Business distribution can be defined as the process by which a company or business tends to provide its service or products to the end consumers. There are mainly two types of business distribution; direct and indirect. While a company tends to sell its products or services directly to the consumers in the former, the business is done through multiple intermediate channels when it comes to the latter. These intermediate channels are usually referred to as intermediaries or middlemen. This factor is extremely significant to ensure the effective and smooth distribution of your business over a targeted geographical market.
An indirect distribution plan tends to depend on multiple factors, unlike direct distribution. Some of those factors include the type of product, market size, the cost of intermediaries, the marketing environment, and the type of company. Similarly, it flaunts different types of intermediaries as well. Some of the common middlemen or intermediaries that you may find in the distribution process of a business are given below.
Agents are the intermediaries that introduce the products or services of a particular company to the customers on the behalf of the producers. While agents are just a small extension of companies, their actions tend to pose a huge impact on the overall business. Note that the agents will not have any ownership over the products or services of a company. Rather, they tend to work on a commission or monthly fee basis.
When it comes to wholesalers, they tend to purchase the products in a bulk directly from the manufacturers. As a result, they are likely to get the products at a much lower price when compared to retailers. They usually store and warehouse those products in huge quantities and tend to sell it to other intermediaries in smaller quantities to make a profit. It is worth noting that wholesalers are unlikely to sell their products to the end consumers. Rather, they sell it to other intermediaries including retailers.
Distributors work almost similar to wholesalers. However, the former is expected to sign a contract so that they will be able to purchase or carry goods from only one company. In other words, distributors will not carry multiple varieties of products from different producers or brands.
Retailers are ideally the shop owners who tend to sell products of multiple brands. They usually purchase goods from the distributors or wholesalers rather than directly from the producers. Needless to mention, retailers usually sell the products to the end consumers in a way to achieve a particular profit margin.