Q&A - Should a business avoid intermediaries and sell direct?

A key decision a business has to make about distribution is whether to sell “direct”. Direct marketing means selling products by dealing directly with consumers rather than through intermediaries.

Traditional methods include mail order, direct-mail selling, cold calling, telephone selling, and door-to-door calling. More recently telemarketing, direct radio selling, magazine and TV advertising, and of course e-commerce have become significant methods of reaching customers directly.

The main advantages of selling direct are that there is no need to share profit margins and the producer has complete control over the sales process. Products are not sold alongside those of competitors either.

There may also be specific market factors that encourage direct selling:

• There may be a need for an expert sales force, to demonstrate products, provide detailed pre-sale information and after-sales service
• Retailers, distributors, dealers and other intermediaries may be unwilling to sell the product
• Existing distribution channels may be owned by, or linked to, competing producers (making it hard to obtain distribution by any other means than direct)

However, there are significant costs associated with selling direct which may be higher than the costs associated with using an intermediary to generate the same level of sales.

There are several potential advantages of using an intermediary:

• More efficient distribution logistics
• Overall costs (even taking into account the intermediaries’ margin or commission) may be lower
• Consumers may expect choice (i.e. the products and brands of many producers) at the point of sale
• Producers may not have sufficient resources or expertise to sell direct