Last Updated on November 6, 2023 by asifa
The term ‘direct distribution network’ describes the systems used in a business to deliver its goods or services directly to the consumer. Direct distribution networks are those which allow an enterprise to deal directly with the end user. In today’s modern world, direct distribution involves distributing large amounts of goods or services directly to consumers. The distribution channels include various modes like the distribution network and the retail distribution. Distribution networks allow users to purchase directly from the maker or supplier and therefore eliminate the need for an intermediary such as a retailer.
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Advantages Of Using A Direct Distribution Channel
One advantage is that it reduces the cost involved in marketing and promoting a product or service. For example, if the distribution is done through a retail store, the retailer does not have to hire people to promote the product and spread word about the product to create awareness among the people. He/she does not have to spend on advertising and other forms of marketing. Even in cases when the product is not physical, such as in the case of a travel website, direct distribution is when the website sells directly to the consumer without a third-party. Direct distribution allows the retailer to handle the whole sales process and make the final decision as regards the marketing of the product or service.
The indirect process involves intermediaries such as marketing consultants, stock brokers, and agents. These intermediaries do not directly deal with the consumer but they are indirectly connected with the consumers. They also earn commission from the retailer they represent. Hence the consumer pays them for their services and indirectly he benefits from them because they earn by the sale of the product. Thus if we see the direct and the indirect distribution channels, they work in a similar way in most cases.
Delving Further Into Direct Distribution
A direct distribution channel generally deals in physical products and can be a retailer, wholesaler, manufacturer, distribution company, or a broker. These companies do not sell directly to the consumers but to retailers and suppliers. Retail stores are a popular example of direct distribution channel as they deal directly with the consumers and they do not have any third party representative.
An indirect direct distribution channel involves three parties. One is the retailer who sells directly to the consumers, second is the wholesaler who sells directly to the retailer, and the third person is the agent who makes money by acting as a middleman between the retailer and the wholesaler or by buying the goods and reselling them to retailers. In this type of channel, the retailer sells directly to the consumer and the wholesaler or the agent buys goods from the retailer and sells them to consumers. This type of channel also has advantages and disadvantages.
It is known that direct distribution channels can be beneficial to the consumers. They are able to directly buy the items from the manufacturers and distributors and this eliminates the cost of overheads. Another advantage is that it reduces the risk of buying poor quality products as the retailers buy directly from the manufacturers and pass the savings on to consumers.
On the other hand, there are disadvantages too. In certain countries like the United States, food products are sold through intermediates who set up the distribution channel. This means that while the wholesaler may be a good manufacturer, his products are sold at a higher price because the retailers don’t have any control over the distribution channels.
Third-party channels can be advantageous for the wholesalers and the manufacturers. They allow them to form a partnership and they get access to a large range of products. But the disadvantage is that the wholesaler needs to bear a lot of advertising and marketing expenses and he may not be in a position to keep his costs down as he is required to make a profit. On the other hand, the middlemen do not get any of the profit but they still have to make a decent living.