Distribution of the products or services produced by a firm is an important part of managing a business. Distribution refers to the process by which products or services flow from the manufacturer or factory to reach its target consumers. The products can be distributed through direct channels of distribution in which the manufacturers deliver their products to the consumers by establishing their own distribution networks. There are also indirect channels of distribution which involve the services of one or more intermediaries (individuals and organisations) which link the manufacturers with their consumers. These intermediaries or middlemen specialise in performing distribution activities. Wholesalers and retailers are the two important forms of middlemen who act as a communication channel through exchange of product information and feedback between the producers and consumers.

An entrepreneur has to decide about an effective distribution channel that can provide a vast market coverage to its product and is also economical. The proper selection of a distribution channel depends on several factors such as the nature of the products involved, nature of the market, number of types of middlemen, competitive environment,legal constraints and the nature and size of the company. The choice of a suitable channel of distribution is very important for a business firm because:- (i) it affects the time and costs of distribution; (ii) it affects the volume of sales; (iii) it influences pricing and promotional efforts. Such a decision will determine the profitability of the business of the entrepreneur and also the long term sustainability of these profits.