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Distribution Channel Options

Adapted from content excerpted from the American Express® OPEN Small Business Network


Read this list to help you determine the appropriate method of distribution for your business.

Direct sales- This is the most basic and traditional form of sales. You have a dedicated sales force that sells your products or services directly to your customers.

OEM (Original Equipment Manufacturer) sales- OEM products are sold to manufacturers who incorporate them into other products to be sold to the end-user. For example, a disk drive manufacturer is an OEM to a personal computer manufacturer which builds the drive into its finished computer.

Manufacturer's representatives- Manufacturer's reps are sales people who operate out of independent offices. They usually handle a range of complementary products and divide their selling time between them. Reps often handle a specific geographical territory, and since many specialize in specific products, they may have contacts to get your product before the right people.

Wholesale distributors- Using this channel, the manufacturer sells products to the distributor, who in turn sells them to a retailer or other representative who markets them to the end user. For some industries - book publishing, magazine publishing, and computer software, for example - this type of distribution is the industry norm. Some distributors have a national or international presence while others focus on a specific geographic region.

Retail- You sell your products directly to retailers who sell them to the final end-user. If the end user of your product is the general public, then you probably will use this method.

Brokers- These are third-party distributors who buy products from other distributors or wholesalers and sell them to retailers or to the end user. Think of them as "product matchmakers" - brokers look for distributors or manufacturers who can sell them the products that the retailer or end-user wants.

Direct mail/direct response- The end-user buys products directly from you through the mail or another form of direct-response advertising. You ship the ordered product directly to the end user. Book clubs would be one example of this form of selling. Computer companies such as Dell or Gateway 2000 that let you order directly from the manufacturer use another variant of direct sales.

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