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8.4 Direct vs. indirect distribution strategies

4 min read•july 30, 2024

Travel suppliers face a crucial choice: sell directly to consumers or use intermediaries. offers control and higher margins but requires investment. provides wider reach but involves commissions and less control.

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Both strategies have pros and cons. Direct distribution means more profit and data but higher costs. Indirect distribution offers broader access but lower margins. Factors like market, product, and tech capabilities influence the best approach for each supplier.

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Direct vs Indirect Distribution

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Direct Distribution Strategies

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  • Direct distribution involves travel suppliers selling their products or services directly to consumers without intermediaries
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- Examples include an airline selling tickets on its own website or a hotel taking reservations through its own call center
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  • Direct distribution allows suppliers to have more control over pricing, branding, and customer relationships
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  • Suppliers can achieve higher profit margins by eliminating commissions paid to intermediaries
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Indirect Distribution Strategies

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  • Indirect distribution utilizes intermediaries or third parties to sell travel products to consumers
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- Intermediaries include [travel agents](https://www.fiveableKeyTerm:travel_agents), [online travel agencies (OTAs)](https://www.fiveableKeyTerm:online_travel_agencies_(OTAs)), wholesalers, and tour operators who act as middlemen between suppliers and consumers
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  • Indirect distribution provides access to a wider customer base and can reduce marketing and sales costs for suppliers
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  • Indirect distribution often involves commissions or markups added by intermediaries, which can impact the final price paid by consumers compared to direct channels
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Benefits and Drawbacks of Distribution Strategies

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Benefits and Drawbacks of Direct Distribution

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  • Benefits for suppliers include:
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- Higher profit margins by eliminating commissions
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- Greater control over pricing and inventory
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- Direct access to customer data for marketing purposes
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- Ability to provide a seamless brand experience
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  • Drawbacks of direct distribution include:
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- Higher costs for technology, marketing, and customer support
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- Potentially limited reach compared to established indirect channels with large customer bases
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Benefits and Drawbacks of Indirect Distribution

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  • Benefits of indirect distribution include:
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- Access to a wider market
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- Reduced costs for marketing and sales
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- Ability to leverage the expertise and relationships of intermediaries
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  • Drawbacks for suppliers include:
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- Lower profit margins due to commissions or discounts
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- Less control over pricing and inventory
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- Potential brand dilution
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- Limited access to customer data
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Factors Influencing Distribution Choice

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Market and Product Characteristics

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Top images from around the web for Direct vs Indirect Distribution

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  • Target market preferences and booking behaviors can influence the effectiveness of direct or indirect distribution
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Top images from around the web for Direct vs Indirect Distribution

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- Factors include the use of online vs. offline channels or loyalty to specific intermediaries
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Top images from around the web for Direct vs Indirect Distribution

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  • The complexity and nature of the travel product may be better suited for certain distribution channels
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Top images from around the web for Direct vs Indirect Distribution

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- Bundled packages or niche offerings may require the expertise and relationships of intermediaries
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Top images from around the web for Direct vs Indirect Distribution

  • Creating the Marketing Strategy | Principles of Marketing View original

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Top images from around the web for Direct vs Indirect Distribution

  • Creating the Marketing Strategy | Principles of Marketing View original

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  • Putting It Together: Marketing Function | Principles of Marketing View original

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  • Creating the Marketing Strategy | Principles of Marketing View original

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Top images from around the web for Direct vs Indirect Distribution

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Supplier Characteristics and Market Conditions

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Top images from around the web for Direct vs Indirect Distribution

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  • The supplier's market position, brand strength, and resources can impact their ability to invest in and manage direct distribution channels effectively
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Top images from around the web for Direct vs Indirect Distribution

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  • The level of competition and market saturation in a given segment can influence the need for suppliers to utilize indirect channels to reach customers and maintain market share
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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Technological Capabilities

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Top images from around the web for Direct vs Indirect Distribution

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  • Technological capabilities and the availability of cost-effective solutions for direct distribution can make direct channels more viable for suppliers
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Top images from around the web for Direct vs Indirect Distribution

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- Examples include booking engines and customer relationship management systems
Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Technology's Impact on Distribution Strategies

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Rise of Online and Mobile Channels

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Top images from around the web for Direct vs Indirect Distribution

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  • The internet and e-commerce have enabled suppliers to reach customers directly through their own websites and booking engines, reducing reliance on traditional indirect channels
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Top images from around the web for Direct vs Indirect Distribution

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  • Online travel agencies (OTAs) and metasearch engines have emerged as dominant indirect distribution channels, providing consumers with easy access to price comparisons and booking options across multiple suppliers
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Top images from around the web for Direct vs Indirect Distribution

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  • Mobile technology and the proliferation of smartphones have increased the importance of mobile-friendly direct and indirect distribution channels, as consumers increasingly research and book travel on mobile devices
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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Data Analytics and Personalization

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Top images from around the web for Direct vs Indirect Distribution

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  • Advancements in data analytics and personalization technologies have enabled both direct and indirect channels to offer more targeted and customized offerings based on consumer preferences and behavior
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Top images from around the web for Direct vs Indirect Distribution

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  • Social media platforms have become important channels for travel inspiration, research, and direct booking, allowing suppliers to engage with customers and drive direct sales
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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Top images from around the web for Direct vs Indirect Distribution

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Emerging Technologies

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Top images from around the web for Direct vs Indirect Distribution

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  • The emergence of new technologies is creating new opportunities for innovative direct and indirect distribution strategies in the travel industry
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- Examples include virtual and augmented reality, chatbots, and artificial intelligence
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About FiveableBlogCareersTestimonialsCode of ConductTerms of UsePrivacy PolicyCCPA Privacy Policy
Resources
Cram ModeAP Score CalculatorsStudy GuidesPractice QuizzesGlossaryCrisis Text LineRequest a Feature
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.
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