Disadvantages of indirect distribution channel:
Part of the profit is taken by intermediaries.
The image of the manufacturer is created, among other things, by the work of intermediaries with consumers. The business owner has no opportunity to monitor this activity on an ongoing basis.
Each intermediary's markup increases the final cost of the product. In the case of direct sales, the same product is cheaper.
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Types of indirect sales
Indirect sales can be carried out in several ways:
Distribution
The rights to the product are transferred to the selling company. The manufacturer usually takes care of the transportation and, in the case of large volumes of deliveries, storage of the product. The distributor mainly interacts with the customers.
Dealership
A dealer is a wholesale buyer who purchases a large batch of goods for subsequent resale. He can sell products from one supplier or work with several competing companies at once. Usually, a dealer specializes in one product category, and therefore is not able to fully form the seller's assortment.
Types of indirect sales
Franchise
In this case, the seller is granted temporary use of the trademark on condition that it is used correctly. Namely, it is necessary to use the manufacturer's corporate style, product range, comply with service regulations, etc. In other words, the franchise is a complete copy of the original business and follows all its rules.
Branches
Working in the branch format involves selling goods for a commission fee. The seller provides the branch with all the advertising materials that increase the site traffic, which in turn increases the profitability of the business.
It is possible to work with several intermediaries at once. This makes it possible to distribute the goods over a large territory. The number of intermediaries determines the length of the indirect channel, which can be short or long.
If the work is carried out with only one intermediary, who is actually a retailer, the indirect channel is considered short. If there are two or more partners and they work with both wholesale and retail, we are dealing with a long indirect channel.
It is worth considering that the longer the intermediary chain, the higher the final cost of the product