What Is an Indirect Channel of Distribution?

What Is an Indirect Channel of Distribution?

An indirect channel of distribution is the succession of points through which a product must pass to get from the creator to the end-user. It most often refers to the intermediaries between the manufacturer of a product and the retail stores that sell it to consumers.

The simplest example of an indirect distribution channel involves three players: the manufacturer of the product, the retailer that sells it and the end-user who purchases it. The retailer is the only intermediary. Goods sold through this channel include home appliances, cars and electronics, such as TVs and computers.

Another channel example involves two intermediaries. The product goes from the manufacturer to the wholesaler, to the retailer and finally to the consumer. Smaller consumable items, such as household detergents and cosmetics, are typically sold through this model.

The longest model of indirect distribution follows a chain in which the manufacturer sells to an agent who appoints wholesalers. The wholesalers sell to retailers who sell to the consumer. The fabric and paper industries typically employ this model of distribution.

While indirect channels of distribution allow the manufacturer the convenience of experienced intermediaries to handle distribution, it also takes control out of the hands of the manufacturer, allowing room for potential problems.