If you are operating a business and are ready to sell the products on the market, this is the stage where methods of distribution come into the picture. Getting your product into the market is known as distribution. Distribution channels are divided into two types. It is very important to understand the leading differences between the methods of distribution channels, that is, direct channel of distribution and indirect channel of distribution. 

According to the terms, the direct channel of distribution allows clients to buy and acquire products directly from the manufacturer. However, an indirect channel of distribution transports goods from manufacturers to clients by way of a number of middlemen. 

Both channels of distribution have benefits and drawbacks as well for businesses. The most beneficial option must be decided by those who are in management and corporate governance. You could decide what is best for you at any given time by going through the below breakdowns. 

Direct channel of distribution 

This method of distribution channel is well organized by the company itself. It sells straight to the consumer or client. The company does not make use of any vendor services. The organization handles all the aspects of delivery and is solely in charge of making sure the consumers receive their orders successfully. We can take the example of a clothing company operating on an e-commerce platform. It would use the direct distribution channel.  

Direct channels may require more cost to set up and also involves more work. They also need a substantial amount of investment. In this method, the company individually bears all the financial risks. There is a very high chance of an audit when selling products to clients. Therefore, flawless documentation and tax records should also be required. It requires a significant cost of investment as direct distribution involves the necessary purchase of equipment, delivery trucks, and warehouses. But this investment generally pays off in the long term. 

The pros and cons of direct distribution

Whether it is a small business or a multinational, it allows goods to be sold directly to customers. You can easily cover all the phases of the market. By directly dealing with your customers, you have got control over the performance of your product. The pros of direct channel distribution are;

• Pay attention to product quality and client feedback.
• Make yourself stand out from the competition. 
• Gather useful information regarding the client’s buying pattern.
• Fast delivery
• Stronger relations with the clients
• No third-party sharing of profits

While having a number of pros, it still might have cons for some business owners. 

• More time consumption
• Expensive rates
• Limited market coverage

Indirect channel of distribution 

This method involves a third party that handles the company’s distribution operations. This strategy provides an edge to organizations and frees them from dispersal operations. Organizations don’t have to worry about the difficulty of getting customers through the door, which allows them to concentrate on their customer base, product quality, and customer satisfaction. 

The indirect channel of distribution enables organizations to widen their business and reach more clients without having the thought of storing the inventory. Third-party logistics has a lot of advantages. It provides a business with much-needed support and expertise in the distribution sector that it might not have. It assists companies to share the cost of inventory. 

For instance, if we sell our product to a retailer, the product will be sitting on the retailer’s shelf ready to buy, but it is already paid for. Eventually, instead of that company, the retailer will bear the cost of that product.

The pros and cons of indirect distribution 

The leading advantages are the availability of the product in the market and also the employment of a sales force to make it more available to the customers. The utilization of the indirect channel of distribution has its own benefits. Some are:

• Share warehouse and delivery costs. 
• Customers will easily find the products.
• Advantages from the experience of the third parties. 
• Not getting yourself into complicated distribution operations.
• Knowledge regarding the local market

Despite having numerous benefits, it might have some disadvantages for enterprise owners. 

• The space between the client and the association
• The profit will be split among the agents.
• The delivery time took longer.
• It’s hard to establish brand loyalty.

The decision of the best strategy to utilize for your business depends completely on what product you are selling and in how much quantity. You will need to take into account a number of factors before jumping into the decision of employing direct or indirect channels of distribution. If you are operating a small business and you do not have the capital to invest in distribution, stick with the one you have chosen until your business grows. At the same time, if you are selling business to business, direct distribution will be the best option as you will never allow any distribution channel between you and the clients.