Having the right distribution strategies in place can give you a great advantage over your competitors. You could have the best products in the world, but if you cannot get them to your customers in a timely and cost-effective manner, you’re wasting money on marketing and you’re losing opportunities for growth. Show When determining what distribution strategies best fit your company’s goals, you need to ask three key questions:
Indirect vs Direct DistributionOverall, there are two types of distribution: indirect and direct. With indirect distribution, your product will go through numerous channels before reaching your end customer. The product may leave the manufacturer, then go to a distributor, who sends it to a retailer, where the customer buys it. With direct distribution, you would send your product directly to your customer or otherwise reduce the number of channels it’s sent through. You might sell your product directly through an e-commerce portal, or directly distribute your product to retailers. Intensive, Selective, and Exclusive DistributionAs with most strategic concerns, the devil is in the details. Indirect and direct distribution strategies are further impacted by the level of penetration, as determined by your marketing mix:
Your distribution strategies and needs can change over time, especially if you are growing a small business. With our world class supply chain management distribution services, American Western Distribution is ready to work with you to determine the logistics of your company’s individualized distribution strategy. Product distribution intensity refers to the scale of the distribution network as well as the appropriate selection of location. Common questions to be asked include: How many retailers in a particular market should be included in the distribution network? How many wholesalers? Levels Of Distribution IntensityIn intensive distribution, a producer's products are stocked in the majority of outlets. The manufacturer attempts to get as many intermediaries of a particular type as possible to carry the product. This strategy is common for basic supplies, magazines, soft drink beverages, and snack foods . It provides for increased sales volume, wider consumer recognition, and considerable impulse purchasing. Low price, low margin, and small order sizes often result from this strategy. As a drawback, it can be extremely difficult to stimulate and control the large number of intermediaries.
Snack food is a good example of a product that is intensively distributed. In selective distribution, the producer relies on a few intermediaries to carry their product. The exact number of outlets in any given market is dependent upon market potential, density of population, dispersion of sales, and the distribution policies of competitors. This strategy is commonly observed for more specialized goods that are carried through specialist dealers, such as brands of craft tools or large appliances . It contains some of the strengths and weaknesses of the other two strategies; however, it is difficult to determine the optimal number of intermediaries in each market.
Retailers such as Lowe's are commonly utilized in selective distribution for large appliances. In exclusive distribution,the producer selects only very few intermediaries. Exclusive distribution is often characterized by a deal where the reseller carries only that producer's products to the exclusion of all others. This creates high dealer loyalty and considerable sales support. Success of the product is dependent upon the ability of a single intermediary. Therefore, it provides greater control but limits potential sales volume. This strategy is typical of luxury goods retailers such as Gucci .
Retailers such as Gucci are utilized for exclusive distribution. The choice of distribution intensity is extremely critical, because it is an important part of the firm's overall marketing strategy. Not only does it provide convenience and availability to consumers, it also increases their brand preference and loyalty. For instance, companies such as Coca-Cola and Timex watches have achieved high levels of success through their intensive distribution strategy. Page 2Depending on the product being sold and ultimate end user, companies can choose a marketing channel strategy that involves utilizing distribution centers (wholesalers) or moving their products directly to a store, or retailer. There are advantages and disadvantages to both and several different types of each. RetailersStores vary in size, in the kinds of services that are provided, in the assortment of merchandise they carry, and in many other respects. Most stores are small and have weekly sales of only a few hundred dollars. A few are extremely large, having sales of $500,000 or more on a single day. An example of a large retailer would be Wal-Mart shown here
Walmart is one of the largest and most successful retailers in history. There are many different kinds of retailers, including:
In order to decide on the types of retailers to include in its marketing channel, a firm must first understand the buying specifications of its consumers. The firm must also understand the buying specifications of the retailers themselves. Although some retailers prefer to buy directly from the manufacturer, others would rather buy from local distributors who have lenient credit terms and offer a wide array of merchandise. WholesalersWholesaling includes all activities required to market goods and services to businesses, institutions, or industrial users who are motivated to buy for resale or to produce and market other products and services. The vast majority of all goods produced in an advanced economy have wholesaling involved in their marketing. This includes manufacturers who operate sales offices to perform wholesale functions and retailers who operate warehouses or otherwise engage in wholesale activities. Wholesale volume is greater than that of retail because it includes sales to industrial users as well as merchandise sold to retailers for resale. An example of a wholesaler is Optimum Sleep, which sells furniture wholesale.
Optimum Sleep is an example of a furniture wholesaler. Wholesalers perform a number of useful functions within the channel of distributions. These may include all or some combination of the following:
By providing this linkage, wholesalers assist both the producer and the buyer. From the buyer's perspective, the wholesaler typically brings together a wide assortment of products and lessens the need to deal directly with a large number or producers. The wholesaler assists the producer by making products more accessible to buyers. It provides the producer with wide market coverage information about local market trends in an efficient manner. |