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Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers. - Leaving Cert Business - Question 7(C) - 2018
Question 7(C)
Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers... show full transcript
Worked Solution & Example Answer:Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers. - Leaving Cert Business - Question 7(C) - 2018
Step 1
Benefits
Answer
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Shortest and Simplest Form of Distribution: A direct channel allows the producer to sell directly to the consumer, simplifying the distribution process and reducing intermediary costs.
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Low Overheads: With fewer intermediaries involved, a business can operate with lower overhead costs associated with distribution.
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Potential Global Reach: Utilizing the internet and platforms like eBay can help small businesses reach a global customer base without the traditional geographical limitations.
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Greater Flexibility: A direct distribution channel offers increased flexibility in terms of pricing strategies, product offerings, and marketing methods, allowing for rapid adjustments to market changes.
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24/7 Convenience: Direct sales often facilitate transactions around the clock, providing convenience for consumers and potentially increasing sales opportunities.
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Higher Rates of Profit: Direct channels often yield higher profit margins as producers eliminate intermediary costs and retain full control over pricing.
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More Control Over Distribution: Businesses maintain greater oversight over their products and brand image by managing their own distribution channels directly.
Step 2
Challenges
Answer
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Geographical Reach and Business Volume: Competing with established wholesalers and retailers can be challenging due to their extensive distribution networks and economies of scale.
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Shipping Costs: Direct sales might require the business to shoulder the shipping costs, especially if they handle all logistics themselves, which can be financially burdensome.
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Lack of Experience: New businesses may lack the experience in direct marketing and distribution, making it harder to navigate challenges effectively.
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Competitors Using Different Channels: If competitors employ wholesalers or retailers, they may benefit from increased visibility and market share, making direct selling alone less effective.
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Customer Perception: Customers may prefer established retailers that offer a sense of trust and reliability, making it more difficult for new businesses to entice them to purchase directly.