Direct channels
Direct distribution channels have their undeniable advantages:
The manufacturer controls the entire sales process, product quality and pricing policy.
There are no intermediary japan phone number markups in the price structure, which increases the seller’s profit.
The ability to closely interact with end customers (and therefore better understand their preferences, tastes, and needs).
More cash in the company's circulation.
Product positioning and the creation of an attractive brand image are facilitated.
As a rule, customers prefer to buy everything directly from the manufacturer.
Disadvantages of direct channels:
It is impossible to significantly increase sales volumes and cover a large part of the market.
Sales activities require significant investments.
Warehouses accumulate stocks of goods awaiting sale. This increases storage costs and the risk of product spoilage.
The manufacturer has to take on the promotion of the product, market analysis, and maintain a network of points of sale. All this is an additional expenditure of resources.
Accounting for commodity and cash flows is becoming more difficult.
Direct distribution channels
Indirect channels
Now let's move on to indirect channels of product sales. They have their own characteristic advantages:
The manufacturer gains access to the intermediary's extensive distribution network. As a result, it increases their market coverage and, in the long term, the level of sales, profits and other financial indicators of the business.
Mastering new segments takes less time.
There is no need to spend money on warehousing and storage processes, focusing only on production.
It is possible to sell goods in larger quantities.
Intermediaries help to better satisfy customer needs regarding service, speed, and quantity sold.
The disadvantages of indirect distribution channels include:
The manufacturer loses direct contact with end customers. Feedback suffers, and it is more difficult for the company to track demand dynamics and respond to them.
The price of the product is no longer under the control of the manufacturer. And the quality, in a sense, is also not under the control of the manufacturer.
The profit percentage falls because dealers buy goods at a discounted price, which is lower than the market price.
There is a possibility of becoming completely dependent on distributors and other intermediaries.
The overall picture is this: selling goods through a chain of participants, on the one hand, allows you to reach more consumers and better satisfy their needs, but on the other hand, it deprives you of control over the final cost and the sales process.
However, if the company decides to trade independently, its costs will be even higher, it will have to solve many technical and organizational problems. The positive side is a more accurate understanding of its target audience and full control over quality and price. But this audience will never be particularly large.
Therefore, it is impossible to call one type of distribution channel unambiguously good or bad, everything is determined by the specifics of the niche and product, the capabilities of the manufacturer, the choice of contractors and partners, sales strategies and many other factors. In any case, the decision on which type of channel to prefer is very important.