When deciding how to distribute your product, use thetraditional distribution model as a starting point. Theconventional distribution model has three levels: the producer, thewholesaler and the retailer. This is a time-tested system with manywell-established members at all levels.
The conventional distribution model, however, calls for allparties in the channel to protect their own best interests. Thus,retailers are pitted against wholesalers, and wholesalers try tobest producers. This web of conflicting interests sometimes worksto the detriment of the entire system. For instance, a producer maytry to bypass the wholesaler and go straight to retailers,prompting the wholesaler to retaliate by dropping the producer’sproducts.
The primary alternative distribution channel is directdistribution. This is the model Dell, Avon and many othersuccessful companies use. It calls for you to sell and deliver yourproduct yourself, using your own salespeople and warehouses. Goingdirect can cut significant costs from the system because you don’thave to provide a profit for intermediaries such as wholesalers andretailers. But slicing two steps from the traditional distributionchannel tends to alienate wholesalers and retailers. Before youdecide to go direct, make sure you don’t need these other channelsof distribution–because if you decide to use them later, they maynot be available to you.
There are many ways to modify traditional distribution. Forinstance, as in the above example, a producer could use a two-leveldistribution framework by selling direct to retailers and cuttingout only the wholesalers. A retailer could do the same thing bygoing directly to manufacturers–this is one of the strategiesWal-Mart has used so effectively. Look around at the many ways yourcompetitors and people in other industries set up theirdistribution channels. One of these models may well be right, withsome modification, for you.
Often, your choice of a distribution plan will be dictated–orat least strongly influenced–by various factors relating to yourproduct, your customers and the way they’ll use it. For instance,if your product–or the new one on which you hope to build yourgrowth plan–is perishable, then the need to provide refrigeratedstorage and transport will significantly restrict your choices ofdistribution methods. Size is another issue. If your product takesup a lot of display space, this consideration will weigh heavilywhen you’re selecting ways to transport and display it. That’s whyautomotive dealerships are usually located outside central businessand shopping districts, where costs for display space for cars andtrucks would eat up profits.
Another concern when it comes to selecting a distribution methodis the way the product is purchased by consumers. For instance,clothing shoppers usually want to try garments on before purchasingthem. So your means of distribution is going to have to include anearby fitting room, like the ones found in department stores. Manyproducts are best sold with the help of a live demonstration, so ifyours is one of those products, your distribution plan will have toinclude some way of conducting these demonstrations. Multilevelnetwork marketing plans, for instance, often include excellentopportunities to demonstrate products in front of live audiences.If your product is often bought on impulse, then it will be betteroff distributed in a manner that will display it in a high-trafficarea such as in the checkout line at a grocery store.
The characteristics of your customers may also dictatedistribution. If customers buy your product frequently, there’ll bemore outlets for its distribution. Videotape rental storesoutnumber swimming pool contractors, for example, because peoplemay rent several videos a week but only build a new pool every fewyears. The distance the customer is willing to travel to purchaseyour product or service is another key consideration. If you have aone-of-a-kind item in short supply and high demand, you may be wiseto limit distribution to your own location. This will give youultimate control over costs and pricing because highly motivatedcustomers will be willing to travel to you to get what theywant.
