A product leaves the factory, passes through a wholesaler and a retailer, and reaches the customer. Use the buttons to follow the goods one way and the money the other.
A distribution channel is the chain of businesses a product passes through between the factory and the customer. In the classic three-stage version, the maker sells to a wholesaler, the wholesaler sells to retailers, and the retailer sells to the public. Each stage takes a slice of the final price for the work it does.
The diagram tracks two flows at once. The solid blue arrows carry the physical product forward, from manufacturer to customer. The dashed orange arrows carry money backward, from customer to manufacturer. Seeing both at the same time shows why the chain can support several businesses at once.
A factory would rather sell huge batches to a few buyers than handle thousands of tiny orders from individual shops. A wholesaler smooths out that mismatch: it buys in bulk, holds stock in a warehouse, and redistributes in the amounts retailers can actually take. The retailer, in turn, is close enough to customers to sell one item at a time.
The chain starts at the factory, where goods are produced in large batches. At this end the maker is set up for volume, not for dealing with individual shoppers.
A wholesaler buys big quantities at a low unit price and breaks them into the smaller orders that retailers need. Stock is held in a warehouse so the wholesaler can keep up with demand between bulk purchases.
Retailers buy the smaller quantities and sell them to the public one by one, adding a margin to cover rent, staff and the job of serving customers.
The product finally reaches the person who wanted it. This is the end of the goods route — and the start of the money route, because the customer now pays.
Payment travels the opposite way to the product. The customer pays the retailer, the retailer pays the wholesaler, and the wholesaler pays the manufacturer. Each business is paid for its slice of the work, which is what keeps the whole chain running.
Product distribution is the route a finished product takes from the factory to the person who finally uses it. In this simple model it runs through a wholesaler and then a retailer, each adding a margin for the service it provides.
A wholesaler buys in large quantities and breaks them into the smaller orders that shops need. A retailer buys those smaller quantities and sells them one by one to the public.
A factory would rather sell huge batches to a few buyers than tiny amounts to thousands of shops. The wholesaler absorbs that mismatch: it buys in bulk and redistributes in the sizes retailers can actually take.
The opposite way to the goods. The customer pays the retailer, the retailer pays the wholesaler, and the wholesaler pays the manufacturer, so cash travels back up the same chain.
No. Some makers sell straight to retailers or directly to customers online. This diagram shows the classic three-stage route because it makes the roles of each link easy to see.