If you or your startup company is launching a new product, you’ll want to find the best way to market and distribute it effectively. Discovering the advantages of direct distribution, along with its disadvantages, will help you to decide which distribution channels will be most successful for your business.
What is Direct-to-Consumer Retail?
Direct to consumer retail allows products to be sold directly to the customers, whether at a brick-and-mortar location, during a trade show or on an eCommerce platform. Rather than selling wholesale to agents or retailers who take care of distributing the products, direct distribution does not use any middlemen to sell on behalf of the producer.
Advantages of Direct Distribution
1. Companies that use direct distribution have total control over how their product is both marketed and sold. When you sell wholesale to a distribution agent or retailer, you’re giving them the ability to promote, display, and deliver your products.
2. Direct distribution allows brands to build genuine relationships with the end users of their products. Companies can respond to customer feedback and product performance reviews. Direct to consumer fulfillment services gives brands the opportunity to build customer loyalty and trust by engaging with them.
3. Consumers today have become more accustomed to fast and seamless digital experiences. A direct-to-consumer retail approach ensures eCommerce customer satisfaction with easy movement of goods for speedy delivery. Indirect distribution through third parties can delay delivery time.
4. Using direct distribution, companies can eliminate the high markups and costs associated with hiring intermediaries to distribute their products. Companies that sell directly to their customers enjoy higher profit margins on their products.
5. When selling the products directly to customers themselves, companies don’t need to worry about sharing “shelf space” off- and online. Direct distribution allows companies to distinguish themselves from their competition.
6. One of the major advantages of direct distribution is that it allows companies to collect valuable marketing data regarding their customers’ buying habits, demographics and more.
Disadvantages of Direct Distribution
1. Companies that use direct distribution channels to sell their products require warehouse management to handle the storage space and inventory.
2. Direct distribution retailers may miss out on opportunities to capitalize on their products without having several indirect distribution channels to widen their reach. Wholesale agents and retailers understand their market and specialize in promoting products.
3. Direct distribution can be time-consuming and costly for business owners. When companies distribute their products themselves, they’re forced to juggle several things at once, rather than focusing on the competency of their product and customer relationships.