Indirect Distribution Channels Explained With Examples

Many businesses reach a point where selling directly to customers starts to be... limiting.

After all, you can only do as much on your own. You can't be in every market, every store shelf, every corner of the internet when you only rely on your own resources.

That’s why manufacturers often consider indirect distribution channels.

In fact, most of the world's biggest brands heavily rely on this approach. And if you’re also considering it, this guide is for you, as we’re going to cover:

• All the details about how it works,
• The pros and cons of this approach,
• What partners and strategies you can consider,
• And some real-life examples of companies doing it well.

What is indirect distribution all about?

Indirect distribution is when a business uses a middleman to get its products to customers. These middlemen can range from wholesalers, retailers, and distributors to agents, dealers, and resellers.

Basically, instead of selling directly (from you to the consumer) and building your own fulfillment network from scratch, you just use someone else’s infrastructure.

In this case, your intermediaries handle the logistics, shelf space, local relationships, etc.

Is this a popular strategy?

We’ll answer this question with data:

• According to the National Retail Federation, retail sales will reach $5.6 trillion in 2026. And that’s in the U.S. alone.
• It’s also a core part of the economy, without any exaggeration. The Census Bureau says its Monthly Wholesale Trade report is a key element in estimating quarterly GDP. This tells a lot about the scale of this model.

Key types of intermediaries

The whole idea of going indirect comes down to adding another layer between you and your customer. But this “layer” can be different:

1. Wholesalers. These are companies that buy large quantities of your products at a lower price and then resell them to retailers or other buyers. So, if you want wide coverage quickly, this is a very popular choice.
2. Retailers. These stores are the final step before the customer. They can be big chains, independent shops, department stores, online shops, outlets, etc. In other words, these are spaces where your target buyers are already shopping. They often have their own marketing channels, so you can “borrow” part of that visibility in physical or online spaces.
3. Distributors. These are partners that usually buy your products and distribute them to other intermediaries (e.g., retailers, dealers, etc.). They are typically more involved than wholesalers and often provide warehousing, sales and marketing support, client feedback, etc. Many manufacturers also tend to use regional distributors to handle markets where they don't have a direct presence.
4. Dealers. These are businesses authorized to sell your products, usually to end customers or businesses. Manufacturers often choose dealers as they not only handle sales but also post-purchase service, which is a must for some industries (equipment, cars, etc.).
5. Agents. These are companies that help you find other partners. They don’t buy your products like wholesalers or distributors, for instance. But they represent you and negotiate partnerships for you. Typically, this is a commission-based work.
6. Resellers and value-added resellers (VARs). They buy your products, sometimes bundle them with their own services or complementary products, and sell them on. Apart from physical product businesses, this model is famous in B2B software and technology.
7. Affiliate partners. These promote your product online and earn a commission on each sale they drive. It’s rarely a primary distribution tactic, but it can be a great addition that is easy to scale.

But you don’t necessarily need to use just one intermediary.

In fact, you can have one-tier, two-tier, and three-tier distribution. So, for example:

• If you simply sign a deal with a retailer to sell your products at their store, it’s one-tier (meaning one layer between you and a buyer).
• If you sell to a wholesaler that then distributes everything to different retailers, it’s two-tier.
• And if you find an agent who negotiates with a wholesaler, which then resells your products to retailers, it’s a three-tier.

Indirect vs. direct distribution channels: What’s the difference?

The short answer: Direct means you sell straight to the customer, with no one in between. Indirect means someone else handles part of that journey on your behalf.

But now, let’s see how they differ practically.

With direct distribution, you control the full customer experience, including pricing, presentation, messaging, fulfillment, and so on.

• The good thing is that you get control and unfiltered feedback, and you build a direct relationship with your buyers.
• The downside, though, is that you carry all the cost and operational weight.

With indirect distribution channels, you give up some of that control, but you gain broader market reach and efficiency you couldn't build quickly on your own.

Your intermediaries already come with existing customer bases and infrastructure, so you don’t have to do any guesswork or additional negotiation.

But of course, most businesses want to have the best of two worlds. So, there is also a hybrid distribution approach that combines both.

For example, Rhode, which sells through its own website:

Source: Rhode

And through Sephora (as one of their middleman):

Source: Sephora

If we look around, it becomes clear that most brands choose this path.

Advantages of indirect model

You know how everyone keeps saying that you have to delegate to be successful. Well, that’s why there are so many benefits of indirect distribution. Let's take a look at the main ones:

Enter new markets without starting from scratch

Being where your customers are is one of the major factors that influence the purchase decision.

But building distribution networks in a region where you have no presence is slow, expensive, and requires lots of research and negotiation.

The good thing, though, is that wholesalers, distributors, and retailers in those markets have already done that work. They have the warehouses, the logistics relationships, the local staff, and pretty much everything you need.

So, by finding the right partners, you can relatively quickly start selling your products in new locations.

Share the load

Running your own distribution means owning every single step, including all the costs.

With indirect channels, intermediaries take care of a large portion of that. You don’t have to worry about every delivery fleet or storage facility. And you don’t have to pay for everything.

That’s why it’s often referred to as a more cost-effective and less demanding distribution strategy. But of course, to make it work, you have to find reliable partners first.

Use local knowledge you don't have

A regional distributor who has worked in the same place for 10 years knows things you can't even imagine.

They can often help you find retailers that are more reliable, give some tips on pricing, suggest marketing strategies, explain the buying habits, and so on.

This knowledge is priceless for effective sales.

And you’re basically just borrowing their expertise without spending time on gaining it on your own.

Get more visibility

Depending on the type of your partnerships, you might also get additional visibility.

For example, if you partner with a retailer that targets at least some of your ICPs, you’ll get more exposure by simply having your brand in their physical and online stores.

Besides, when they run any marketing campaigns, you can also show up there.

These things might seem minor. But over time, all this visibility compounds. Because no famous brand you know now got where it is in a day.

The most important element, though, is to choose aligned partnerships only.

Improve customer experience

Sometimes, finding a distribution partner can help you meet consumer needs.

Say, you don’t have a physical store and only sell online. Then, working with a retailer is a way to give your customers a chance to experience your product in real life.

And this is, obviously, much more cost-effective than opening your own store.

Disadvantages of indirect model

As with anything, this model has its cons, too. Some of the major ones are:

Little control over how your product is presented

Once your product leaves your hands and enters a third-party network, you can't control the full customer experience anymore.

You generally can’t get direct customer feedback. But on top of that, a retailer might discount your product, shelve it in the wrong aisle, not present it properly, put it next to a competitor's offering, or even ignore your product positioning altogether.

Sure, this is the worst-case scenario. But you can’t really know for sure.

Possible channel conflicts

When you work with several partners in the same area, it's almost inevitable to face conflicts and fierce competition.

Besides, if you later try to build a direct channel alongside your indirect one, you risk conflicting with your existing partners.

That's something Nike ran into when it tried to prioritize toward DTC (more on this later).

Profit sharing

Obviously, as you’re using partners’ infrastructure, it will affect your overall profit margin.

For products with thin margins, this can become quite tricky.

There's often tension between what you need to charge and what the market will bear once wholesale pricing, retailer markup, and shipping costs add up.

Real-life brand examples

Now, it’s time to look at the examples of brands that sell indirectly and check how they make it work.

Adidas

Source: Adidas

Some of the biggest fans of the indirect option are businesses in the clothing industry, including Adidas.

Adidas has an online store and physical shops scattered across major cities around the world.

But it wouldn’t be as successful without its intermediaries. In fact, 60% of their sales come from wholesale, not DTC.

Source: Adidas

Nestle

Source: Nestle

An indirect approach is also highly common for food and beverage companies, including Nestle.

It’s one of the most diversified and well-known food companies in the world. They own over 2,000 brands, have 335 factories in 75 countries, and sell in 185.

Now, imagine distributing everything they produce directly. It would be a true nightmare.

They almost don’t sell directly to consumers. Sure, they have Nespresso stores and some other models, like an online store for the Indian market or partnering with Deliveroo in some regions to deliver snacks.

But it isn’t their main way to operate.

Like many similar businesses, Nestle relies heavily on wholesalers to get their products to as many places as possible.

P&G

Source: P&G

P&G is one of the best examples that works at a genuine industrial scale.

The company behind Ariel, Pampers, Braun, Pantene, Old Spice, Gillette, Oral-B, and dozens of other brands sells its products in more than 180 countries through a variety of channels.

They use mass merchandisers, grocery stores, membership club stores, drug stores, distributors, e-commerce platforms, and pharmacies. And yes, almost none of that happens through channels P&G owns.

They still have online stores for some brands (like Gillette in the example below). But it’s just a small part of their distribution.

Source: Gillette

Mostly, instead of selling directly to consumers, P&G sells to wholesalers and distributors, who then supply retailers, who then sell to end customers.

For example, Walmart and its affiliates alone are responsible for 16% of P&G’s total sales.

Source: P&G

This approach gives P&G reach that would take decades to replicate if it decided to build its own infrastructure. And frankly, it would barely make any sense.

Apple

Source: Apple

Apple is a really good example of how to combine direct and indirect channels.

Their indirect network includes authorized distributors, wholesalers, retailers, and telecom carriers (AT&T and Verizon), who bundle Apple products into their telecommunications packages.

The reason this works well is that Apple uses its own stores not to replace indirect but to anchor it.

The Apple Store sets the standard for how the brand looks and feels.

And that standard benchmark influences how every third-party retailer handles the product. The result is that their brand feels more authentic even when you're buying from a carrier kiosk in a shopping center.

Nike

Source: Nike

Nike's case is one of the most discussed distribution stories in recent years.

In 2017, Nike launched its Consumer Direct Offense strategy, deliberately cutting a huge portion of its wholesale retail partners.

They wanted to focus on their own stores and digital platforms.

They’ve managed to slightly grow their DTC revenue. But they also saw the first decline in digital sales since 2015. There were multiple reasons for that. Analysts noted that Nike "focused too much on where they were selling and lost focus on what they were selling."

And retailers that Nike had put out of priority were forced to fill the gap with competing brands. So, consumers who no longer found Nike in their usual shops simply started buying other brands.

Nike reversed some of their actions and resumed its wholesale relationships with Foot Locker, Macy’s, etc.

And while they still focus on growing their direct sales, wholesale remains their main channel.

Source: Nike

This case is a good reminder that any changes in your distribution management have to be carefully planned.

6 things to consider when choosing this distribution model

If at this point, you understand that the indirect model fits you, here are a few things to keep in mind.

1. Choose your strategy

Before you approach a single partner, you need to know what kind of indirect distribution you're actually going for.

There are several approaches, and they serve very different purposes:

• Intensive distribution means getting your product into as many outlets as possible.
• Selective distribution is more deliberate: you choose a limited number of partners who meet specific criteria, which helps protect brand image without going fully exclusive.
• Exclusive distribution takes that further. It grants a single partner rights to a territory. This is quite common in luxury goods and high-end automotive.
• Franchising is a specific approach where a franchisee operates under your brand. They use your workflows, systems, etc., but they cover all the expenses.
• Hybrid (dual) distribution is what most mature brands eventually land on. They run both their own channels and third-party ones.

The right approach here depends on your product type, your price point, overall business goals, and so on. So, there is truly no right or wrong.

2. Pick your intermediaries

Honestly, the partner list you build matters more than the model you choose. A distributor that’s not a match will just add more cost without improving your reach. And who needs that?

So, when evaluating intermediaries, look for:

• Financial stability,
• Genuine market coverage in the regions you care about,
• Relevant experience,
• Similar values, etc.

The success of your distribution strategy mainly depends on this. Because you can’t get all the benefits we talked about above if you choose the wrong partner.

3. Consider the cost efficiency

Simply do the math before you commit to anything.

What's the margin per unit after your intermediary takes their cut? What does it cost to onboard and manage a new distribution partner? And dozens of similar questions.

Depending on how you price your product, the economics could be clearly favorable or not at all.

So, it’s essential to calculate everything before getting into any partnership.

4. Make sure you’re aligned with your goals

Going indirect is often the right answer to a couple of specific problems and objectives. For example:

• Expanding market reach faster than your own infrastructure allows,
• Entering regions where you have no local presence and experience,
• Making your products available where you don’t have access,
• Selling where your customers already shop, etc.

If those are your goals, it's a strong fit.

But if your priority is tight brand control or rich customer data, indirect channels aren’t built for those objectives.

That’s why be honest about what you're trying to achieve.

5. Check your partner’s reputation

Here's the thing: your intermediaries become part of your brand's delivery chain.

So, if you work with a wholesaler who always ships late or a retailer known for poor customer service, your brand will take a hit.

Unfortunately, their problems become your problems, even when it’s not your fault.

That’s why it’s so important to do your research.

Look at their existing portfolio of brands and talk to other manufacturers they work with. Check for any history of compliance issues or any kind of conflicts.

This is exactly the moment where you should take the approach of “better safe than sorry.”

6. Analyze your competitors and define your performance metrics

Before committing to any distribution structure, look at how your direct competitors go to market:

• What approaches are they using?
• What intermediaries do they have?
• How does it work for them?

These insights can help you understand where to look for better opportunities and what to stay away from.

On top of this, before signing your partnership, define clear performance benchmarks.

You have to understand what your “best case scenario” goals are. What do you expect to see in three months, six months, a year, etc.?

Be realistic here. But also set clear review standards.

Often, partners who know they'll be evaluated show up differently than partners who don't.

And if you don’t hit any of your milestones or the performance is lagging, track what’s wrong, try to fix it, and if it still doesn’t work, consider other options.

The idea is not to throw away everything once you hit the first issue. But to be aware of what’s going on and whether it makes sense for your brand.

Conclusion

Going indirect is what most big brands do eventually. Unlike direct distribution, there is a variety you can rely on.

It helps you scale without carrying everything on your own back.

If you go about it the right way and choose the right partners, it can help your business grow faster than ever.

Still, before going for this channel, make sure to weigh both sides of the coin and learn as much as you can about potential risks.

FAQ

What is the difference between direct and indirect distribution?

Direct distribution refers to selling your product directly, meaning from the manufacturer straight to the customer.

And an indirect distribution involves a middleman (or a couple of them) in between you and your buyer. These could be distributors, retailers, wholesalers, dealers, etc.

What is one disadvantage of indirect distribution channels?

The main disadvantage is less control over everything. You can’t fully control how your product is delivered, discounted, and presented. Besides, you can’t get much customer feedback.

While you can have certain limitations and guidelines in your contract, you still have to trust your intermediaries to execute all that.

What is an example of indirect distribution?

Rhode selling its beauty products in Sephora, or Nike selling its sneakers in Foot Locker, are examples of using a retailer for indirect distribution.