Choosing The Perfect Distribution Strategy

Distribution is the process of getting your ready-to-sale products from the warehouse to the point of sale. 

Manufacturers decide their methods of product distribution depending on the feasibility, ROI, and nature of the product.

For example, a biscuit maker would want to reach out to as many types of consumers as possible, whereas car manufacturers would choose to take their products only to a selective set of audiences, who can afford them.

A shoe company, on the other hand, might want to do both. They can choose to sell their costliest shoes only to the rich through a website, and sell the regular less-pricey shoes to everyone at their shoe store.    

Although it is not as simple as it sounds, it can be achievable by building strong distribution channels.

What does a distribution channel do?

The distribution channel is a path from the producer to the final consumer. For sales success, defining a business channel is extremely important. The path is decided based on things we mentioned earlier: feasibility, ROI, and nature of the product.

Broadly speaking, there are two types of distribution channels:

Direct Selling: Also known as direct-to-consumer (D2C), this channel enables the manufacturer to directly sell to the end consumer without paying any intermediaries. An ideal example of this is brand websites where you can buy directly from the company or even social selling platforms and groups like Instagram and WhatsApp.

Direct distribution is perfect for businesses looking to streamline their downstream supply chain, cut out the middleman, and save money on logistics, distribution, and brand-building. 

Business owners these days always prefer to have the additional capacity and have a direct distribution channel, as it can help through immediate feedback from your target audience and provide better clarity on how well your products are performing in a market.

This type of distribution is optimal for new brands that want to invest less and enter the market before deploying indirect distribution channels that can provide a better market reach for its product range.

Indirect Selling: This is the most commonly practiced method of distribution. This is because a manufacturer it would take a manufacturer a long time to sell every product unit. Many products like curd or ready-to-cook mixes might even expire before they find a buyer.

Indirect distribution helps the manufacturer get back the cost of manufacturing the product even before it reaches the final consumer. The manufacturer sells to one distributor at a price lower than MRP. The distributor then sells it forward to a retailer, at a higher price than he paid. The retail will sell the product at MRP, ensuring that everyone in the distribution channel makes a profit. 

In this type of distribution, there are various partners who help ensure that products are reaching the right place, at the right time. 

1. Distributors

They buy directly from manufacturers in bulk through primary sales and store a large amount of product inventory, which gets distributed to different retailers.

2. Retailers

They are the merchants who sell directly to consumers at MRP. A retailer ensures that products are showcased in a lucrative way in their shops and is also the one who convinces the consumer to make the purchase.

3. Agents 

Agents are additional intermediaries by a company as they usually work on a commission and are hired by companies to sell goods to end consumers. 

Once you determine the distribution channels you want to opt for, the next step is to choose the type of distribution strategy that best suits your business goals.