When you start a business, one of the many questions that you need to find an answer is which type of distribution channel to use. The main aim of every business is to bring their products and services to maximum customers and increase profit. Most often manufacturers have to choose between selling their products directly to the customers or establish a distribution network to reach potential customers.
Let’s take a look at the benefits of direct and indirect distribution channels for your business.
Direct Distribution Channels
As the name suggests, this type of distribution channel allows the manufacturers to sell their products directly to the consumers. This can be done by sending the products directly through the mail, selling the products door to door, or opening own retail stores. One of the main reasons why most companies choose direct distribution channels is that it allows them to deliver products to customers in the shortest route possible.
Many companies try direct selling, which is selling the products to the customers at the manufacturing plants. This is probably one of the easiest and cheapest methods of distribution. Usually, perishable goods like milk, eggs, bread, agricultural products, etc. are distributed through direct selling. These goods may lose their value if they are stored for too long.
Door to door sales is another direct distribution method that many businesses utilize. Door to door salesmen was employed by the companies to introduce new products to the customers. Manufacturers also distribute their products through mail order. However, this is usually used for magazines, books, and health care products. Another method of direct distribution is opening a factory outlet, which can either be a brick and mortar store or an online store.
Benefits Of Direct Distribution Channels
One of the main reasons why manufacturers choose a direct distribution business is that it will give them complete control over their outlets. The company will have total control over hiring and training the employees. This will help the company to develop a direct relationship with the customers, which is very important for the development of the company.
Direct distribution channels are very suitable for companies that have a limited area of distribution. This will help them to avoid spending money on distributors. Another benefit of a direct distribution channel is that it helps the company to get feedback directly from the customers. It will allow the manufacturers to understand what they need to do for improving the quality of the products and their customer service.
This type of distribution channel allows the manufacturers to maintain the confidentiality of information related to their consumers. Maintaining customer information is very important for maintaining the credibility of the company. Another benefit of the direct distribution channel is that it eliminates the middlemen and hence lowers the distribution costs. This will help in increasing the profit of the organization.
Indirect Distribution Channels
Common people are more connected to indirect distribution channels than direct distribution channels. This is mainly because we buy most of our household items from retail stores, which are a major part of the indirect distribution channel. There will be middlemen in indirect distribution channels that distribute the products on the manufacturer’s behalf. There are different forms of indirect distribution channels. Let’s take a look at some of them.
One of the most common types of indirect distribution channel is producer-retailer-consumer. In this form of indirect distribution channel, big retailers buy the products from the manufacturers in bulk and sell those products directly to the customers. Clothes, perishable goods, electrical appliances, etc. are often sold through this distribution channel.
Another type of indirect distribution channel is producer-wholesaler-retailer-consumer. Most of the consumer goods are distributed through this distribution channel. If the producer has only a few products to sell and has limited finances, this type of distribution channel is ideal. The product will get great promotion from the wholesalers and retailers.
Benefits Of Indirect Distribution Channels
The indirect distribution channel is very beneficial for new businesses because you won’t have a clear idea of the customer base and building your customer base takes time. If you work with retailers, you will get an already established customer base. This will help you to reach more consumers and give them an idea of the new products that you are manufacturing.
One of the main advantages of indirect distribution channels is that they will increase the speed of distribution to the market. If you are entering a region where your brand does not have a strong presence yet, you should opt for indirect sales because it allows you to enter the market easily at a lower risk and cost.
An indirect distribution channel allows you to streamline and scale your business operations easier because the retailers already have the logistical infrastructure. It is very expensive and time-consuming to start your own logistics and marketing. If you leverage the established logistics, it will give enough time for you to focus on improving the quality of your products.