Distribution channels represent the methods of which a consumer receives the end product or service from a company. They are generally discussed in the Market Analysis section of a business plan. In this section, a company shoud describe the supply chain which consists of all parties and services needed to get the product/service created, packaged and sold to the end consumer. Whether offering a product or a service, each company must determine how they will deliver their offering. Products may need to go to a number of different places before they get to the consumer. We will use an example to describe what needs to be included in this section.
Company A produces and sells furniture. Company A should address the following issues in the distribution channel section:
- What materials are needed to create the furniture?
- Where is the Company going to purchase these materials?
- How will the Company receive these materials?
- Once these materials are received, where will the furniture be assembled?
- Will the Company own a factory or warehouse or both?
- Where will the furniture be stored?
- How will the Company package the furniture?
- What materials are needed for packaging? Where will the Company purchase these materials?
- Where will the Company sell it’s furniture? Will the Company own it’s property to showcase the products or will the furniture be sold in other stores? If the Company will offer the products via other stores, which stores?
- How will Company A get the furniture to the stores? Will they own trucks or hire a trucking company?
- Will the Company use the same delivery methods from the stores to the end consumer?
The distribution channels section should be precise and brief but describe each party and necessary step of the supply chain. Ths section will be approximate 2 to 3 paragraphs long or 1/3 of a page to 3/4 of a page.
Written by Shosh Pincus
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