Definition: Direct distribution is a supply chain strategy that delivers products directly from producer to end consumer without any intermediaries. This term applies when the manufacturer takes the product directly to the consumer with its own transport and logistics network.
What Does Direct Distribution Mean?
Although wholesalers and distributors are common participants in most of the distribution channels, some companies prefer direct distribution. When the producer chooses this model he must manage several complex processes. The company has to deal with customer orders, which means to receive and respond requests from multiple kinds of persons or companies. In addition, delivery logistics has to be designed with a low cost approach in order to maintain the profitability of the operations.
On the other hand, direct contact with end consumers allows the company to obtain permanent feedback about their opinions and reactions, which increases its ability to satisfy customers and provide them with some added value.
Nowadays, direct distribution is mainly seen at online sales because it is easier to reach global markets while maintaining lower marketing and sale costs by using the internet as the main distribution platform.
Example
A new small firm named Mandy Bed was created to manufacture high quality bedding with innovative designs and high-end materials. The Founder and President is trying to pick the most suitable distribution model. Selling through the most popular retailing chains will bring advantages because of the access to a large market and management of fewer customers. Nevertheless, the President thinks that an additional player will push prices too high.
Moreover, the brand will be competing with many other products on the shelves. The company finally selected direct distribution through two channels, one store located at a luxury commercial district and online sales through third-party marketplaces and its own web site. This will guarantee higher control on the distribution process and lower prices. The company will also have direct contact with consumers which will keep them supplied with first hand information about their opinions, preferences and reactions to the product.
