What are the drivers of channel length? Distribution reform in The People's Republic of China

The objective of this paper is to develop a model for analyzing the relative importance of the predictors of channel length. Identifying and explaining the factors that influence channel length is one of the most important tasks of channel research. The focus of this paper is The People's Republic of China (hereafter, PRC). The PRC is in transition from a planned to a market economy. As the economy evolves from a planning orientation to a market orientation, distribution structure reform is a critical factor in this process. Yet, very little is known about the factors that shape a nation's channel system. Understanding how improvements in distribution systems contribute to economic development can aid decision-makers in developing countries to improve resource allocation. Drawing from channel structure theory, the proposed model hypothesizes that channel length is a function of economic development, consumption, consumer mobility/outreach, urbanization and government policy. Both cross-sectional and time-series analyses were used for hypothesis testing. The results show that economic development, government policy and consumption are predictors of channel length. These findings show that government policy can aid market reform as economic development takes place, Moreover, the findings show that the evolution of distribution channels is not unidirectional as hypothesized by some, but channels may evolve from short to long and then shorten again.