Advantages & Disadvantages of Direct Distribution

Doing away with middlemen helps manufacturers cut down on costs.

An important decision relating to marketing a product is how to distribute it, or in what retail channels to make it available to customers. The choice of a distribution channel could contribute to the success, or failure, of a product. Manufacturers may sell directly to their customers or through middlemen such as wholesalers and retailers. Selling directly to consumers, or direct distribution, has some advantages and disadvantages.

Direct Distribution Methods

Selling through the Internet is one method of direct distribution that has become more common as e-commerce has taken off. Consumers can buy products directly from a manufacturer through his website. Some manufacturers also own their own retail outlets to sell directly to consumers. Mail order is another way that consumers can buy directly from manufacturers. Consumers can look at a manufacturer’s catalog with a description of the goods and order the goods directly.

Consumer Contact

One major advantage of direct distribution is that manufacturers interact directly with consumers. This gives them the chance to observe trends in the marketplace and changes in consumer preferences. Thus, based on this feedback the manufacturer can adapt her product offerings.

Eliminates Middlemen

By selling directly to consumers, a manufacturer does away with middlemen. This offers certain advantages, such as doing away with the cost of an additional layer of distribution between the consumer and the manufacturer. Using outside distributors adds transportation costs, for instance. Cutting down on such distribution costs by doing away with middlemen typically translates into a better price for consumers. As well, doing away with middlemen gives the manufacturer better control over a product’s sales and pricing.

Lack of Expertise

The main disadvantage of direct distribution is that manufacturers typically lack retailing expertise. Manufacturers with a good product to offer the market may not be good at marketing it. By using other distribution channels to distribute their product, they are able to make use of the expertise of dedicated retailers and wholesalers. Not only that, the time that a manufacturer spends in retailing activities is time that might be better spent on production-related activities.

References

• Mississippi State University: Deciding on A Distribution Channel
• Purdue University; Marketing’s Four P’s: First Steps for New Entrepreneurs; Cole Ehmke, et al.