Cases

In a general sense, the idea of using wholesalers versus an in-house distribution system is very appealing to companies. It drastically reduces the number of hours a company needs to apply and it typically allows them to focus on what they do best, such as manufacturing carpets. The downfall of this approach in general terms is a reduction in price points, as companies have to lower their price for wholesalers versus selling them at the manufacturer’s price directly to retail.

Discussing the pros that could be gained for Cardon Carpet Mills in going to direct distribution, the selling price, and in turn an increase in margins, is one of the obvious pros. Although direct distribution would allow them to sell at a lower price point than most wholesalers, they would expect to sell for significantly higher than what they sell to the wholesalers now. Another pro is the retail relationships that the company can develop through direct distribution, possibly even working their way into exclusive negotiations with some retailers. Using direct distribution the company would also allow the company to have a better sense of product demand and therefore be able to control a tighter oversight on their inventory. Some of the cons associated with direct distribution as mentioned are an obvious increase in workload and time for the company. They would also be heading into unchartered territory in terms of business practices and therefore would likely run into some distribution problems which could damage or even sever ties to retailers. The flexibility of demand for their products is also not as readily available, as wholesalers can often process special orders of smaller quantities for retailers. As Cardon would yet to have established any economies of scale in the distribution process, there would likely be a minimum order needed for shipping and freight, which could make them less attractive to smaller retailers. Another critical con of moving to direct distribution would be...