 2001). Some advantages can be found when the indirect distribution channel is adopted. First, it is simple and cheap. The manufacturer does not need to pay start-up cost for the channel and if the goods is moving to foreign countries the risk is relieved, also the costs will be shared with intermediary (Frazier, 1999). The limitation of this distribution channel is clear. The right of controlling the market is handing over to the middlemen. Another one is the intermediary may give up handling the product suddenly if there is no profit in the market (Keegan and Schlegelmilch, 2001).
According to Keegan and Schlegelmich (2001), multi-channel can be defined as using both direct and indirect distribution channels. This channel can keep the profit balanced and expand target consumers, also easy for the company to find the potential market and consumer. However, it is not good for promoting the product and may raise the risk in some extents.
There are some factors affect the companies to choose distribution channels which will use for their products, such...