Question

Describe types of distribution channels and provide an example of each. Discuss the advantages and disadvantages of each using real-world examples.

Answer 1

Types of distribution channels:

A. Direct Channel: In this channel of distribution, the manufacturer sells directly to the consumers by eliminating all the middlemen. For example, Nike sells its products by opening its stores.

B. Indirect Marketing Channel – In this channel of distribution, the manufacturer sells products and services with the help of middlemen like wholesalers and retailers. For example, Coca-cola sells its products to consumers via wholesalers and then retailers.

The pros of direct distribution

- collect valuable data on customer buying habits on a regular basis to analyze the buying behavior.

- get your products to consumers faster than the competitors

- avoid sharing profits with third-party intermediaries like wholesalers and retailers.

For example, Nike sells through a direct distribution channel by opening its stores at various locations. It makes products by collecting customer feedback by personally handing the customers in the stores.

The con of direct distribution is that it involves a high cost in supply chain management and logistics. for example, Nike invests a huge amount in buying a place for its stores and hiring professional employees and workers who can maintain the accuracy and image of the company.

The pros of indirect distribution

- share shipping and storage costs with the wholesalers and other intermediaries

- make it easier for customers to find the products at any place they go.

- no need to maintain the ambiance of the shop or store

For example, Coca Cola has a wide network of wholesalers in the world that sells products to the retailers and the retailers sell it to the customers. It saves the cost of transportation and managing stores for the company.

The con of indirect distribution is that the company cannot directly contact the customers and receive feedback from them. they have to delay on various distributors for collecting feedback that can be biased and false.

For example, the customers of the coca-cola company find it difficult to convey the company a message that they are facing a slight change in the taste of the product.

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