Indirect Distribution

Deciding on a Distribution Channel

Distribution Channel

The way a product reaches the consumer

Two categories of distribution channels• Direct• Indirect

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Direct Distribution (Sales)

Producer of product sells directly to the consumer

Advantages:• Less complicated• Less expensive• Eliminates cost of “middle man”• Allows for market research

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Direct Distribution (Sales)

Disadvantages:• Producers may not be good marketers• Direct sales take time away from production• Producers may not be objective in sales• Allows for market research

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Direct Distribution (Sales) Examples

• Person to Person• Display booths at events• Party-plan sales• In-home demos

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Additional Direct Distribution (Sales) Examples

• Business trade shows• Temp space in shopping malls• Direct mail• Mail order• Telemarketing

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Indirect Distribution Utilizes Middlemen Who Sell

Advantages:• Middlemen are sales professionals• Useful when zoning prevents home sales• Useful when location of home base is too far

from consumers• Greater sales volume potential• Frees producer to focus on production

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Indirect Distribution

Disadvantages:• Producer removed from consumers• More expensive than direct distribution• Less control over product

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Indirect Distribution Examples

• Sales Representatives• Wholesalers, Distributors, Jobbers• Wholesale Trade Shows• Wholesale to Retailers• Consignment• Mail Order

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Indirect Distribution Channels

• Wholesalers• Distributors• Jobbers

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Manufacturer or Sales Reps

• Move merchandise• Call on retailers• Handle marketing within a territory• Get commission on orders

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Wholesale Trade Shows

• Build long lasting relationships• Good packaging and nice display are critical• Quality business cards, brochures and/or free

Sales literature and pre-determined pricing structure will help in attracting retail accounts

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Selling Wholesale to Retailers

• Producer can make contact• Must know trade practices• Need written agreements• Cannot undercut retail price

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ConsignmentContracting with Retailers to Display

and Sell Product

Advantages:

• Exposure without overhead expenses of utility and space

Disadvantages: .• Money tied up in inventory with possibility of damage

• Merchandise may not be displayed to advantage

• Merchandise may not be aggressively marketed

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Mail Order

• Producers may develop their own catalogs, fliers, or indirect distribution

• Buy ad space in an established catalog, magazine, tabloid, etc.

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Mail Order

• Timing is important• Knowledge of postal regulations, FTC

rules, and tax laws in each state where merchandise is exchanging hands

• Need good mailing lists

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Securing Mailing Lists

• Can be rented or purchased• Need clear description of customer profile• Check library for mailing list brokers• Check listings in trade journals

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When Evaluating Mail-Order Media, Ask About:

• Demographics of readership (sex, age, ethnicity)

• Regional publications• Number of ongoing advertisers• Circulation numbers

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Magazine Advertising

Advantages:• Longer shelf life than other ad media• Often read cover to cover by different people• Associates your product with prestige of magazine• More sophisticated production process and better

quality paper than newspapers and most catalogs

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Magazine Advertising

Disadvantages:• Longer lead from ad placement

time to published ad• High cost

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Questions When Considering Catalogs

• Is there a fee to be included in the catalog or do you pay a percentage of the sales?

• Is there minimum inventory that must be available?• What is your knowledge of laws and regulations?• Is merchandise warehoused by catalog company or

does producer drop ship.

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Questions When Considering Catalogs

• How is merchandise evaluated – actual product or photographs?

• What is the pricing structure?• What is the time frame for catalog

production and distribution?

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Additional Indirect Distribution Examples

• TV Marketing• Computer Networks• Vending Machines / Rack Merchandising• Cooperatives• Franchises• Multilevel Marketing (MLM)

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Telemarketing

A sales approach conductedentirely by phone.

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Television Marketing

• Cable network channels• Infomercials

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Computer Networks

Vast online information system thatlinks businesses and potential customers

all over the world.

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Internet Marketing

• Web sites• Social Marketing• Internet Sales

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Vending Machines&

Rack Merchandising

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Cooperative

A business formed by a group of people to market their products together

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Franchises

• Buying continuous direction and support from people who are experts in their field

• Owned and managed by self-employed business people

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Franchise Agreements May Include

• Using the franchisor’s name• Help in finding a location• Store design and outfitting

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• Advertising• Acquiring Supplies• Management Training• Protected Territory

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• Financing• Marketing and Promotion• Record Keeping

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Multi-Level / Network Marketing

People sell at different levels in company hierarchy. Distributors recruit new people to join the program. The practice is sometimes called

“sharing” business.

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Possible Distribution Channels

• Direct Channel: Producer > Consumer

• Single Channel (w/ middleman): Producer > Retailer > Consumer

• Double Channel (w/ middleman): Producer > Wholesaler > Retailer > Consumer

• Simultaneous Dual Channel: (Producer > Wholesaler > Retailer) and (Producer > Consumer)

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Making Choices

Consider:• Opportunities available• Appropriate for your business• Delivery time frame• Packaging for shipment• Cost• Keep up to date

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Indirect Distribution

Documents

direct distribution

distribution

wholesaler

franchise

producer gt

middleman

retailer gt

magazine