What Are Channels of Distribution? Types, Strategy & How to Choose the Right One
Channels of distribution (also called distribution channels or marketing channels) are the pathways through which a product travels from the producer to the end customer. They encompass every intermediary, partner, platform, and process involved in getting a product into customers’ hands.
For product managers and business strategists, channel decisions are among the most consequential choices in go-to-market strategy. The channel selected determines how customers discover and access the product, what the customer experience looks like, and what margins are achievable — and changing channels after the fact is expensive and disruptive.
Types of Distribution Channels
Direct Channels
The producer sells directly to the end customer without intermediaries.
Direct-to-Consumer (DTC): The company sells through its own website, retail stores, or sales team. This maximizes margin, enables direct customer relationships and data, and provides full control over the brand experience — at the cost of higher acquisition investment.
Direct Sales: An employed sales team reaches out to and closes business directly with customers. Most common in B2B, particularly for high-ACV (annual contract value) enterprise software and complex products.
Indirect Channels
Intermediaries are involved between the producer and the end customer.
Resellers and Distributors: Third parties who purchase the product and resell it to end customers. Common in hardware, consumer goods, and some enterprise software. Resellers provide market access and scale but reduce margin and customer relationship proximity.
Value-Added Resellers (VARs): Partners who bundle the product with additional services, integration, or complementary products. Common in enterprise IT, where VARs add implementation, customization, or managed services on top of a core product.
Retail: Physical or online retailers who carry and sell the product. Essential for consumer products requiring mass-market reach, but typically involves significant margin sharing and limited control over the customer experience.
Marketplaces: Third-party platforms (Amazon, App Store, Salesforce AppExchange) where customers discover and purchase products. Marketplaces provide access to established customer bases but create dependency on the platform and typically require revenue sharing.
OEM (Original Equipment Manufacturer): The product is sold as a component of another company’s product. Enables volume distribution but typically at low margins and with limited brand visibility.
How to Evaluate and Choose Distribution Channels
Customer Reach
Does this channel reach the right customers? A channel that serves a large audience is only valuable if that audience includes your target buyer. Match the channel to where your specific customer segment discovers and buys products in your category.
Customer Experience
Does this channel enable the customer experience you want to create? Complex products requiring education and support may not be well-served by self-serve retail; simple, low-cost products may not justify a high-touch direct sales motion.
Economics and Margin
What does this channel cost in terms of margin sharing, sales commission, or platform fees? How does the cost of customer acquisition through this channel compare to alternatives? Does the economics work at your price point and volume projections?
Control and Data
How much control does this channel preserve over brand presentation, pricing, and the customer relationship? What customer data will you have access to, and how does that affect your ability to learn and iterate?
Scalability
Can this channel scale with the growth of the business? Some channels work well at small scale but create bottlenecks as volume grows; others require minimum scale to be economically viable.
Multi-Channel and Omnichannel Strategies
Many businesses distribute through multiple channels simultaneously — direct sales for enterprise customers, self-serve for SMBs, and marketplace for international reach, for example. Multi-channel strategies capture more of the market but introduce channel conflict risks (different channels competing for the same customer) and operational complexity.
Omnichannel strategies take this further, creating a seamless customer experience across all channels rather than separate experiences per channel.
Key Takeaways
Distribution channel decisions are strategic — they define how customers access your product, what the acquisition economics look like, and what relationship you have with the customer after purchase. The right channel fits your product’s complexity, your target customer’s buying behavior, your pricing model, and your organizational capabilities. Misalignment on any of these dimensions makes distribution significantly harder, more expensive, and less effective than it needs to be.