Marketing Center

Direct vs. indirect distribution channels

If you’re ready to move your products into more markets, your distribution strategy will be essential.

Distribution is the process of getting your product into your target markets. You might handle the distribution process directly at the outset whether digitally or in person, but as your business grows, it may be more efficient to enlist a distributor to get your product to retailers who sell on your behalf.

Direct distribution

Whether it’s a small business or a multinational company, direct distribution allows products to be sold directly to customers. On a micro scale, a jewelry maker, selling small collections, may choose to set up a website and sell directly to the public. On a larger scale, Apple sells directly to consumers through their Apple stores. Keep in mind that while direct distribution may offer advantages, there are also pitfalls when not using middlemen including:

  • Positive: Total control over how the product is marketed and sold

  • Negative: You may have limited market coverage

  • Positive: No fighting for shelf space with the competition

  • Negative: More time consuming and expensive for some business owners

Indirect distribution

For a manufacturer, indirect distribution means selling wholesale to agents or retailers so that they can distribute the product for you. They store it, display it, and employ the sales force to put it into the hands of customers. Some considerations:

  • Distribution agents specialize in getting products into as many markets as possible.

  • You will share the profits with distributors.

  • Retailers may sell your competitors’ products in addition to your own. However, retailers know their local markets and how best to sell your product there. So even though your products may face competition for shelf space, you may ultimately see higher sales.

Choosing a distribution strategy

Determining the best method for getting your product to the consumer depends on what you’re selling and how much you’re willing to invest in distribution. New small businesses generally don’t have the capital to pursue multiple distribution avenues at the outset, so they need to choose one that fits, and stick with it while the business grows.

Generally, if your product is perishable or if you’re selling B2B, you’ll want fewer distribution channels between your point of manufacturing and your customer. In which case, direct distribution may be best. If, however, you’re aiming for a wider market, with hopes of getting your products in front of as many consumers as possible, you may need to sell to distributors instead, and let them do the legwork while you focus on making the product better.

If you do partner with distributors, do some vetting to ensure that they are capable of selling your products and finding the right market opportunities for them. Prioritize developing a long lasting relationship. You’re the product expert, but you’re leveraging their sales expertise. Lastly, the decision may not be whether to go direct or indirect, but when to favor one over the other to find your optimal mix.

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