Direct distribution

Direct distribution - one of the three basic distribution methods, where products (or services) are shipped straight from producer to customer. In other two methods manufactured item or service reaches final client through mediators (wholesalers or/and retailers). Direct channel of distribution is the shortest and the most uncomplicated form of product distribution . P. Szopa and W. Pękała emphasize that "using this kind of channels by producer retains full control over a disposal of products and the level of prices and services" . Nowadays, manufactures do not use direct distribution as main distribution channel, because it is very difficult to resign from extensive network, which can be built with a help of mediators . However, growth of Internet sales and new solutions in logistics, such as cross docking, may change the situation in the future.

Types of direct distribution channels

M. Andrejić, V. Todorovich and O. Durden define the following types of direct distribution channels :

• Selling through Catalogues or Telesales

Interested customer can place the order via phone, mail or e-mail. Distribution activities in this type of channel can be realized either by manufacturer (especially when product is very specific and unique) or by any logistics company, which specifies on courier services.

• E-commerce

From manufactures point of view everything looks similar to catalog selling (but Internet platform should be built). F. Kotler emphasize that selling through Internet lets producer easily access global markets. Also, there are no costs of maintaining retail stores, printing catalogues, paying for TV advertisements, etc.

• Business to Business

Commonly, big batches of industrial products (e.g. wire, gasoline) are sold directly from manufacture to manufacture (customer-manufacture is interested in as low as possible prices and transportation costs; also in the best possible terms).

• Public Place Sales

Sales can be realized directly at points of production (e.g. farms), through exhibitions events, through auctions (e.g. flower auctions in Holland), etc.

• Door-to-Door Sales

Door-to-door sales where one of the most popular in distribution of some specific types of goods (e.g. vacuum cleaners), before internet becomes available to anyone. Manufacture employs salespersons, which travel all over the country and try to sell a product directly to a consumer (if product not portable enough, salespersons additionally organize delivery from producer to client's home after sale).

• Sales through a Network of Own Stores

Manufacture can create a chain of own shops (or a single store, if producer is small), so that their products can get to the client directly. The disadvantage of this method - need of large investments. In addition, stationary stores will constantly generate costs (staff salary, rent payments, et cetera).

Examples of Direct distribution

• Online Shopping: Direct distribution is used in online shopping, where products are shipped directly from the producer/retailer to the customer. This eliminates the need for any intermediaries.
• Direct Selling: This is a form of direct distribution where goods and services are sold directly to customers in their homes or offices. This is mainly done by independent sales representatives who go door-to-door or host parties to promote the products.
• Direct Mail: This is a form of direct marketing where a company sends promotional material, such as catalogs, brochures, or flyers, directly to a customer’s address.
• Direct Response Advertising: This is a form of advertising used by companies to directly solicit a response from the customer. This can include television commercials, radio ads, or online ads. The customer is then able to respond directly to the company by calling a toll-free number, visiting a website, or filling out a response card.

Advantages of Direct distribution

• Direct distribution has several advantages. Firstly, it allows manufacturers to have more control over the sales process. This control is important as it allows them to ensure that their products are always being sold in the best possible conditions. Secondly, direct distribution can reduce costs associated with distribution, as there are no additional costs associated with wholesalers or retailers. Thirdly, it can help manufacturers to build better relationships with their customers, as they can provide better customer service and tailor the products to meet their customers' specific needs. Finally, direct distribution can reduce lead time, as goods can be sent directly to the customer as soon as they are ready.

Limitations of Direct distribution

• Direct distribution has certain limitations.
• Firstly, it requires a great deal of resources and capital for distribution, as the producer needs to have own delivery network, warehouses and customer service infrastructure.
• Secondly, producers need to have a strong market presence in order to be able to reach customers easily and quickly.
• Thirdly, it can be hard to build a customer service that meets customer’s expectations as producers can't outsource this function.
• Lastly, direct distribution requires more effort to develop customer loyalty and trust in the brand.

Other approaches related to Direct distribution

• Introduction:

Apart from traditional Direct distribution, there are several other approaches to product distribution.

• Omni-Channel Distribution:

Omni-channel distribution is a modern approach based on multi-channel integration. It allows customers to choose from the range of options and buy from any channel accessible to them.

• E-Commerce Distribution:

E-commerce distribution is a form of direct selling, where products are sold through electronic means, such as websites or mobile applications.

• Cross Docking:

Cross docking is a logistics solution, where incoming goods are sorted and then immediately sent to the next outbound delivery. It aims to reduce product handling and cost of storage.

• Drop Shipping:

Drop shipping is an arrangement, where producer handles storage and shipping of products, while retailer is responsible for marketing and customer service.

• Summary:

In addition to traditional direct distribution, other approaches, such as omni-channel distribution, e-commerce distribution, cross docking and drop shipping are gaining popularity.

Footnotes

Direct distribution — recommended articles

Distribution policy — Aggregator model — Direct export — Indirect marketing channel — Exclusive distribution — Indirect sales — Hybrid business — Selective distribution — Sales agent

References

• Andrejić M. et al. (2015). Distribution channels selection using PCA-DEA approach, International Journal for Traffic and Transport Engineering, Vol. 5, No. 1: pp. 74-81.
• Durden O. (2018). What Is a Direct Channel of Distribution?, Chron.com, accessed 03.04.2019.
• Kotler P. et al. (2008). Principles of Marketing, Financial Times, 5 edition, 2008.
• Szopa P., Pękała W. (2012). Distribution channels and their roles in the enterprise, Polish Journal Of Management Studies, Vol. 6, No. 1: pp. 143-150.
• Todorovic V. et al. (2018). Solutions for more sustainable distribution in the short food supply chains, Sustainability 2018, Vol. 10, No. 3481.

Author: Pavlo Smereka