Product Distribution Channel Strategy for Successful Business
The term direct distribution channel basically refers to the ways in which a business dispenses its goods or services directly to the ultimate end user. In this way, the end users have the control of purchasing goods and services in bulk and thus are in control of their cost of production. It tends to involve a network of multiple intermediary companies including retailers, wholesalers and manufacturers.
There are many intermediaries who work through the direct distribution channel. For example, websites that sell social media boosters (such as SubscriberZ) are considered intermediaries in direct distribution. These intermediaries include distributors, manufacturers, merchandisers, agents, brokers and retailers. When a retailer decides to retail directly to end consumers then the retailer establishes a direct distribution channel with one or more manufacturers, wholesalers or distributors. The retailer does not have to enter into an indirect relationship with these intermediaries as they do not enter into a partnership or contract with the manufacturer, wholesaler or distributor. Rather, the manufacturer, wholesaler or distributor provides them with the products on behalf of the retailer and ensures that the retailer has a supply of the goods at an affordable price.
In order to enter into a direct distribution channel relationship with a manufacturer, wholesaler or distributor to the retailer needs to make arrangements with these third parties. Some third party manufacturers may engage the services of distributors when they want to increase the market share that they have in the market. The manufacturer supplies the goods to the direct distribution channel and the retailer ensures that the retail channel has a sufficient supply of the product. The retailer will then enter into a contract with the manufacturer or wholesaler to retail the product under a brand name or a name belonging to him.
The direct distribution channel is generally preferred by many over the indirect channel. This is because the direct distribution channel helps in increasing the volume of sales of a product. In addition, it helps in attracting a greater customer base. In addition, the retailer needs to consider factors like quality of the products sold by him, his personal approach to selling products and his unique selling proposition before entering into a direct distribution channel relationship. The main objective of the direct distribution channel is to make the products available to the end users at a cheaper and more affordable price.
The direct-to-consumer model was introduced in the early 1990s. It enables the manufacturer or the wholesaler to sell directly to the end users. This model differs from the indirect channel in that the manufacturer does not need to enter into a commercial relationship with the retailer. However, both the intermediaries and the retailers benefit from this business practice. The manufacturer sells directly to end users, whereas the wholesaler ensures that there is a continuous supply of goods to the retail market. This can be attributed to the fact that the intermediaries have an indirect relationship with the retailers while the manufacturer directly interacts with the consumers.
There are four main types of direct selling channels. These include the conventional direct selling channels such as the retail chains, manufacturers’ channels and distributors, electronic, wholesale channels and online retailing channels. The direct selling channels provide for sales to the direct customers. On the other hand, the indirect channels involve a third party who enters into a commercial relationship with the retailer. These channels allow retailers to sell their products to end users and gain profits through retail sales.
There is considerable variation among the distribution channels in terms of costs and profitability. It is important to analyze the profit margin of the distribution channels and identify the appropriate selling technique. A manufacturer has to take into account factors such as his brand equity, selling techniques and customer response to develop an effective distribution strategy. It is recommended that the manufacturer identifies the best selling technique and uses it to promote the sale of the product.
Retail chains have to ensure that they distribute goods in an efficient manner so that they can achieve a higher level of sales. They should also provide prompt customer service. Effective merchandising and distribution will attract consumers towards the products and reduce the cost involved in selling them. Thus, effective product distribution can be the difference between success and failure as retailers.