The term direct distribution channel simply refers to the systems utilized by an enterprise to deliver its goods or services straight to the intended customer. Direct distribution channels are the ones that enable the manufacturer or service supplier to deal directly with the end-user. Thus it is often called a direct sales channel. This distribution method can be implemented both in the retail market as well as in the wholesale and distribution markets. The distribution channel is also one of the main components of the supply chain management system and hence the term distribution management.
Increasing Sales
Most of the time, a direct distribution channel is used to provide customers with the latest products available at discounted prices. It is a cost-effective way of increasing the number of sales of a particular product. With the help of this channel, manufacturers are able to generate more revenue. However, it is not only the manufacturers who can benefit from this system. Many service providers, wholesalers, retailers, importers as well as distributors find direct distribution channels as a very useful means to promote their products.
In a distribution channel, manufacturers sell directly to the retailers or directly to the end consumers. It does not involve any middlemen at all. These are considered to be the most economical and the most efficient ways of reaching out to your target market. The big advantage is that there is no need for any middleman or distributor to be involved here.
Loss Of Control
One of the big disadvantages of using this method is that direct marketers will have to pay a certain amount of fees to the retailer and they might not necessarily have complete control over the quality of their product. They might have access to a certain number of customers. It is also found that the direct market accesses some of the smaller wholesalers and importers. On the whole, the indirect distribution channels tend to have higher returns.
Types of Distribution Channels
The distribution channels, which are generally considered to be the most effective include the retail level, direct sales channels, wholesalers, and direct manufacturers. These companies provide a variety of services to both the retailer and the end-user. They can either handle the products for the retailer themselves or work with the retailers on behalf of them. They can be the wholesale suppliers of a manufacturer and they can assist in the supply chain as well.
The wholesalers, on the other hand, are the ones who directly deal with the retailers. They have the capacity to market the products directly to end-users. They can do this by retailing or selling in bulk to retailers. Thus, they are the indirect distributors as well.
Additional Channels
Direct manufacturers have another distribution channel apart from that of the wholesalers. Through them, manufacturers can promote their new goods to retailers and direct end-users. Retailers who are interested can contact a manufacturer directly. Manufacturers generally prefer to channel their goods through a chain of retailers before they are able to promote them to end-users through the retail channel.
Direct Vs. Indirect Selling
There are three different distribution channels that are generally used today. One is the direct selling channel. Another is the indirect selling channel and the third is the wholesale direct channel. With all the different distribution channels available today, a manufacturer can effectively promote their product to consumers and earn more profits. The manufacturers who can take full advantage of the direct distribution channels can take advantage of the consumer buying decision and increase their profit margin.
Profitability
Direct distribution channels are generally very profitable. However, one has to be very careful about the type of product that he or she wants to sell. They have to make sure that their product will meet the needs and requirements of the consuming public. In other words, they have to target a particular group of consumers and cater to their interests. Many inexperienced business owners prefer to hire an outsourced Chief Marketing Officer to help in this aspect. For example, if they want to sell household appliances, they have to understand the purchasing power of the consumers. If they fail to understand the buying power, they may fail to get a good margin of profit and sales.
Conclusion
One of the most common ways of getting a good margin of profit is to sell directly to consumers. For instance, if a manufacturer wishes to sell directly to the end-users, they can do so. A manufacturer can sell directly to retailers or they can also choose to sell through direct mail orders and cataloges. Direct mail orders and cataloges are quite popular among all the three distribution channels mentioned above.
On the other hand, intermediaries sell products through third-party manufacturers and distributors. For instance, a wholesaler distributes clothes sold by a manufacturer through intermediaries. The intermediary takes care of the details of manufacturing and selling such clothes. As a result, the intermediaries charge higher prices for the clothes that they sell. However, the consumer gets the right to buy directly from the manufacturer at the retail price.
