Demerits of Direct distribution:-
1. Heavy Investment
In case the producer goes in far direct distribution system, he will have to make heavy investment in terms of treasure and talent in building a whole time department consisting of an army of salesmen and host of other administrative trail. Further, he should have his own warehousing and transportation facilities in addition to have shops or establishments in different parts of his sales-territory which cover a state or a region or even a country. All this needs heavy doses of initial investments of both talents and treasure.
2. Problem of unwieldy management
The manufacturing or producing the products is itself an up heal task having its own problems and issues. Conversion of raw materials into end products is the most laborious and cumbersome process. With these, if the producer thinks taking upon the responsibility of distribution also he adds to existing burden and multiplies it to his failure. The management becomes unwieldy thus dividing and diverting his energies, resources and talents over two diametrically opposite activities. To do full justice to anything one should goods by specialization that benefits him and other too. Here, he can not do that as he knows production but not distribution. In fact, distribution is much more ticklish and challenging than production.
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3. Nature of products
There are good many consumer products with low unit selling price and lowest margin where the manufacturer can not do the work, with economy and efficacy. Thus , most consumer staple products such as soap, detergents, biscuits, chocolates, sweets and toffees, match-boxes, cigarettes, shampoos, face-powders, creams and the like , where it plays to employ middlemen who can meet the small and intermittent needs of consumers at convenient locations. A manufacturer, however, big he is, is forced to rely on the paraphernalia of intermediaries. Otherwise, unit cost of, managing the show would be one of the highest whereby neither the producers nor the consumers will be well off.
4. Consumer preferences
Majority of consumers prefer to buy their needs through the local dealers than directly from the company manufacturing. It is through exclusive dealers or agents that individuals as well as institutional buyers obtain their needs duly fulfilled. Thus, a person in need of office furniture says Godrej, would prefer to see local authorized dealer than contracting directly the manufacturing units at Bombay, Calcutta, Delhi or Madras consumers have more faith in their immediate dealers as they can contact them for after sale services and complaints, if any.
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5. The consumer satisfaction
The method of distribution to be followed hinges on the extent of consumers to be met and satisfied. If the manufacturer has a limited and highly concentrated class of customers then it works cheaper to have direct distribution. Thus, a local baker to a confectioner or a hotel-keeper can think of direct distribution to his customers coming within his local radius, in most case. Even if, up-country service is expected, it can be met, if customers come to the locality. However, it is a rare case. In majority of cases, the demand is to be met through intermediaries as number of customers exceeds the normal limit.