A direct distribution channel refers to a network of intermediaries or companies through which an item or service passes directly from the manufacturer to the end user. Distribution channels range from direct manufacturers to wholesalers to distributors and the Internet. The term “direct” also implies that there is no third party involved in the process of distribution.
Direct manufacturing refers to items that are manufactured and sold directly to the customer. Some examples of direct manufacturing include watches and shoes. Indirect manufacturing occurs when one intermediary stores items that have been made by another company and sells them directly to the customer. An example of indirect manufacturing would be automobile parts that are purchased from a wholesaler, who in turn, sells them to a dealer, who in turn, sells them to end users.
Direct Channels Can Be Either Direct Or Indirect.
A direct distribution channel provides customers or stockholders with products or services at no extra charge while indirect channels have additional charges for stock, marketing, or other elements. Examples of indirect distribution channels include warehouses, wholesalers that ship products to retail stores, and distributors that ship products to retail stores. An indirect distribution channel can include grants, loans, franchises, sub-contracting, and licensing programs.
The manufacturer supplies raw materials to the manufacturer or the retailer. The manufacturer delivers finished goods to the retailer at one point in the supply chain. One retailer provides products to another retailer. The consumer obtains the retailer’s products, which pass through one intermediary, before reaching the ultimate consumer.
Breaking Down Distribution Channels
Distribution channels can be broken down in two ways – directly and indirectly. A retailer purchases goods from a manufacturer or directly. A wholesaler buys goods from a manufacturer or indirectly. An intermediary acts as a link between the distributor and the final consumer. Indirect distribution channels are usually found in markets where the distribution cost is lower because the products don’t need to be delivered from the manufacturer.
Direct distribution channels are usually found in retail. Examples include groceries, drug stores, supercenters, and mass marketing retail stores. Indirect distribution channels are found in warehouses, wholesalers who ship goods to retailers, and retailers who ship goods to wholesalers. The direct channel has a bigger market share than its indirect counterparts because it offers lower prices to consumers and lowers shipping costs to intermediaries.
The Goal Of Distribution Channels Is To Sell Products To The End User Or Consumer
Distribution involves three key processes – manufacturer, retailer, and end user. Manufacturers make the products and then enter into direct retail sales with retail stores or wholesalers. Retail stores and wholesalers purchase the goods from manufacturers and distribute them to end users. End users are consumers who buy the products and companies who make the goods available to end consumers.
The perfect example of a direct retail channel is Walmart. It is an example of a perfectly established direct channel relationship. Walmart can provide Walmart customers direct access to Walmart suppliers and Walmart wholesalers who can offer Walmart a lot of wholesale discounts that the company could not obtain on its own. In short, a successful retail distribution channel can increase the profit margin of a company and increase the number of customer transactions.
Another popularly known distribution channel is the level channel. Level channel distributors have several advantages over other retailers. A level channel provides retailers like Walmart with access to several wholesalers while still limiting the number of retailers the wholesaler can work with. At the same time, Walmart can offer a larger variety of goods to its customers and can increase its sales per outlet by reaching out to other retailers.
The third popularly known distribution channel is the marketing distribution channel. Marketing distribution channels provide a company like Walmart with access to manufacturers who can promote the products of a company like Walmart directly to consumers. An example of a marketing distribution channel is Walmart’s direct marketing channels such as Walmart Stores or Walmart Pro. The advantages of marketing distribution channels over direct retail channels are that consumers can be more aware of the presence of a company like Walmart, that a company like Walmart can advertise directly to consumers, and that retailers can reach out to people who would be potential customers (this last advantage is the main advantage of Walmart Stores over other direct marketing channels). Another advantage of Walmart Pro is that the company’s website allows consumers to shop for products online, which could significantly improve Walmart’s ability to increase sales. Walmart also has a massive customer base across the world, which makes it more likely that consumers in other countries will know about Walmart.
Summary
Longer channels represent another option for companies interested in reaching out to as many consumers as possible. These longer-term channels tend to be established for a long period of time, allowing retailers to work with consumers for an extended period of time. For example, outlets like Wal-Mart have long held the position of being one of the most trusted stores in the country, which means that consumers will go to Walmart if they have a question about a product or service. These long-term channels are often not as well known as marketing channels, but they do represent a great opportunity for a company interested in expanding its consumer base.