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Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers. - Leaving Cert Business - Question C - 2008
Question C
Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers... show full transcript
Worked Solution & Example Answer:Evaluate the benefits and challenges for a small start-up business of choosing a direct channel of distribution rather than selling through wholesalers and retailers. - Leaving Cert Business - Question C - 2008
Step 1
Benefits of Choosing a Direct Channel of Distribution
Answer
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Shortest and Simplest Form of Distribution: Direct channels allow a small start-up to sell directly to consumers, simplifying the logistical flow from production to sale.
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Low Overheads: By eliminating intermediaries like wholesalers and retailers, a business can reduce costs associated with distribution, leading to better profit margins.
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Global Reach and Online Marketplaces: Utilizing platforms such as the internet or eBay can expand the startup’s market reach globally, opening new consumer bases without the geographical limitations imposed by physical retailers.
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Greater Flexibility: Direct sales provide the startup with the ability to adjust pricing, marketing strategies, and inventory in real-time, responding swiftly to market demands and consumer feedback.
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24/7 Availability: Online direct channels offer convenience for consumers to shop at any time, potentially increasing sales volume compared to traditional shop hours.
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Higher Profit Margins: Direct distribution channels allow for higher profit margins as profits are retained rather than shared with intermediaries.
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More Control Over Distribution: The startup maintains direct control over how products are marketed and delivered, leading to a more consistent brand experience.
Step 2
Challenges of Choosing a Direct Channel of Distribution
Answer
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Geographical Reach Limitations: A small start-up may struggle to compete with established wholesalers and retailers who have broader distribution networks and customer bases.
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Increased Shipping Costs and Responsibilities: Customers may bear shipping costs, which can deter potential sales. Additionally, the start-up must handle logistics, which increases complexity and costs.
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Competition with Established Retailers: Competing against businesses that benefit from established supply chains and customer loyalty can be a significant hurdle for a startup.
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Lack of Experience: Start-ups may lack the experience and credibility that come with established wholesalers, potentially leading to challenges in building trust with consumers.
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Resource Limitations: Limited resources may hinder the start-up's ability to effectively market and manage direct sales, leading to potential pitfalls in sales strategy and execution.