When one member of the Channel owns other members of the channel it is called?

AB Distribution Channels (marketing channels)-The routes followed in the process of making a product or service available for use or consumption by the consumer or business user. IntermediaryA business involved in activities that move products from the producer to the final user; also known as a middleman or channel member. Direct marketing channelA marketing channel that has no intermediaries; the company sells directly to consumers. Indirect marketing channelA channel containing one or more intermediary levels Channel conflictDisagreements among marketing channel members about goals, roles, and rewards. Conventional distribution channelA channel consisting of one or more independent producers, wholesaler, and retailers, each of which is a separate business making its own decisions about providing what its customers want. Vertical marketing system (VMS)-A distribution channel in which one member (Perhaps the manufacturer) owns the organization at the other levels in the channel, has contracts with them, or has so much power that they all cooperate and act as a unit. Horizontal marketing systemA channel arrangement in which two or more companies at the same channel level join together either temporality or permanently to pursue a new opportunity. Multichannel distribution system (hybrid marketing channel)-A distribution system in which a single firm develops two or more marketing channel to reach one or more customer segments. DisintermediationThe displacement of traditional intermediaries from a marketing channel as a result of technological advances and the appearance of new types of intermediaries. Marketing logisticsaka physical distribution. Tasks involved in managing the physical flow of materials, final goods, and related information supply chain managementsystem for coordinating inbound, outbound, and reverse distributions. inbound distributionmovement of products and materials from suppliers to the factory outbound distributionmovement of products from the factory to resellers and consumers reverse distributionmovement of broken, unwanted or excess products returned by consumers or resellers. storage warehouselarge building used used to store goods until they can be sold. Moderate to long time distribution centerlarge, highly automated warehouse designed to receive goods, take and fill orders, and deliver goods as quickly as possible. just-in-time logistics systeminventory management that provides shipment of new stock exactly when needed in the correct amount. intermodal transportationcombination of 2 or more modes of transportation to maximize advantages of each. Integrated logistics managementlogistic concept emphasizes teamwork, both within company and marketing channels, to maximize performance of entire distribution system cross-functional teamworkworking together inside the company to coordinate logistics decisions related to marketing, sales, finance, operations and purchasing to create high market satisfaction at a reasonable cost. logistics partnershipsworking with channel partners outside company to meet goals of efficiency and lowering costs while satisfying customers and improving whole channel distribution third-party logistics provider (3PL)independent logistics provider that performs any or all of the functions required to get the client's product to market

A distribution channel is a chain of businesses or intermediaries (such as manufacturers, warehouses, shipping centers, retailers, and the internet) through which goods and services pass until they reach the end consumer. Channels are broken into direct and indirect forms.

A direct distribution channel allows consumers to buy and receive goods directly from the manufacturer. An indirect channel moves products from the manufacturer through various intermediaries for delivery to the consumer.

Both distribution channels have advantages and disadvantages for a business. Those involved in a company's management and corporate governance must determine the better option.

Key Takeaways

• Direct distribution is a direct-to-consumer approach where the manufacturer controls all aspects of distribution.
• Indirect distribution involves third parties, like warehouses, wholesalers, and retailers.
• Direct distribution gives companies more control over the whole process.
• Indirect distribution may allow companies to focus on their core business while outsourcing distribution to an expert.
• A manufacturer is responsible for different costs, depending on which channel it uses.

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What Is The Difference Between A Direct And An Indirect Distribution Channel?

Direct Distribution

A direct distribution channel is organized and managed by a company that sells directly to consumers. In such a case, the company keeps all aspects of delivery in-house (instead of using vendors) and is solely responsible for ensuring that customers receive their purchases successfully.

Direct channels require more work and can be more expensive to set up. In fact, they may require significant capital investment. Warehouses, logistics systems, trucks, and delivery staff must be put into place. However, once that's done, the direct channel is likely to be shorter, less involved and less costly than an indirect channel.

By managing all aspects of the distribution channel, manufacturers retain more control over how goods are delivered. They can cut out inefficiencies, add new services, and set prices.

Tip

A direct channel between a company and its customers may be a smart way to build and secure customer relationships.

Indirect Distribution

An indirect distribution channel involves intermediaries that perform a company's distribution functions. Indirect distribution frees the manufacturer from certain startup costs and responsibilities that can cut into the time it needs to spend on running the business.

Plus, with the right vendor relationships, an indirect distribution channel can be much simpler to manage than a direct distribution channel. It can give a company welcome support and distribution expertise that the company may not have.

However, indirect distribution can also add new layers of cost and bureaucracy which can increase costs to the consumer, slow down delivery, and take control out of the manufacturer's hands.

The costs of having vendors involved in an indirect distribution channel may translate to higher product costs for consumers.

Key Differences

As mentioned, a direct distribution channel moves a company's products directly to consumers from the company. An indirect channel outsources the distribution of those products to different intermediaries that are responsible for delivery.

One goal of any company with customers is to deliver products in the most efficient and effective way for the customer and the company. Keep in mind that the distribution channel ideally should add value for customers and support a company's goals for sales.

Here's a summary of key differences between direct and indirect distribution channels Direct Channel Indirect ChannelControlCompany maintains ultimate control over (and responsibility for) distributionCompany has less distribution control and depends on othersCostGreater initial costs but efficiencies may develop over time and lower themSharing costs can lessen financial impact; good vendor relationships may lead to more savingsRelationshipsCompany has direct connection with customers, which can support brand loyaltyCompany depends on intermediaries for good customer interaction (which can backfire if vendors have problems)LogisticsCompany is responsible for all aspects of distributionOthers handle distribution of productsCore FocusMay be difficult with distribution responsibilitiesEasier to maintain since distribution is handled by othersDelivery TimePotentially more streamlined due to direct routeMay take longer, depending on situations with vendorsBrandCompany can control the customer experience and build brand awarenessDistribution problems might adversely affect relationships and view of companyProfitKeep more profitShare profit with others

Does Amazon Use a Direct or Indirect Channel of Distribution?

Amazon uses both distribution channels. It uses a direct distribution channel when it sells products to consumers directly. The indirect channel comes into play when consumers on Amazon's site buy products from independent retailers and those retailers must fulfill deliveries.

Which Companies Use Direct Distribution?

Some of the companies that use direct distribution include Amway, Apple, Avon, Bowflex, Charles Schwab, L.L. Bean, Mary Kay, Peloton, and Walmart. To lower costs and gain more exposure, L.L. Bean and Peloton also use indirect distribution.

What Distribution Channel Is Best for a Business?

You'll have to consider various factors to make the choice of direct distribution channel vs. indirect distribution channel. For instance, the costs of each distribution channel, costs you may have to pass on to customers, the channel that might encourage greater sales and repeat sales, the speed at which your products can be delivered, and how fast your competitors make their deliveries. You should also consider the amount of control over customer relationships that you feel you should keep or give up.

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