Direct Distribution Channels For Wholesale Products

What is a direct distribution channel? Well, simply put, it is an efficient channel by which goods and services are to be delivered directly from the manufacturer to the ultimate user. The ultimate user may be a store owner or a customer. In either case, the channel provides a seamless connection between the two. Conversely, it refers to the path payments earn from the final destination to the manufacturer.

Four Types Of Direct Distribution Channels

They are retail channel, Wholesale channel, Major Retail Channel and Governmental Distribution Channel. A retailer decides whether to open a retail outlet, or a wholesale outlet. Once opened, these outlets can only sell products that belong to their own company. For example, websites such as SpotifyStorm act as an online wholesaler of social media engagement. But, in a governmental distribution channel, the products that belong to a public good are procured through a contract with the government, which then makes the products available to the general public.

An intermediary is a third party that plays an important role in a direct distribution channel. An intermediary will typically act as the supplier or the retailer. The role of the intermediary is to facilitate smooth communication between the manufacturer and the consumer, and to provide information regarding products to the consumer. They also ensure that the quality and standards of products sold by manufacturers to meet the requirements of the customers. For example, in the case of a manufacturer selling directly to the end user, intermediaries help the manufacturer to sell directly to end users.

Indirect Distribution

Indirect distribution channels include wholesaling and stocking, which are the two main means of distributing goods. Stocking is used to stock products which have not yet reached the retail outlet. As the name suggests, this method helps manufacturers to sell a product directly to the end user. It is a less costly way of selling products than direct distribution channels.

In the case of wholesalers, retailers, and distributors, manufacturers can sell directly to consumers. They do so when they enter into a distribution channel with wholesalers. This type of distribution channels help the manufacturer to sell directly to the end user. However, it may not be feasible to open up a warehouse to store and deliver merchandise to consumers. Other indirect distribution channels include dropshipping companies, online wholesale stores, and websites such as Salehoo.

Which Channel To Choose?

A manufacturer has two options in selecting a channel for selling their products. They can use a direct or indirect channel. An indirect channel includes wholesalers, distributors, and retailers, who work with one another. Each of these groups play a role in the supply chain process.

An indirect channel requires a retailer to source inventory from a wholesaler. Then, the retailer sends that inventory to the manufacturer for them to sell. The producer pays the wholesaler for the goods they have sent out. At the same time, the retailer earns a profit on the amount they have paid the wholesaler. The manufacturer uses this money to pay the distributor or retailer, so both parties make money off of the transaction. This type of channel structure is ideal for small companies, who cannot afford to have a large quantity of inventory on hand.

Direct distribution channels require the manufacturer to have a warehouse and warehousing facility to store and ship product to retailers. It also requires the manufacturer to have a way to identify which retailer has sold that product, allowing the manufacturer to pay them directly. This type of channel allows manufacturers to make more sales to end consumers. While a retailer only needs to display the product for sale, a manufacturer only needs to ship the product to a destination. Although this type of channel provides smaller profits, it can be very profitable for a manufacturer as well.