Fredox Inc. manufactures confectionaries, cakes, and other packaged foods. The firm tries to reach both consumers and business customers by using a combination of both direct and indirect distribution channels. The company uses these channels to maximize its sales.
-Which of the following, if true, will weaken the chances that Fredox will sell more through direct distribution?
A)The company sells only to a few business customers.
B)Listing fees for confectionaries are relatively high.
C)The products that Fredox sells have relatively low-unit value.
D)Most of the firm's business comes from bulk selling.
E)The company's sales increased by 6 percent last year.

Question

Quizplus · Accepted Answer

Direct distribution channels are usually more expensive than indirect channels because they involve direct contact with customers. Therefore, it makes sense for companies to use direct channels when their product has a high-unit value. Since the products sold by Fredox have a relatively low-unit value, it may not make financial sense for Fredox to use direct distribution channels.