A crucial factor for every business is figuring out what will be the best way to distribute your products to your customers. Coming up with a product distribution strategy is an important step that should not be overlooked. Some brands will just opt for the easiest or cheapest option available instead of coming up with an effective distribution strategy. However, there will not be just one true or correct distribution strategy that will work for everyone. Check out our recommendations below!
What is a distribution strategy?
A distribution strategy is a plan to make your product or service available to the customers you want to target through a supply chain.
Distribution strategies cover the entire approach for the availability of your offerings starting from gathering inputs about what your company communicated in your marketing materials to what type of target audience you want to serve.
Companies can decide whether they would want to distribute their products through their own channels or partner and collaborate with other companies to use their distribution channels to do the same.
Some of these companies may like to use their own exclusive stores for their own products while others will use other available retail chains to sell their products. A lot of companies also do a combination of both.
Why are distribution strategies important for brands and merchandisers?
Coming up with a good distribution strategy is important as it is what your company will deploy to make sure that your product offerings can reach the maximum number of potential customers at optimal or minimal distribution costs.
A good distribution strategy will be able to maximize your profits and revenue but a bad distribution strategy can lead not only to losses but may also help your competitors gain an advantage through the opportunity in the market that you created.
5 Merchandising Distribution Strategies You Should Try
Now that you have learned about why distribution strategies are important for brands, here are 5 distribution strategies that you should consider trying:
1. Intensive Distribution
A company that has a mass marketing product will more likely use an intensive distribution strategy. These mass marketing products will be put into as many retail locations as possible.
Intensive distribution tries to cover as much of the market as possible. This strategy hinges on making a large number of products available in several different locations.
These items do not typically necessitate an involved purchase decision where the customer might think about doing some research before buying it. They are times which are routine purchases which means that they involve only a minimal effort to sell.
The best examples of products that use the intensive distribution strategy are FMCG (fast-moving consumer goods like soda, milk, gum, toilet paper).
2. Exclusive Distribution
When brands want to use an exclusive distribution strategy, they make a deal with a retailer to sell their products through that specific storefront only.
An example of exclusive distribution is when businesses sell their goods directly through their own branded stores. This strategy is used by the most exclusive and prestigious brands.
When using an exclusive distribution strategy, the seller will grant selling rights to just a single retailer. The major advantage with this is that they can focus all of their efforts on that concentrated area and store which can help them get better results.
3. Direct Distribution
A company is using a direct distribution strategy when they directly sell and send their products to their customers. A modern approach to direct distribution is when companies use their own eCommerce website to sell products to their customers.
This can be an effective option for those companies that have a client base which is moderately knowledgeable about using the internet, requests a specific solution to meet needs, or is devoted to their brand.
Before companies should consider implementing a direct distribution strategy, they should remember that there is a large amount of investment required for it.
Manufacturers will need to add warehouses, vehicles, and other necessary staff so that they can effectively distribute goods on their own.
4. Indirect Distribution
Indirect distribution is when a company’s products go through different numerous channels before reaching the end customer.
These channels are intermediaries that assist in the logistics and placement of products so that they can reach customers swiftly and in a great location based on their preferences and habits.
Products that fall under the low commitment or routine purchases category like toothpaste are best suited for indirect distribution as this method places a large number of items in multiple retail locations.
5. Selective Distribution
Selective distribution is a middle-ground option between an intensive distribution and an exclusive distribution. It is one of the most popular strategies used by high-end brands.
With this strategy, products are distributed in more than one location, but they will only just have a few limited outlets. While this may seem like these companies are limiting their sales by only having a few stores, it can actually help them target the best performing outlets.
This strategy allows companies to spend more time and effort towards training facilities and improving the overall quality of their products and stores. This can also create a more personalised shopping experience for customers.
Which Distribution Strategy Is Best for Your Business?
These 3 important factors play a significant role in determining what type of distribution strategy will work best for a brand:
1. The type of products you are selling
The recommended distribution strategy for a brand can largely depend on the type of product and the type of purchase decision customers make when deciding to buy it. There are three major types of purchase decisions which are routine, limited, and extensive.
A routine purchase is when a customer will spend relatively little time selecting products that are generally low priced like paper towels or hand soaps.
For these product types, an extensive distribution strategy may be the most appropriate as customers will not usually be devoted to specific brands and expect these products to be available in a lot of different locations. Having a high number of these products available for customers can lead to higher sales.
Limited purchase decisions cover items that are generally moderately priced and often require more time when selecting it compared to a routine purchase. Some examples of limited purchase products are small appliances and clothing.
Most customers will put some thought into the purchase of these items because of their price and usability, but still not as much compared to extensive purchases like a car or house. A selective or intensive distribution strategy is most suitable for these products.
An extensive purchase decision involves big-ticket items like cars, apartments, and houses. An exclusive distribution strategy can work well with these items because it may also be more lucrative to have fewer of these costly products because of its high production price.
2. Who your target customers are
Some companies would utilize multiple distribution strategies to cater to different consumer bases. For example, if your target customers for a certain product are people aged 50 and above, you might consider directly selling products through a catalog.
However, if another product is targeting a younger customer base, you should think about indirectly selling this product by working with a retailer.
Your target customers play a crucial role in determining what distribution strategy to use. You have to think about all the ways you can make their purchasing process easier.
3. Your warehouse capabilities and logistics
Whether your brand uses distribution strategies like direct or indirect will also depend on whether you are capable or willing to invest in your logistics.
This includes having a transportation fleet, shipping personnel, and a warehouse for storing and sorting goods. If companies want to have these, they should remember that it involves a considerable upfront investment.
Your brand will need to consider all the pros and cons of holding your own distribution versus using an intermediary when deciding on what distribution strategy to use.
If you are looking for a mobile merchandising app that will provide you with valuable information and data for whatever distribution strategy you will use, then you should take a look at the Optim Merchandising app.