Answer – Place, distribution, channel, or intermediary

Marketing channel diagram showing direct and indirect distribution routes

Channel Length: Direct or Indirect?

Colorado Ricardo currently runs a zero-level (direct) channel: the bike moves straight from the factory to the customer with no intermediary in between. Kotler and Armstrong (2018) describe how adding intermediaries – a one-level channel through independent retailers, or a two-level channel through a regional distributor as well – extends a manufacturer’s reach at the cost of giving up some control over how the product is sold.

Distribution Intensity: Intensive, Selective or Exclusive

An intensive strategy would put the e-mountain-bike into as many outlets as possible; an exclusive strategy would tie it to a single partner in each territory; a selective strategy sits between the two. For Colorado Ricardo, selective distribution through a small, carefully chosen set of independent bike shops in neighbouring states (Utah, Wyoming, New Mexico) is the better fit: it builds real reach beyond Colorado while keeping enough control over how the bike is presented to protect the hand-built, premium story that low-margin, high-volume sporting goods chains would dilute.

Why Use an Intermediary At All?

Worked example – what a dealer network does that the factory can’t

An independent bike shop in Salt Lake City can hold local stock, let a customer test-ride the same afternoon, fit and service the bike locally, and give trail-specific advice – none of which the Denver factory can do cost-effectively for a customer 500 miles away. Bucklin (1966) makes the underlying point: intermediaries only survive in a channel if they can perform these functions at a lower total cost than the manufacturer reaching every customer alone.

Key point

Kotler and Armstrong (2018) list the functions channel members perform – breaking bulk, holding inventory close to the customer, providing local knowledge and after-sales service – that a producer could never reach cost-effectively on its own. The trade-off for Colorado Ricardo is that a dealer network also creates a second, less controllable version of the brand story, and could compete for the same loyal Colorado customers the direct-sales showroom was built around.

A channel decision cannot be made in isolation from price and target segment – see the Pricing Strategies and Segmentation exercises for how those choices interact.