Distinguish between Direct and Indirect Selling Channel. Discuss the Advantages and Disadvantages of both the channels.
Direct selling channel refers to the channel consisting of no domestic market channel members but consisting of foreign market channel chambers. Indirect selling channel refers to the channel consisting of domestic market channel members. Thus, direct selling channel is short and direct while indirect selling channel is long and indirect. The distinction between direct and indirect selling channel is on the basis of how the exporter carries out the transactions flow between himself and the foreign importer.
In indirect selling channel the exporter utilities the services of various types of independent international marketing middlemen and transfers the responsibility for the selling job to some other organization. In direct selling channel, the responsibility for performing international selling activities rests on the producer.
Advantages of Direct Selling Channel.
Control: The exporting company will have direct and full control over marketing operations and, therefore, can device and implement the proper marketing strategy in tune with the conditions prevailing in the export market.
Customer Satisfaction: In the case of highly specialized equipment’s, buyers would generally prefer to deal directly with the manufacturers as they expect to be completely assured of the service and backup system. Distributors may not have personnel with the requisite technical knowledge and experience for providing psale, point of sale and after-sales service.
Profit: By selling directly the exporting company can save on the commission that. otherwise becomes payable to the agent. If the volume of sales is fairly high, it may become more profitable for a firm to establish its own sales Office than paying commission to a distributor.
Feedback: Direct selling channel improves communication between the manufacturer and the customer. Manufacturer can gather more reliable information and data from the market.
Disadvantages of Direct Selling Channel.
Difficulty in Management: If the manufacturer is not familiar with the foreign market, he will have difficulty in managing the channel.
Risks: Direct selling channel entails more risks because it is time consuming and costly. Direct selling channel is justified when there is a large volume of business. The manufacturer will have to arrange a lot of resources in terms of finance, personnel and equipment’s, which involves a fixed cost.
Advantages of Indirect Selling Channel.
Feasible in case of New Exporter: A new exporter faces a number of difficulties in exporting the products. Indirect channel provides him valuable support. Since the exporter is not well known in the export market, he will face difficulties. He may take the services of a known distributor to handle the product because the standing of the distributor will make the customers accept the offer.
Economical: If the foreign markets are small, it will be economical for a producer to rely on indirect channel. Little or no investment is required to enter the overseas market. An exporter need not maintain personnel to do the overseas business.
Less Risks: Since a local party is involved in the channel, the risk involved is less.
Better Management: The intermediaries may have established network of sales offices and better marketing and distribution knowledge. The intermediary is likely to represent several clients who can help share distribution costs.
Disadvantages of Indirect Selling Channel.
Lesser Control: The exporter does not enjoy much control over marketing operations. This situation may adversely affect the product’s success in the future.
Dependence on Intermediary: The exporter depends upon the services of marketing middlemen. If the chosen intermediary is not aggressive, the exporter may have to suffer.
Not a permanent arrangement: Indirect selling channel may not necessarily be permanent. An intermediary may discontinue handling a manufacturer’s profit if the profit margin is low.