Channels of distribution - SS1 Commerce Lesson Note

Direct distribution:

In direct distribution, the manufacturer sells products directly to the end consumer without involving any intermediaries. This can occur through various means, such as company-owned retail stores, online sales platforms, or direct sales representatives. Direct distribution allows manufacturers to have complete control over the customer experience and gain valuable insights into consumer preferences.

Indirect distribution:

Indirect distribution involves the use of intermediaries or middlemen to distribute products from the manufacturer to the consumer. There are two main types of indirect distribution channels:

a) Wholesalers: Wholesalers purchase goods in bulk from manufacturers and sell them in smaller quantities to retailers. They act as intermediaries between the manufacturer and the retailer. Wholesalers often provide warehousing, inventory management, and delivery services to retailers, making it easier for them to access a wide range of products.

b) Retailers: Retailers are businesses that sell products directly to consumers. They can operate in various formats, such as brick-and-mortar stores, online marketplaces, or a combination of both. Retailers play a crucial role in reaching the end consumer, as they offer convenient locations for product availability and provide customer service.

Distributors:

Distributors are independent entities that purchase products from manufacturers and sell them to retailers or other businesses. They specialize in distribution and have established networks and relationships with retailers across different regions. Distributors help manufacturers reach a broader market by leveraging their existing distribution channels and expertise in logistics.

Agents:

Agents, also known as brokers or sales representatives, act as intermediaries between manufacturers and retailers. They do not take ownership of the products but facilitate sales transactions. Agents typically work on a commission basis and help manufacturers connect with retailers, negotiate agreements, and promote products to potential buyers.

Franchising:

Franchising is a distribution channel where the manufacturer (franchisor) grants the right to independent entrepreneurs (franchisees) to sell their products under an established brand and business model. Franchisees operate their own businesses but follow specific guidelines and standards set by the franchisor. This channel allows manufacturers to expand their presence rapidly while leveraging the efforts and investments of individual franchisees.