What is Direct Distribution? Direct distribution refers to any business process that has an intimate connection with the manufacturer. There are two channels through which the manufacturer delivers its products: direct manufacturing and direct selling. Direct manufacturing takes place in-house during the initial production phase and involves the use of the manufacturer’s own facilities as well as those of the third-party supplier. While the latter involves third-party distribution, which can either be done on a regular basis or on a one-off basis.
Advantages To Consider
Direct manufacturing has certain advantages. The primary one is that it reduces the cost and production time by directly meeting the consumers. With this, the manufacturer enjoys cost advantages over its intermediaries, which means that it can offer lower prices to the end consumer without having to cut down on other aspects such as quality or service. In addition to that, the direct channel enables the manufacturer to directly interact with the customer. For example, a website that advertises itself as one of the best sources for stock market news would likely want to communicate directly with its readers, which are the ultimate consumer. This kind of interaction ensures that the customer receives the best product and service possible.
Drawbacks Of Direct Distribution
However, the disadvantages of the direct system can also outweigh its advantages. Cost is the biggest factor affecting the success of the system. Since it is the manufacturer that places the bulk order, it requires access to markets beyond its home turf. This is where countries other than its home country come into play. These countries provide access to the consumers that the manufacturer is meant to serve, thus lowering the costs involved in the process.
Another problem that arises from the direct line of distribution is that it is dependent on the quality of the manufacturer’s product. If the quality of the manufacturer’s product is poor, the profits made by the manufacturer will suffer. As a result, the manufacturer may choose to withdraw from the market. On the contrary, the intermediaries benefit from the sales of poor quality goods. In such a scenario, the latter suffer a loss when there is no sale.
The final disadvantage is that the channel becomes highly localized. This means that the products that are sold do not have cross Borders reach. As a result, the manufacturer has to invest a lot of resources in marketing that is localized, which results in a loss of capital.
Types Of Direct Distribution
Direct Distribution (DC) has three main types. The first one is known as the Manufacturer Direct Distribution Channel (MDA). In this channel, the manufacturer directly deals with the end users, who are dealers or retailers. The second main type of Direct Distribution is referred to as the Retail Acquired Distribution Channel (RAD), which happens when the manufacturer acquires retail outlets directly.
The third main type is known as the Exclusive Distribution Channel. In this case, the manufacturer develops and markets its own products, which are distinct from those of its competitors. The benefit of exclusive distribution is that the manufacturer can control the pricing of its products, since it will sell directly to the consumer, and not to any distributor or retailer. However, there are some disadvantages associated with this form of distribution strategy. First, it is very difficult for a manufacturer to protect its brand name in the face of generic products manufactured by other companies.
Types of Indirect Distribution
There are four types of indirect distribution channels. The first is the Major Publisher Distribution Channel (MPD), in which the manufacturer sells its goods to distributors, retailers, M&A advisors and other intermediaries. The cost of marketing the product through intermediaries reduces the price of the product. The second is the Major Port Distribution Channel (MPPC), in which the manufacturer ships its products to retailers at the point of sale. The last one is the Small Publisher Distribution Channel (SSD), in which the manufacturer ships its merchandise to the retailer at the point of entry.