Meaning, Merits and Demerits of Direct Distribution System

Meaning of the 'Direct Distribution Method'

Under this system, the manufacturer supplies his products to the consumer through the medium of his own shops or depots, or branches or representatives, etc. In the direct distribution system, there is no intermediary between the producer and the consumer, i.e. the product is directly supplied from the producer to the consumer. For it, the producer adopts the following means

      i.)            Own Shops;
    ii.)            Own Representatives;
  iii.)            Mail-order Business;
  iv.)            Telephone;
    v.)            Vending Machines.
  vi.)            Merits of the Direct Distribution System

       I.            Merits to the Consumers

(1)   Availability of Product on Low Price. Since, in this method, there is no intermediary in between, hence the consumers are able to get the product on a lower price, and are saved of the exploitation by the intermediaries. The larger the number of the middlemen, the higher the price of the product, and the final burden has to be borne by the consumer.

(2)   Availability of Product in Original Form. Many a times, due to the intermediaries, the consumers are unable to get the product in that original form in which it was received from the manufacturer. In the direct distribution system, this problem is fully solved.

(3)   Proper Management of the Services. By selling through this system, the consumers are able to avail all the services extended to them by the manufacturer (producer), for instance the after-sales services. In this system, the consumers' complaints are, immediately or at the earliest resolved.

    II.            Merits to the Manufacturers

(1)   Knowledge of the Market. Since the producer is directly related to the consumer, he remains conversant with the market demands, changes in the consumers' list, etc. Consequently, he could make necessary adjustments is his product according to the market.

(2)   No Competition. In this method, only one producer's goods are sent to one sales center. Consequently, other competing product doesn't happen to come before the customer and thus the consumer, without comparing the competing products, makes the purchases and the manufacturer is saved of the competition.

(3)   Price Control Possible. By this method, the producer could fix up the prices in his own way as desired by him.

Demerits of the Direct Distribution System

       I.            From Consumers' Point of View

(1)   In this system, the consumers are unable to mutually compare the products or commodities.

(2)   Since the consumers are required to purchase the product at one specific or prescribed price, he is unable to strike the bargains.

(3)   There is no facility of changing the products by exchanging or returning the product not liked and taking some other product in return.

    II.            From the Manufacturer's Point of View

(1)   By adopting this distribution method, the producer is required to invest more of money.

(2)   The manufacturer is required to set up a big sales organization.

(3)   In it all the kinds of risks or losses are to be borne by the manufacturer or producer.