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The Direct Or Indirect Sales Channel, Which One To Choose?

Is it more convenient to have a sales organization made up of its agents or better to rely on distributors, shops, and so on? Unfortunately, in these cases, the answer cannot start from a reductionist and simplified attitude depends. The external factors concerning the company that is called to decide must be considered: in this sense, the market guides the choice.

The choice of a direct or indirect network is also guided by the characteristics of the customers who, let us remember, are the actual value of every company. In addition to quantitative assessments, which take into consideration the considerations on the costs of the various forms of distribution, it is necessary to consider some fundamental guidelines concerning the market:

  1. Fragmentation – concentration: if customers are very numerous and not easily identifiable inhomogeneous segments, it is more appropriate to use dealers who may have greater ease of contact, given the number of profiles and geographical location.
  2. Discount orientation – value-added services: in general, the sale of value-added services is more difficult if entrusted to retailers, at least in the immature stages of the market. Customers who have service expectations beyond the concept of a product experienced as a utility prefer direct contact with the manufacturing company, which is more capable of implementing complex solutions. Direct distribution could be more effective.
  3. Articulated offer range-restricted: the market may require a wide variety of products, which are only partially available in the manufacturer’s portfolio. At this juncture, choosing an indirect network that can satisfy the diversity of necessary products is essential.
  4. Stable – fluctuating demand: in some market scenarios, the need for products or services can be pretty unstable and challenging to predict along the time axis. Having the availability of an indirect network would make it possible to smooth out the peaks of requests due to the flywheel represented by the retailer’s warehouse, capable within certain limits of planning purchases, facilitating the organization, including the production of the company.

In reality, there are also intermediate nuances between the opposing options: naturally, the level of management complexity increases and the possibility that the two systems enter into a potentially fierce competition due to overlaps and the difficulty in defining operational limits. Tight market situations would aggravate all this.

Why Having A Sales Strategy Is Essential

Having a sales strategy is essential because it will drive the entire business. Choosing one sales model will determine the resources to be hired, the skills to be sought, the marketing activities, and much more.

The Advantages And Disadvantages Of The Direct Sales Channel

For example, indirect sales are one of the undeniable advantages of having a direct channel with the customer, which allows you to access a wealth of information you would not otherwise have. This information is invaluable in improving your sales and marketing process. Having a direct sales channel means solving customer problems much faster. 

Finally, having this direct relationship with the customer means controlling the quality of the message you want to convey, and therefore marketing can work without distortions. Among the disadvantages, there is undoubtedly the difficulty in multiplying. A rusks producer who sells to large-scale distribution, for example, gains access to several customers already acquired by the point of sale that would hardly be able to generate by looking for customers directly.

The Advantages And Disadvantages Of The Indirect Sales Channel

In indirect sales, as mentioned above, you can quickly access many potential customers who already exist and are already served by the distributor or reseller on duty. This can boost sales. This is because someone else is working for you to get your product sold. You harness other people’s intelligence and skills. The downside is that all of these people have to be paid. Another disadvantage of the indirect channel is that you have no relationship with your customer. 

You cannot respond quickly to problems or requests. Another problem that arises when the direct channel and the indirect channel are exploited simultaneously is the conflict of interest. In fact, in the indirect channel, having to pay a third party who sells for you, you either make less margin or raise the price.

At the same time, you may be tempted to sell on the direct channel at a lower price, knowing that your profit margin will still be high. The problem arises when your partners in the indirect channel realize that you are selling at a lower price in the direct channel, which may not suit them.


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