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What is a Distribution Channel in E-commerce?
A distribution channel in e-commerce is a route through which a company sells its products or services online to the end users. It includes all the different steps involved in selling a product or service online, from the first step of reaching potential customers to the final step of delivering the product or service to the customer.
Distribution channels can be simple or complex, short or long depending upon the order fulfillment requirement. This includes the use of online marketplaces, e-commerce websites, social media, search engine optimization, email marketing, and more.
Significance of Distribution Channel in E-commerce Logistics
Distribution channels are a vital part of e-commerce logistics. They are responsible for the efficient and effective delivery of products from the business to the customer.
- Distribution channels enable businesses to reach out to a wider audience and increase their sales.
- They also help to reduce costs associated with shipping and handling, which can make a huge difference in the overall profitability of a business.
- By optimizing their distribution channels, businesses can increase their efficiency and reduce delivery time, both of which are key components of successful e-commerce logistics.
Prerequisites to Calculate Distribution Channel and How It Works
A few essential factors responsible for choosing a distribution channel include –
- Products – The type of product plays an important role here. A business has to choose a distribution channel depending if their items are perishable and nonperishable.
- Business objectives – Choosing a distribution partner having concrete links with the business objectives is a fair choice. A business with strong recognition wanting to reach a broader audience may easily use direct distribution.
- Knowing the market demand and expectations help determine a customer-centric strategy.
Use Case With Distribution Channel
- Direct Distribution – The channels where the company sells its products directly to the customers. Like digital solutions, software solutions, etc.
- Indirect Distribution – The channels where the manufacturing unit sells its products through retailers. For example – medicines, pharmaceutical equipment, packed food items, etc.
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