A direct distribution channel is simply a path through which all products and services have to pass to reach the targeted consumer. In its simplest form, it refers to the pathway that payments receive from the end user to the distributor. Direct distribution channels include wholesalers, manufacturers, agents, brokers, middlemen and retailers who distribute their products directly to end users. The most famous among them are retailers such as Wal-Mart, Costco, Target, K-Mart, Sam’s Club, etc.
Benefits Of Direct Distribution
There exists several advantages associated with direct distribution channels. The major one is the reduction in cost. Retailers do not need warehouses to store their inventory; they can simply locate their stores near the consumer and make personal contact with the consumers directly. The other advantage is improved customer service, since retailers have a direct contact with the people, they can build good relationships with them. Besides, the business concepts that flow from direct distribution channels are easily applicable to indirect distribution channels as well. This concept works when running an online business as well. For example, YouTubeStorm is a direct seller of social media metrics for YouTube, and it sells directly to the end-user. This is in contrast to other websites that act as intermediaries between the final consumer and creators of a product.
There Are Various Kinds Of Direct Distribution Channels
For instance, manufacturer direct, network sales, multiple-listing-shop (MLS) and retail chains are some of them. Each of them has their own set of advantages and disadvantages. When we talk about manufacturing directly, there are two things involved. Firstly, the retailer needs to cater to only specific product lines, secondly the retailer needs to manage its channel effectively.
On the other hand, multi-listing-shop (MLS) involves a retailer that offers more than one brand to a customer. Retailers with such direct channels offer more variety for the customers, and therefore, increase sales. However, there are few disadvantages associated with multi-listing-shop, for instance, when the manufacturer decides to stop manufacturing a particular product line, the retailer would lose its sole distribution source.
Direct selling indirectly satisfies all the requirements of any business line. When the manufacturer sells directly to the retailer, there is no need for the retailer to have its own product line. The manufacturer sells directly to the retailer who sells to the end users. So, indirect distribution channels such as mail order and Internet also fulfills the purpose.
Drawback of Indirect Distribution
A problem that arises in indirect distribution channels is, the product or service may need to undergo a quality assurance process before it gets sold. As such, there may be a cost involved in this process. In addition, they may need to hire additional staff for this purpose. Apart from this, some intermediaries may decide to charge extra for some additional services.
However, indirect wholesalers provide another option for retailers to fulfill their demand. The cost involved in hiring a third party retailer is generally much less than what is required in case of direct distribution channel. This is because intermediaries are generally third party companies hired by retailers. They offer products and services to the end consumers at a price that the retailers can afford to offer them.
Intermediaries Are Beneficial At Times
If done effectively, intermediaries can help retailers to save a lot of money. They also allow end users to buy only what they need. While doing so, they do not charge extra for any additional service passes that they provide. Moreover, they do not add to your total inventory. While all these advantages are enough for any business to use intermediaries, you must ensure that you select a good and reputed one to get a good deal from the distribution channel.
There are many types of distribution channels available in the market. The best way to look for the right one for your business is to analyze your needs and preferences. What type of products do you want to sell? What type of wholesalers or retailers will you employ? These questions will help you to find the distribution channel that will suit your business the most.
Which Distribution Channel Works Best?
When selecting the best shot, it is important for the retailer to evaluate both the wholesalers and the retailers. By comparing each entity you will be able to determine which among them offers the best opportunity to increase your sales. For example, direct distribution channels for retail stores are usually available in big retail chains. Retailers can save a lot of money by buying goods from wholesalers instead of retail stores. This is because the prices offered by wholesalers are often much lower than those of retail stores.
On the other hand, retail stores cannot afford to make big purchases all the time. They will only get items from wholesalers that are directly sold to consumers. If you are an online retailer and you decide to get goods directly from wholesalers, then the best option for you will be to use intermediaries. intermediaries play an important role in the direct distribution channel as they provide consumers with products at reasonable prices and they also act as a link between the wholesalers and the retailers. So, whether you are starting up your own online store or if you want to expand your retail chain, always go for intermediaries instead of direct wholesalers.