Direct distribution refers to any business process that enables a manufacturer to sell its products directly to the final consumer. In this case, the manufacturer does not need to deal with an intermediary such as an agent or wholesaler. Instead, the manufacturer sends its finished products directly to the customer.
The direct distribution channel has several advantages over the traditional indirect channels.
For one, it lowers the costs and risks of product failure. For another, it increases the efficiency of the production process since the manufacturer can change the product quickly. It also provides customers with instant access to new products. On the other hand, it lacks several important qualities that make it an inferior distribution channel. These include efficiency of the distribution process, reliability of the information about the products and timely delivery of the goods to the final consumers.
The traditional indirect channels include the retail stores and wholesalers.
They ensure that the manufacturer’s product reaches the target consumers in the shortest time possible. However, as they are frequently accessed by different parties, their potential flaws are exposed. For example, intermediaries may fail to deliver the goods on time because of unforeseen events, the buyer may change his mind about purchasing it, and intermediaries may fail to supply all the products the manufacturer needs.
In contrast, the direct distribution channel allows manufacturers to sell their products directly to retailers.
Retailers buy directly from the manufacturer after receiving an order from the distributor. Retailers benefit from the lower cost of operating the channel. They do not need to maintain a fleet of trucks or incur extra operational expenses. In addition, they benefit from the fact that selling products through this channel reduces the cost of logistics including rent, utility bills, taxes, etc., and shipping costs such as transportation costs and insurance.
Direct marketing companies offer another advantage to manufacturers.
They help increase brand loyalty by promoting one’s products. They also increase the manufacturer’s share of the consumer market by lowering the price of competing products. By promoting the brands, the channels ensure that the manufacturer receives quality growth. They thus play an important role in brand building for new products by ensuring that the products get adequate distribution.
As a final advantage, marketing channels provide a source of diversification for manufacturers.
They have access to specialized markets, which they could not achieve otherwise. It is not only the direct consumers who can benefit from the distribution offer by the marketing channel. Through this distribution channel, the manufacturer can also reach out to other channels such as wholesalers, retailers, and other third-party sales representatives. Thus, the distribution channels provide a means of expanding the reach of the manufacturer into new markets and thereby increasing the manufacturer’s share of the overall consumer pie.