A distribution channel is an organized network of intermediaries or companies through which a certain good or service is passed on to the end user or the ultimate consumer before it reaches the end user. Distribution channels can consist of retailers, wholesalers, distributors, and the web. It is also known as the retail chain or the distribution channel. Each type has specific characteristics that make it uniquely different from the other. It also has unique qualities such as the quality of goods available, the service provided, the price charged, the availability of a service, the knowledge of the company that provides the distribution service, and the reliability of the chain.
Direct distribution channels are established between the manufacturer or the distributor and the end consumers or buyers. The distribution can be in the form of retail sales such as an individual seller selling his products directly to the customer or in the form of wholesalers and manufacturers selling directly to retailers. iIt can also be in the form of a website that allows users to buy Facebook page likes and similar social media engagement directly to consumers that will use the product. Wholesalers sell their products to retailers and buy directly from them to carry out the sale. Distributors and importers either sell directly or through a distribution channel.
Different Types Of Direct Distribution Channels
Some of the major types of direct distribution channels are direct mail, retail sale, bulk sales, direct production, indirect production, and factory direct sales. These different types have their own advantages and disadvantages. While direct production may be more efficient in terms of the number of units manufactured, it may not be able to provide the same efficiency in terms of the number of quality products manufactured. On the other hand, indirect production involves the use of contract manufacturers or agents who purchase raw materials at low prices and deliver the finished products to the retailers at a higher price.
In a direct distribution channel, the manufacturer or distributor offers the products directly to the consumers. Consumers can purchase directly from the manufacturer. In case of bulk purchases, consumers are offered a certain amount of products and this is given to them as a discount or special offer. This means that the retailer needs to make a little profit from the transaction. Wholesale prices are kept to a minimum to enable retailers to offer competitive prices to the consumers.
A Better Understanding Of Direct Distribution
Direct distribution channels include direct manufacturers and distributors, wholesalers and brokers. The manufacturers sell directly to the retailers, while distributors and wholesalers ship the products to retailers at a wholesale rate. Brokers do not deal directly with consumers but rather, they act as a connection between the manufacturer and the retailer by negotiating the best possible wholesale rate. Some direct distribution channels include manufacturers who sell directly to retailers and others include manufacturers who sell in conjunction with wholesalers.
A direct distribution channel usually has a physical address and a sign on the main street of the town or city. In this type of channel, the producer or the wholesaler does not have to find a distributor in every locality. They only need to advertise the sale of their product through this channel and the retailer will come in contact with the producer or the wholesaler and will be able to buy the product. So in the process of advertising the sale of a particular product the producer or the wholesaler is not required to enter into any sort of commercial transactions.
There are various reasons due to which direct distribution channels are preferred over other channels. The first reason is that the costs of advertisement are very less since the producer or the wholesaler does not have to bear the cost of advertising. The second reason is that the consumers get the products directly from the manufacturer. In this way, the consumers can see the quality of the product and they can make an instant decision whether to purchase it or not. The third reason is that the distribution channel ensures that the product reaches all the corners of the nation or even the world.
Now let us come to the micro level issues regarding direct marketing. These micro level issues are also important, since the micro level affects the quality of the product directly. For example in the case of mobile phones, the distributors ensure that the product reaches the customers at their homes. Hence there is a lot of concentration on distribution channels. So in the electronic market the direct distribution channels include the retail stores, web sites, malls, supermarkets etc. Also the direct manufacturing companies like the Apple company prefer to use these channels as they can control the quality level and they can also assure that the new models of their products are supplied to their desired outlets.