Direct Distribution Channel VS Indirect Distribution Channel

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What is the direct distribution channel?

A direct distribution channel is simply a set of intermediaries or companies through which a particular good or service is passed on to the end user before it reaches him. Such channels are generally broken down into direct and indirect channels. Direct channels allow the consumer to purchase goods directly from the producer, while an indirect channel passes the goods through various other distribution channels till the consumer receives it. The type of distribution used determines what the distribution medium will be used for and therefore, the price at which it can be purchased. 

What do direct distribution channels include?

Direct wholesale distribution channels include direct manufacturers, distributors and direct wholesalers.

Distribution intermediaries include retailers, agents and merchandisers. While retailers can either be direct or indirect distributors, wholesalers are considered as distribution intermediaries, since they actually sell the goods to retailers. Wholesalers can either be direct or indirect wholesalers.

A direct distribution channel allows retailers to sell directly to the customers. The retailer can either operate an online retail store or he can employ his own sales force. Either way, the retailer must have the products or goods for selling. He must also have the means of conveying the order from his manufacturing facility to his retailers.

What is the indirect distribution channel?

Indirect distribution channels include wholesalers and retailers. The difference between the two is that wholesalers normally make bulk purchases from manufacturers, and retailers normally sell items to consumers. Retailers also have the option of using warehouses, retails stores, kiosks or distribution channels to sell their items. Wholesalers typically sell directly to retailers. Wholesale distributors do not sell directly to consumers.

In a direct selling business, a retailer offers a particular product or service to a client. The product or service is offered directly to the prospective customer without having to go through a distribution channel. The distribution channel involves the delivery of the goods to the final consumers. Some of the distribution channels include sales channel, warehouse channel, kiosk channel and point of sale channel.

The role of an intermediary in a distribution channel

An intermediary is any person or entity that facilitates sales and distribution for another party.

Examples of this are wholesalers, distributors, stockers, brokers, manufacturers, middlemen and brokers. The intermediary can be an individual or a company. Brokers represent both the retailer and the manufacturer. Middlemen represent the manufacturer and the retailer.

Wholesalers and retailers function as distribution channels when they make purchases from manufacturers and then resell to retailers. Distribution channels carry goods to the end consumer for the purpose of retailing them to the end consumer at the retail outlet. The distribution channel usually handles goods in bulk and brings them to the outlet of the retailer. Retailers purchase goods in bulk and then distribute them to their end consumers.

A third party can act as an intermediary between the manufacturer and the retailer. This third party can act as an agent who brings the goods directly to the consumer without the intervention of the manufacturer or wholesaler. The nature of the relationship between the manufacturer and the retailer determines whether the third party is necessary. If there is no third party then the process of wholesale distribution would have to be done directly.

Distribution channels can be either direct or indirect. 

  • In the direct distribution channel, wholesalers and retailers both act as intermediaries.
  • In the indirect distribution channel, wholesalers and retailers do not act as intermediaries.
  • There is only one distributor that brings goods directly to the consumer.

A major benefit of direct distribution channels is that it allows the manufacturer and the retailer to directly interact with the end consumer. They can establish their reliability and prove their quality. There is no middleman to eliminate guesswork or to hide facts from the consumer. When products are delivered directly to the customer, they are examined closely by the end user to ensure quality and compatibility.

Another benefit of indirect distribution channels is that they do not require manufacturers to enter into long term contracts. This means that a manufacturer does not have to enter into a long term partnership with a retailer to sell goods. Instead, the retailer provides the products on consignment. The advantage of this form of selling is that it helps lower overhead for both the manufacturer and the retailer.

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