What is an indirect distribution channel?
An indirect distribution channel is a method in which a company uses intermediaries to deliver its products or services to customers. These intermediaries, known generally as partners, could be wholesalers, distributors, resellers, or dealers. Instead of selling directly to the customer, a company utilizing indirect distribution channels allows their partners to handle all or a portion of the sales process on their behalf.
Think of it like this: You’re a telecom company that has designed a state-of-the-art network router. Rather than selling these routers directly to businesses or consumers, you might work with local distributors who specialize in selling telecom equipment. These distributors, who have a wider reach, an existing supply chain, and established customer networks, can more efficiently market and sell your routers to various retail outlets or directly to businesses.
Some of the major benefits of using indirect distribution channels to sell your products include:
- Extended reach: You can reach new markets and customers that might be difficult to serve directly
- Cost efficiency: This distribution strategy may be more cost-effective than establishing your own sales infrastructure, especially in new markets
- Local expertise: Partners often possess local market insights and customer relationships that can help you grow your sales
- Existing supply chain: Rather than building your own supply chains, you can tap into the existing ones of your partners
Managing indirect distribution channels can be complex, as you must align your company’s and partners’ goals. A successful strategy generally depends on careful partner selection, nurturing engaged relationships with those partners, providing adequate support, and maintaining good communication. When set up well, though, indirect distribution channels can be a powerful way to rapidly increase your reach and grow your sales.