Indirect Distribution: Definition, Examples and Benefits for Businesses

In the business world, distribution is one of the important elements that must be considered by companies. Distribution not only plays a role in spreading the goods produced, but also affects the buying process and consumer satisfaction. One type of distribution that is often used is indirect distribution, where products cannot be received directly from the producer by the end consumer.

So, what are the benefits for businesses? What are some examples of indirect distribution? To answer all these questions,  TransTRACK has summarized it for you.  Check out the explanation below.

What is Indirect Distribution?

Indirect distribution also known as “indirect distribution channel” is a distribution strategy where the manufacturer does not sell its products directly to the end consumer. Instead, the product passes through intermediaries or additional distribution channels before reaching the hands of consumers. In this concept of channeling goods, there are intermediary stages that help products pass through the supply chain before reaching the market.

Indirect Distribution Stages

Indirect distribution generally has three intermediary stages before the product reaches the end consumer. These stages start from producers, distributors, to retailers. Here is the explanation.

Manufacturer Stages

The first stage in this distribution is the producer. All distributed products start from the manufacturer. A manufacturer is an entity or company that designs, manufactures, and produces a product or service. After the manufacturer makes the product, it is then distributed.

Distributor Stages

Distributors are the first middlemen in the indirect distribution channel. They purchase products from manufacturers and distribute them to various stores or retailers. Distributors often have an extensive network and large geographical coverage, which allows the product to reach a wider area as well.

Retailer

Retailers are the next step in the indirect distribution chain. They are shops or businesses that sell products directly to end consumers. Retailers are places where consumers buy products or services, and they can be supermarkets, retail stores, restaurants, or online stores.

In indirect distribution, the role of distributors and retailers is crucial. Distributors help manage product stock, organize deliveries, and contribute to product promotion. Retailers, on the other hand, interact directly with consumers and provide products for purchase.

Advantages of Indirect Distribution for Businesses

Using this type of channeling in business has a number of significant advantages. Let us understand in detail some of its key benefits:

Reaching a Broader Market

One of the biggest benefits of channeling these goods is the ability to reach a wider market. By engaging intermediaries such as distributors and retailers, your products can be available in different locations and geographical areas. This allows you to reach more customers without the need to manage multiple points of sale yourself. Distributors and resellers can help market your products to different market segments and regions.

Streamline Logistics Management

This type of distribution helps in managing logistics more efficiently. Distributors often have storage facilities and a strong logistics infrastructure. They can organize the storage, packaging, and shipping of products better than if you had to take care of it yourself. This can reduce your operational burden and logistics costs.

Increased Focus on Core Business

Using this type of channeling can allow you to focus more on the core aspects of your business. You can focus more on product research and development, innovation, and researching new marketing strategies. Managing your own distribution channels requires significant time and resources. By using distributors and resellers, you can free up time and resources for the things that really matter.

Marketing and Promotion

Distributors and retailers often have better capabilities when it comes to promotion and marketing locally. They can plan advertising campaigns, promotional offers, and marketing strategies tailored to their market. This can help increase your brand’s visibility to the general public.

Examples of Businesses that Implement Indirect Distribution

Examples of indirect distribution can be found in various industries and businesses. These are some examples that will help you understand how this distribution works practically:

Clothing Business

Most clothing brands use indirect distribution. They sell their products through various intermediaries, such as clothing distributors, agents, and retail stores. Consumers buy these clothes in retail stores or through online stores. Most apparel manufacturers usually do not sell their products directly to end consumers.

Food and Beverage Business

Food and beverage products also often use indirect distribution. Food and beverage manufacturers work with food distributors, wholesalers, and retailers. You can find these products in supermarkets, restaurants, grocery stores, or specialty stores such as alcohol stores.

Electronics Business

Electronics companies like Samsung, Apple, or Sony use a network of distributors and retail stores to sell their products. They do this to reach a wider market around the world. Consumers will buy their products from electronics stores or through online stores.

Automotive Business

The automotive industry is a classic example of indirect distribution. Car manufacturers like Toyota, Honda, or Ford sell their cars through a network of authorized dealers. Consumers who want to buy a car go to a car dealer to select and purchase a vehicle. These dealers are middlemen that help manufacturers sell their products to consumers.

In all these instances, it is an important strategy to sell products to consumers. Intermediaries such as distributors, wholesalers, retailers, and dealers play a role in helping products reach a larger market and utilize their expertise in logistics, promotion, and sales. Through strong relationships with intermediaries, manufacturers can reach more consumers.

To improve the efficiency of this process, the use of technology such as  Fleet Management System (FMS) will have a significant impact. The application of FMS to the indirect distribution process is an important step in optimizing a company’s distribution operations. FMS is a system designed to manage and monitor company vehicles, enabling efficiency and accuracy in the delivery and distribution process.

The implementation of Fleet Management System in indirect distribution helps companies optimize the entire supply chain. It ensures on-time delivery, logistics efficiency, cost savings, and improved customer satisfaction. With FMS, companies can more effectively manage their vehicles and optimize distribution operations in a complex environment.
You can get this FMS technology at TransTRACK. TransTRACK is a provider of cutting-edge technology for logistics, fleet management, freight forwarding, and personal vehicle maintenance. Visit the website TransTRACK for more information!