Distribution Channel Strategies
Distribution is among the four pillars of an effective marketing mix. Distribution is the means by which a product or service is made available to the consumer or market user who needs it specifically. This can either be done directly by either the manufacturer or distributor or using intermediary carriers or brokers. Distribution also includes retail distribution and wholesale distribution among others.
Distribution can either be a direct or indirect channel. Direct distribution means selling directly to the end user or purchaser. Indirect channel can mean selling to retailers, importers or exporters. Examples of indirect channels include wholesaling, retailing and leasing. Most distribution channels operate on a large scale, while some operate on a small scale.
There are several stages in the supply chain of a distribution channel. The first stage is before selling to the end consumers. This stage includes preparation of advertising and marketing materials, gathering of information about the market, preparation of samples for selling, and finally, presentation and distribution. Once the products are ready, they are distributed to retailers or suppliers who will retail the products to end users or buyers. It should be remembered that the producer does not do the actual selling but rather only handles the distribution process until the consumer receives his/her product.
The second stage is where distribution is carried out. This is when consumers receive the goods. Consumers can receive the goods in many ways. They can receive the goods by way of electronic mail, telephone call, visits to the retailer or by visiting the company’s premises itself. If the company does not have any stores, then distribution can take place at the retailer’s store or warehouse. When a manufacturer carries out distribution in bulk, then this is termed as bulk distribution.
Once the goods reach the customer, they need to be packaged and shipped. Packaging and shipping are done mainly for convenience to the consumers. However, some companies like a reverse channel company which also assists the manufacturer to carry out the distribution as well as handling the sales. This type of distribution involves the manufacturer delivering the goods directly to the end user or buyer.
In today’s modern e-commerce world, manufacturers have the ability to do things which would have been previously very expensive for them. For example, they are able to create and design e-commerce websites which would connect them directly with the end consumers/buyers. This would enable them to reach people who are either online or would otherwise not be able to access their products. This is the reason why manufacturers nowadays are using supply chain software to aid them in e-commerce. Supply chain software allows the manufacturer to monitor and control the distribution as well as sales of their manufactured goods.
On the other hand, retailers benefit a lot from having a good distribution channel. As the retailer does not have to personally deal with the distributors, they do not have to bother about delivering goods to the client or customer. Instead of that, the retailer just needs to order the goods and pay for its delivery. It takes away the hassle of having to deal with salesmen, warehouses, as well as delivery trucks. The retailer just needs to focus on how to advertise and market their goods and this will greatly reduce the operational cost.
Another major advantage that the producer has over the retailer is that the retailer does not have to spend too much on distribution. The producer sends the goods to the retailer at an agreed upon price. This cost is often included in the manufacturer’s margin. Therefore, the producer can pass the savings onto the retailer. Since the producer does not have to handle or warehouse the goods, there is additional time and money saved. Also, since the distribution channel has already been set up, it is easy for the manufacturer to coordinate with the retailer on the delivery of goods.