When expanding into new markets, the best brands know that staying on top of their entire sales process is critical to sealing the deal. But how can you stay on top of your sales process if you aren’t engaged in it each step of the way? Product distribution is one important step that often goes overlooked as brands opt for the cheapest or easiest option rather than devising a legitimate distribution strategy. In this post, we will tell you everything you need to know about product distribution, from different distribution strategies to who is who in the industry, so you can refine your own distribution strategy to achieve peak performance on the shelf.
Let’s get technical. Distribution entails making a product available for purchase by dispersing it through the market. It involves transportation, packaging, and delivery. Distribution is fundamental to a company’s sales.
A distributor is defined as someone who purchases products, stores them, and then sells them through a distribution channel. They are in between manufacturers and retailers or consumers, working on behalf of a particular company as opposed to representing themselves. Usually, distributors partake in collaborative relationships with clients and manufacturers.
The right distributor enhances a company’s exposure in the product market and can give an edge in terms of speed and efficiency.
Know Your Product Distribution Channels
A distribution channel refers to the flow of business that occurs between a manufacturer and a consumer. It is the path that a transaction follows. Distributors are the intermediaries that deliver and house products for producers to sell to retailers. These channels can be relatively simple or increasingly complex.
There are direct and indirect channels. In a direct channel, the producer works directly with the consumer. An indirect channel, on the other hand, incorporates intermediaries into the sales flow. There are four levels that break down the flow between manufacturers and consumers. When looking to expand into new markets or switch up your distribution strategy, you need to know the different levels of distribution.
Level Zero:A level zero distribution channel is the simplest. It involves a direct sale from manufacturers to consumers with no intermediary.
Level One:A level one channel has one intermediary as the middleman between the producer and consumer. An example is a retailer between manufacturer and consumer.
Level Two:When thinking about levels, associate the number to the number of intermediaries. In this case, a level two channel involves two intermediaries between producer and consumer. An example here would be a wholesaler selling to a retailer who then sells to the consumer.
Level Three:Here’s where an agent or broker comes in. Agents work on behalf of companies and deal primarily with wholesalers. From here, the wholesalers sell to retailers who then sell to consumers.
The Three Types of Distribution
Distribution strategies depend on the type of product being sold. the trick is knowing what type of distribution you will need to achieve your growth goals. There are three methods of distribution that outline how manufacturers choose how they want their goods to be dispersed in the market.
Intensive Distribution: As many outlets as possible. The goal of intensive distribution is to penetrate as much of the market as possible.
Selective Distribution: Select outlets in specific locations. This is often based on a particular good and its fit within a store. Doing this allows manufacturers to pick a price point that targets a specific market of consumer, therefore providing a more customized shopping experience. Selective distribution caps the number of locations in a particular area.
Exclusive Distribution: Limited outlets. This can mean anything from luxury brands that are exclusive to special collections available only in particular locations or stores. This method helps maintain a brand’s image and product exclusivity. Some examples of companies that enact exclusive distribution would be high-end designers like Chanel or even an automotive company like Ferrari.
The chain of distribution can get confusing as more people are added into the mix. Distributors, wholesalers, retailers, and agents all work as intermediaries in the sales process. It is important to know the key differences of the individuals who play a role in the distribution process.
When working with distributors, brands have a responsibility to oversee the process and prevent retail execution errors like out of stocks and distribution voids. This requires setting up clear lines of communication between managers, sales teams, and distributors to ensure you get that information as clearly and quickly as possible. Brands that are on top of their game form better relationships with their distributors and open up opportunities for expansion much easier than brands that communicate on an ad hoc basis.
While emails and text messages may suffice for quick fixes, these simply won’t work long-term. Let’s say your sales rep informs you about an out of stock at location X. You might be able to remedy the situation by contacting your distributor and ordering another shipment to that location. But if location X is continuously experiencing out of stocks, the trend may fly under your radar if the only evidence you have is a few email threads buried deep in your inbox. Your random ordering pattern may make it difficult to forecast demand, or keep distributors and retailers from receiving predicting shipments. This is where data tracking and analytics become your best friend.
When you equip your team with the tools to constantly provide you with field insight, any recurring issues will become obvious much more quickly. Say that instead of you receiving an email or text each time something was awry in the field, you received a data point that you could instantly compare to past data and use to identify any patterns instantly. Now, rather than your distributor having to constantly fulfill last-minute shipments each time location X experiences an out of stock, you can begin sending extra product with each scheduled shipment, making your and your distributor’s life easier.
With so many different orders to fill and clients to keep up with, having a data tracking system in place will make your and your distributor’s hard work worth it. If there is a hiccup in the distribution network, you are empowered to glide past it with ease and maintain a consistent presence on store shelves, keeping distributors, retailers, and customers happy.
Derick’s Tips to better conversions 1. Visual salience Let’s start with the absolute basics. Visual salience is defined as “The distinct subjective perceptual quality which makes some items in the world stand out from their neighbors and immediately grab our attention.” Here’s an example. ￼ Even though there are several dots in this image, our […]
In order to gain credibility on the internet you really need to put your name out there and start racking up customer reviews, traces of yourself online, and proof of your success. Something that encompasses all of these things is doing affiliate site marketing to make a little extra cash via online tools and programs. […]
Derick Downs 2 Min Read Merchandising, sales, and demo teams are the unsung heroes of CPG marketing. From winning new retail placements to driving sales at face-to-face events, retail services firms can have a huge impact on a brand’s growth and success at the point of sale. But as deep an impact sales and demo […]