Distributors are experts at receiving, organizing and managing inventory as well as logistics and transportation. One of the biggest challenges is the sizeable costs that can come with direct distribution. What Are the Kinds of Marketing Channel Functions? To sell directly, you typically need your own distribution center or warehouse to hold completed inventory. Because they … In this case, big trucks are needed to contain the large amount of goods to be sold throughout the day. To use the direct distribution approach may involve greater investment than is worthwhile. Here are some of them: In the wholesaler’s point of view, he should have a big capital to buy the product from the manufacturer and then. The biggest disadvantage of exclusive distribution is that company is dependent on few suppliers or retailers for marketing of their products which in a way does not give benefits of diversification to the company because if 1 or 2 distributors are not able to do good sales then it can impact the sales of the company in a big way which is not the case when company has many small … The electronic channels include telephone and television channels, internet and web. Wholesaling is dependent on quantity, which means that he can’t purchase the items that he wanted alone. This means owning or renting a building, hiring labor to manage storage, shipment and logistics, paying utilities and possibly throwing out inventory that goes bad or expires. Morsa Images/Getty Images. Retailers are experts at holding inventory for customers and providing sales and service support. If you decide to go the indirect route, it’s important to clearly define the terms of your agreement with your partner from the beginning. This is true at times, but buyers fail to consider the retailer’s expenses on transportation, VAT, and human labour. Asking for discounts is a disadvantage most of the time in the retailer’s part. One of the examples is wholesale fish, which the wholesaler bought from the fishmongers. Wholesale Financing Indirect Financing Syndicated Financing Our team Cleantech Practice Our team ... good way of bringing your product to market without burdening yourself with the start-up costs of establishing your own distribution channels. This approach often has cost savings for the business and value benefits for the customers. What Are the Different Channel Organizations in the Marketing System? This means you need to ensure you have plenty of warehouse storage space to facilitate those sales. ( Log Out / However, there are some drawbacks and risks. In the buyer’s point of view, wholesaling is not good when it comes to quantity. Disadvantages of delivering services through agents and brokers 1. Fill in your details below or click an icon to log in: You are commenting using your WordPress.com account. In the direct-to-consumer channel, brands don’t have to share sales profits with other parties. Quantity. The Advantages & Disadvantages of Wholesalers All Wholesalers Aren't Created Equal. The retailer will have to compare his goods with other retailer before he can set his own price. The main disadvantages are: -it’s risky. Selling wholesale means that you will likely be selling your products in large quantities to many different retailers and distributors. If you distribute products directly, you may require a full sales staff that sells directly to customers. When distribution channels are used, then... 2. Some distribution channels can be extremely complex.. Hemera Technologies/AbleStock.com/Getty Images. The need for a big storage is a disadvantage to the wholesaler. Dedicated to the reliable supply of fresh, quality seafood. In informal terms, direct distribution often is described as eliminating the middle man. However, there are major disadvantages that are hard to avoid. You may also find it harder to reach potential customers without the network an established distributor provides. The wholesaler doesn’t have a choice but to find means to sell the catch even at a very low price. People would think that the retailer has purchased the goods at a very low price since they were from wholesale. A distribution channel can also be very complicated, with several levels.Each layer of marketing intermediaries that performs some work in bringing the product to its final buyer is a "channel level". Large wholesalers aren’t hard to find. Privacy Notice/Your California Privacy Rights. Manufacturers normally have a sales staff that meets with distributors or retailers to convince them to carry the products to market. These costs can offset or even exceed the profits you give up when you avoid the wholesale and retail steps in distribution. This is a competitive disadvantage because customers are notoriously in favor of instant gratification. 1. ( Log Out / Difference Between a Vertically Integrated Company & a Horizontally Integrated Production Company, Keys to a Successful Distribution Business, Advantages & Disadvantages of Conducting a Business Under Economies of Scale. What Are the Cons of Distribution Channels? 1. Another type of intermediary is a wholesaler: a company who buys in bulk from companies such as yours and then resells the products through one of the channels listed here.The advantage for you is minimal involvement and less competition, as compared to selling to retailers. Change ), You are commenting using your Google account. When it comes to business, wholesaling helps a lot of retailers and buyers get a product at a good price. The buyer has to buy a minimum number or amount of products dictated by the wholesaler. If the goods were not all sold, most of the time, the wholesalers cannot return the goods to the manufacturers. He has been a college marketing professor since 2004. Advantages And Disadvantages Of Distribution Channels. In informal terms, direct distribution often is described as eliminating the middle man. Posted by brownsseafoods on September 17, 2012, https://brownsseafoods.wordpress.com/2012/09/17/5-disadvantages-of-wholesale/. The figure below shows some examples of channel levels for consumer marketing channels: The ongoing task of managing and paying a sales force is another element that goes beyond typical manufacturer expertise in designing, making and selling products to distributors. 3. Disadvantages of Direct Distribution. The term “wholesale” refers to the link in the supply chain that provides retail... Finding the Right Wholesaler. It is a distribution system in which manufacturers produce or create products and sell them directly to a business or consumer buyer. In addition, brands retain marketing control, meaning tha… The process of making goods available to the consumer needs effective channel of distribution. ( Log Out / The ability to interact with the end user is completely eliminated.. He holds a Master of Business Administration from Iowa State University. Change ). If there is … This is to avoid over and under-pricing which would confuse the buyers. The goods may be sent to the consumer directly or indirectly through middlemen.