A direct distribution channel is essentially a series of intermediaries or companies that pass a product or service through an exchange before it reaches its final user or the ultimate end user. Direct distribution channels can include retailers, wholesalers, distributors, and the web. The most common form of direct distribution is retail distribution. This refers to the retail store or location where the item or service is purchased. There are other forms of direct distribution such as promotional items, personal hygiene products, electrical and electronic goods, food items, and bottled water.
Defining Retail Distribution
Retail distribution occurs when the producer sells directly to the end user or customer. An example of this would be the manufacturer selling directly to the retailer, such as in the case of internet users who buy Twitch views directly from the company that creates them. The retailer, however, needs to have a point of sale terminal device that displays the item or service being sold. It also needs a method of receiving payments from the end user or customer. This payment could be in the form of cash, debit card, electronic funds transfer, or credit card.
An indirect distribution channel, on the other hand, sells indirectly to consumers or customers. An example of this would be the manufacturer selling to distributors or importers who will deliver the product directly to consumers. In this case, the manufacturer does not have to hire or train distributors or importers. This means that the manufacturer is able to pass on direct savings to the end consumers or customers.
With direct distribution channels, consumers or clients have a direct connection to the manufacturer. This means that they can inspect the product or service before purchase and have a relationship with the person who manufactured it. A major benefit of this arrangement is that there is no need for the manufacturer to employ thousands of people or employees. As the manufacturer delivers the goods, the consumer does the paperwork and pays for the item. With indirect channels, consumers or clients do not have direct access to the manufacturer.
Different Retailer’s Approaches To Distribution
Both direct and indirect distribution channels have their own advantages and disadvantages. However, some wholesalers have capital invested in equipment and warehouses which enable them to provide greater services or products at cheaper costs to retailers. On the other hand, some retailers have fewer resources and can only afford to sell smaller items or bundles at a much lower price. The nature of a direct distribution channel is that it links two retailers. The retailers do not have to rent any storage buildings or facilities.
In order to establish such a relationship, the wholesaler contacts the manufacturer or dealer and offers to distribute their product. The dealer or manufacturer then contacts the retailer and offers the wholesaler the products to sell. When the retailer agrees to sell, he pays the wholesaler a specified amount. Alternatively, when the consumer or client visits the retailer, the dealer or manufacturer delivers the product directly to the consumer without any intermediary.
Direct Wholesaling and Other Retail Examples
Direct wholesaling can be compared with indirect distribution. In the case of indirect distribution, the manufacturer delivers the products to the retailer or consumer after paying the retailer a certain amount. This is done through a distribution agent who works on commission and receives some part of the total sales price. The direct process may take longer as there is no middleman involved. In most cases, direct wholesalers deliver goods more quickly than indirect wholesalers.
Another example is perishable goods. A food retail chain has a different distribution channel for perishable goods like refrigerated goods, canned goods, frozen food and bottled beverages. A chain may have a single nationwide distribution hub, or it may have a series of regional hubs where different products are distributed. A popular beverage chain, for instance, has national hubs for the sale of flavored waters, energy drinks, diet sodas, and flavored teas, while a grocery chain like Whole Foods has national hubs for the sale of healthy snacks, frozen fruits and vegetables, nuts, protein powder and specialty food items like organic foods and home-cooked meals.