The direct distribution channel is one of the most used distribution methods in distribution management. It is very advantageous and gives the end user or the retailer a lot of choices in receiving their goods.
However, what is a direct distribution channel? Below are some of the most popular ways in which this method is usually utilized.
First off, it is an indirect way to market your products or services. A retailer chooses a direct supplier that will provide them with a large number of products for their products or services. Then, they offer these products or services to their customers directly. As such, the retailer does not have to handle the packaging and shipping of the product. The customer has to do that. This is a very common form of sales in retailing.
Direct Distribution can also be done by wholesalers and manufacturers.
In fact, most distributors have both a direct and indirect relationship with retailers. In order for the distributor to make any profit, he has to purchase the products at a wholesale price and then resell them to retailers at retail prices. The manufacturer, on the other hand, makes his product available to the distributor or retailer directly at a wholesale price and then delivers the product to the retailer. Both parties benefit from this transaction.
Another common example is the manufacturer who produces a new electronic device and ships it directly to the retailer.
This type of transaction is called OEM. It is usually done with the permission and assistance of the manufacturer or distributor. However, some countries have laws that prevent manufacturers from delivering the devices directly to retailers without the necessary authorization. If this happens, the law states that the manufacturer is guilty of what is commonly known as “stealing” the prospective customer’s business.
How is direct distribution channel defined?
This can be a complicated question to answer considering that the answer may vary between different circumstances and across different industries. For instance, it could be a situation where the manufacturer delivers the product directly to the buyer who then retails the product to retailers. Or it could also be a situation where the manufacturer sends the product to the retailer with the agreement that the retailer will sell the product directly to customers.
On one end of the spectrum, some distributors are direct with no intermediaries. On the other end, some distributors will have intermediaries who will help them market the product in their retail outlets. Direct wholesalers and distributors can help create higher gross margin for retailers who are willing to accept a higher gross margin to increase sales.
On the other hand, what is a direct distribution channel is also what is called indirect. This is a very broad term that can include situations such as an affiliate market, direct manufacturer distribution, or manufacturer-retailer co-op. It can also include situations where a manufacturer sends products to a retailer with the understanding that the retail outlet will distribute the product to a number of other retailers. This is the opposite of direct distribution.
It is a complicated issue that affects every industry.
With so many different influences and terms being used to describe the process, it is difficult to know what is a direct distribution channel and what is not. If you are in the distribution industry and are struggling to understand what a direct distribution channel is, then you may want to consider talking with someone who can help you better understand this process. Distributors are an excellent source for learning more about the direct distribution channel. Distributors can provide valuable feedback regarding the nuances of this important process.