Choice of appropriate channel of distribution is a very important marketing decision, which affects the performance of an organisation. Important factors affecting the choice of channels of distribution by the manufacturer are:
1) Product Related Factors: The choice of channels of distribution depends upon the factors related to the product. Products can be perishable or nonperishable, industrial or consumer product, depends upon the value of product and the degree of complexity of the product. Industrial products require short channels, where Consumer products can be better distributed by long network of channels. Perishable products like fruits, vegetables, and dairy products are best sold through short channels, while non-perishable products like toiletry and fabrics require longer channels to reach wide spread consumers. If the unit value of a product is low, long channels are preferred while in case of high value products, shorter channels may be used. In case of complex products, short channels are preferred but if the product is a non-complex one, it is sold through long channels.

2) Characteristics of company: The important company characteristics affecting the choice of channels of distribution include the financial strength of the company and the degree of control it wants to hold. Direct selling involves lot of funds to be invested, whereas Indirect selling through intermediary does not need huge funds to be invested. Thus, if the firm has plenty of funds it may go for direct distribution otherwise, indirect channels. Similarly if the management wants to have greater control on the channel members, short channels are used otherwise, it can go in for longer channel.

3) Competitive Factors: The choice of channel is also affected by the channel selected by competitors. The decision on choice of channel of distribution is made depending upon the policy of the firm, whether it wants to go with the competitors or be different from them.

4) Market Factors: Market factors like size of market, population of potential buyers and quantity purchased determines choice of distribution channel. If number of buyers is small, short channels are used otherwise longer are used. If the buyers are concentrated in a small place, short channels may be used, otherwise a longer channels. Similarly if the size of order is small large number of intermediaries may be used. But if the size of order is large, direct channels is preferable.