Direct distribution, also referred to as direct retail sales channel, refers to the delivery of goods and services from a company’s point of sale to the customers.
It is considered one of the most economical and least expensive marketing strategies available today. Because of this, companies are always on the lookout for distribution channel partners that can help increase their sales figures and improve bottom-line profit levels. If you are planning to enter into this business, you have to know the various aspects of this business. These factors are important because it helps in determining which company will be able to provide you with the best sales opportunities.
There are several different types of distribution in which companies can partner up with each other.
The most popular ones are wholesale direct distribution and factory direct. Wholesale distribution involves a distributor or a wholesale agent who sells directly to the customers. Meanwhile, factory direct distribution involves a manufacturer who provides equipment and materials to a distributor so that the latter can sell the products to retailers.
A distribution channel has a lot of advantages and benefits. With this, it reduces overhead cost for the companies involved.
The distributors do not need to pay extra income tax withholdings. They are not required to hire employees. They can do away with the use of warehouses and distribution centers.
Because of the presence of a distribution channel, there is a reduced risk of having defective or unavailable products because the distribution agents make sure that the goods are available to the customers at all times. Distribution channel also ensures that goods reach their destinations on time and in good condition. As for the quality of the products delivered, distribution channels ensure the product’s quality by ensuring that goods are delivered from the manufacturers directly or from depots where products are being supplied from other companies. This helps in minimizing risks of faulty products that can cause financial loss for the companies.
Many distribution channels are used by the manufacturing companies.
The distribution channels can be direct or indirect. Direct distribution refers to the goods being distributed to the customers themselves. This is done by the manufacturer himself or by authorized representatives. Indirect distribution is done by third parties acting as representatives of the manufacturer.
It is important for a manufacturer to have a direct distribution channel for distributing their products. This is because this will ensure that the good received is the good existing in the market. When there is a problem in the delivery of the goods, the manufacturer can immediately contact the distributor and get the problem solved. In many cases, a manufacturer may have several distribution channels so that they can distribute their goods at the same time. This helps in reducing costs and increasing production and output. It is an effective way of increasing sales.
On the other hand, indirect distribution is done when a large number of companies act as representatives of the manufacturer.
In this case, several smaller companies act as the distributing agents. A number of distributors or packers are present in the distribution channel and the manufacturer can contact them for placing the order of the products. The distributors are supposed to place the products in the warehouses of the larger companies. It ensures that the products are received on time and that there are minimum delays in receiving the products.
An important function of a distribution agent is to place the order of the products directly to the end users. They get paid for their performance and if the product is delivered late, the manufacturer will not be responsible. This is a very cost effective method of increasing sales and profits. There are many distribution channels such as depots, stores, malls, and electronic distribution systems but direct distribution remains to be the most popular.