Distribution refers to the process of selling and delivering products or services from manufacturer to customer. As companies grow, it becomes vital to improve your distribution to ensure that everyone in your distribution channel is happy. Depending on the network of your distribution channel, there can be many people and strategies involved in a company’s product distribution.
Why Is Product Distribution Important?
Product distribution plays a vital role in a company’s operations. You want to have the ability to analyze and improve relationships between manufacturers and customers. If there’s no way to do this, you won’t improve. When you run into bottlenecks in your distribution, a lot of bad things can happen. When deliveries start to fall short, customers, retailers and your suppliers won’t be happy. If you want your product distribution to be successful, you want a feedback loop that allows you to make continuous improvements.
As it pertains to customers buying products online, there’s a level of trust customers give you when they buy a product they can’t physically see and touch. For merchants, this is where accurate pictures and descriptions are extremely important.
3 Types Of Product Distribution
The type of distribution strategy you use will depend on the product you’re selling.
- Intensive Distribution
- Selective Distribution
- Exclusive Distribution
Now that you know what those 3 product distribution strategies are, let’s break them down to see how they’re unique and differ.
- Intensive Distribution: This strategy targets as many channels and outlets as possible. The goal of intensive distribution is to penetrate as much of the market as possible. You want to be everywhere you can.
- Selective Distribution: This strategy is selective, only focusing on specific channels and outlets. There’s going to be specific locations you want to be at with this method. 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 for customers. Selective distribution caps the number of locations in a particular area.
- Exclusive Distribution: This strategy focuses on limiting the channels and outlets you use. Very selective. The first example for this particular method is luxury brands, perhaps a special collection of some type where it’s only available at specific locations or stores. This method helps maintain a brand’s image and product exclusivity. Some examples of companies that use exclusive distribution would be high-end designers like Chanel or even an automotive company like Ferrari.
There’s 4 core profiles in distribution.
- Brokers And Agents
We’re going to be comparing distributors and wholesalers as they play the main key roles in distribution.
How Do Distributors And Wholesalers Differ?
When it comes to the difference between a distributor and a wholesaler, many things are often confused between one another. Despite the two having things in common, the two greatly differ also. Distributors work closely with manufacturers to aim at selling more goods and gaining better visibility on those goods. It’s not uncommon for distributors to reach out to wholesalers so they can resale their products. Wholesalers work closely with retailers, they buy products in bulk due to the discounts they get from retailers. It is distribution that plays a key role in your distribution channel because it plays as a medium between manufacturers and their customers.
Distribution And Dropshipping
Every company wants to operate a product distribution channel that benefits everyone. With ecommerce and dropshipping, it’s no different. Manufacturers, suppliers and distributors can leverage the online marketplace to promote their products. Merchants can then leverage these online channels to choose the products they want to sell as seen fit. When customers purchase products from online stores, merchants are notified and orders are placed with the distributor who arranges for shipment from their facilities. Merchants heavily rely on their distribution partners as everything but selling is out of their control.
What Is Distribution Management?
Distribution management refers to the resources and processes that are used to deliver a product from a specific location to the point-of-sale, which includes storage at warehouses, retail distribution points, shipping and delivery and others.
- Warehousing – This would refer to where you choose to house products.
- Packaging – You always want to make sure your packaging is efficient so products can be safety shipped.
- Inventory Management – Proper inventory management is key to distribution. Managing your inventory is one of the core pillars in distribution management. We’re always talking about ways to optimize inventory, like inventory control and (EIF) ending inventory formula.
- Order Processing – When a customer places an order, distribution management needs to plan for the delivery of that item. This involves collecting the stock, loading it and delivering it in a timely manner. Approval needs to be sent and invoicing done for this step to be valid.
- Logistics – You always have to think about how products are going to be shipped. What type of transport and shipping you’re going to use is important to your bottom line. If they require overseas shipping there must be agreements in place for permits to be approved quickly.
- Communication – Clear communication along the entire distribution channel is always vital to success. You want to make sure you have such processes in place. This is to ensure that the correct products are shipped and customers know when they will receive their items.
What Is E-Distribution?
You don’t hear the term “E-distribution” a lot but it refers to the distribution of things like software and digital downloads.
There’s a numbers of different categories that E-distribution plays a role in, such as video games, computer software, marketing tools, online advertising, movies, music, e-courses and digital ebooks. Since it’s easy to create multiple products or subscriptions, this industry is quickly growing and super profitable. While it differs from physical distribution, e-distribution has to be immediate for it to be successful.
When customers buy a digital product, they expect to receive that product immediately through a download link or given digital access to the product. If you buy a digital product and don’t receive it, the excitement quickly fades and you’re going to reach out to the supplier. In the background, there’s a lot of systems running to ensure digital products are delivered correctly.
The upside in this industry is limit less as there’s very little negative factors for delivering these types of products and services.
What Is Marketing Distribution?
As slightly different from e-distribution and supply chain distribution, marketing distribution is how the marketing department makes products and services available to potential prospects and customers. Availability can be through the manufacturer, supplier, distributor, retailer, or wholesaler. From the perspective of the 4P’s of the marketing mix, marketing distribution can be slotted into the place category. Examples of marketing distribution channels include:
- A distributor can be employed by a manufacturer to reach out to suppliers or retailers to purchase their product,
- A supplier can make their stock available on a marketplace for merchants to find and sell,
- A retailer could stock a wide array of products strategically placed across their store to entice customers to buy,
- A wholesaler can build a website so customers can order products straight from them.
*Accelerated Analytics publishes resources like this to provide insights to different analytical metrics, data points and formulas. Please be aware, we’re not claiming that our POS reporting services will offer this example or any other metric, data point or formula. To learn exactly what our reporting covers, please feel free to schedule a demo or give us a call. Thanks for understanding.