Published by MBA Skool Team, Last Updated: January 17, 2022
What is Direct Channel?
A direct channel of distribution defines a condition in which the producer sells a product to a consumer directly without any of the intermediaries. In case of a direct chain of distribution there can be online sales or mail order or face-to-face sales but there can’t be any sort of distributor except the original producer.
Those chains of distribution which include nonaffiliated retailers or wholesalers can’t be defined as direct channels of distribution. They are called indirect chains of distribution.
Direct Channel can be an effective way to do business given how the technology has become important today. People buy using internet so the brands or manufacturers can use the D2C or direct to consumer model and save a lot of costs doing so. Without intermediaries the businesses can save costs and can have more control over the product and the sales.
Many big brands are using direct channel to sell their products online as well as through conferences and virtual events. The profits of the manufacturer would increase in case the direct channel is used effectively.
Another aspect of direct channel is that customers directly connect with the brand and manufacturer which leads to faster feedbacks and improvements as when compared to the traditional supply chain channels where the customers are interacting more with the intermediaries as compared to the manufacturer.
A direct channel of distribution say an E-Commerce portal and delivery has various benefits. A web-based selling has very low overhead and provides your product publicity at a global level. Due to the absence of any intermediaries to share the profits, the direct distribution channels generally have higher profit than the indirect distribution channels.
An E-Commerce portal is very convenient and is available round the clock for its customers. A number of customers also appreciate the opportunity to provide profits to producers and artists directly. Due to these reasons we are witnessing a huge surge in the E-Commerce space.
The most generic disadvantage of a direct distribution channel is its inability to compete with the high geographical reach and huge business volume of an indirect distribution channel which involves major wholesalers and retailers. Although players like Amazon, E-bay, Alibaba etc. are increasingly expanding and serving new markets everyday Last Mile Delivery for remote areas still remain a big challenge for them to encounter.
The companies do provide Free Shipping for a lot of products and for orders over minimum limit but still not all products are exempted from delivery charge which tends to fend away the customers.
Examples of Direct Channel
1) Amazon is the producer of KINDLE, so amazan.com selling Kindle online as an E-Commerce portal is a case of Direct Channel
2) A small farmer selling his production of vegetables in the market is also an example of Direct Channel.
Hence, this concludes the definition of Direct Channel along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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