A marketing channel, or channel of distribution, is a group of individuals and organizations that direct the flow of products from producers to customers. The major role of marketing channels is to make products available at the right time, at the right place, and in the right amounts. In most channels of distribution, producers and consumers are linked by marketing intermediaries. The two major types of intermediaries are retailers, which purchase products and resell them to ultimate consumers, and wholesalers, which buy and resell products to other wholesalers, retailers, and business customers.

Marketing channels serve many functions. They create time, place, and possession utilities by making products available when and where customers want them and by providing customers with access to product use through sale or rental. Marketing intermediaries facilitate exchange efficiencies, often reducing the costs of exchanges by performing certain services and functions. Although some critics suggest eliminating wholesalers, the functions of the intermediaries in the marketing channel must be performed. As such, eliminating one or more intermediaries results in other organizations in the channel having to do more. Because intermediaries serve both producers and buyers, they reduce the total number of transactions that otherwise would be needed to move products from producer to the end customer.

Channels of distribution are broadly classified as channels for consumer products and channels for business products. Within these two broad categories, different channels are used for different products. Although consumer goods can move directly from producer to consumers, consumer channels that include wholesalers and retailers are usually more economical and knowledge-efficient. Distribution of business products differs from that of consumer products in the types of channels used. A direct distribution channel is common in business marketing. Also used are channels containing industrial distributors, manufacturers’ agents, and a combination of agents and distributors. Most producers have multichannel distribution systems that can be adjusted for various target markets.

A strategic channel alliance exists when the products of one firm are distributed through the marketing channels of another. Multichannel distribution—the use of a variety of marketing channels to ensure maximum distribution—is increasingly used to reach target customers wherever and whenever they may choose to interact with a company or its products. Some products use digital distribution to deliver content through the internet to a computer or other device. It is important to recognize that the line between different marketing channels is becoming increasingly blurred.

Selecting an appropriate marketing channel is a crucial decision for supply chain managers. To determine which channel is most appropriate, managers must think about customer characteristics, the type of organization, product attributes, competition, environmental forces, and the availability and characteristics of intermediaries. Careful consideration of these factors will assist a supply chain manager in selecting the correct channel.