A well thought out distribution strategy by a small business provides informed decision making on types of distribution channels, distribution partners and tips on the most profitable strategy. There are important reasons to utilize distribution partners and critical questions to get answers on deciding the appropriate channel of distribution for your business.
It’s important to understand the advantages and disadvantages of distributors. Know your business plan, where you are, and where you’re going in business. If you see your business expanding, it’s probably beneficial to partner with a distributor to get there. Be prepared and do your homework. Selling your product is not just about distribution, but about product and brand awareness or share of mind.
Deciding the Right Small Business Distribution Channel Strategy:
Selecting the distribution channel appropriate for your business requires assessing a wide number of important factors about:
1. Your Business
The precise nature of your business
The type of product or service you want to sell
The geographic make-up and location of the markets you serve
Selling costs versus the sales process control you desire
The profit margin of your products or services
2. Your Customers
Preferred purchasing methods of your customers
Size, quantity, price, convenience, variety
Importance of Brand
Required or Preferred pre-sale services by your customer
Required or Preferred after sales services by your customer
3. Your Distribution Partners
Intensity of distribution partners to your product or service
Selective distribution, exclusive distribution, limited product offering, private label
Motivation of distribution partners
Ability to manage distribution partners
Integration of various types of distribution partners
Cost of distribution partners
Today, many small companies use a mix of different distribution channels.
Distribution Types & Methods
Company Owned or Provided
Your Sales Force
Outside Sales Agents
Independent firm that only performs the sales function on your behalf
Independent companies usually carry physical inventory & perform the physical distribution and sales function on your behalf. Can sell to retailers/dealers or direct to the end-user.
An independent reseller that purchases the rights to distribution or sales territory of a single product/service brand
Independent firm that sells to end-users and usually inventories physical product
Value Added Resellers (VARs)
Independent firm that sells to end-users and adds tangible value to the product or service being sold
5 tips for securing the right distributor for your business:
1. Create a website
When you’re first trying to secure a distributor, each one will look at your website to learn more about your company before it decides to place an order. Make sure you have a professional website with all the information a distributor might need: contact information, location, and product information.
2. Price correctly
Make sure you’ve researched all the pricing data available for your industry and similar products. Communicate with your distributor about your recommended manufacturer’s suggested retail price so different distributors don’t sell your product at different price points.
3. Prepare marketing materials
Distributors will ask for high-resolution images of your products, as well as your sales and marketing materials. Have these ready in digital and print formats.
4. Establish payment terms
Once you choose a distributor, clearly define the payment terms in advance. Late payments will affect your cash flow and threaten your production and shipping operations. Consider offering a discount for paying when ordering or within 10 days of placing the order.
5 .Lastly & Very Importantly
Be cautious about requests for exclusivity. Ask to try out the relationship first before partnering with that distributor.
Foster a Strong Distributor Relationship
Securing the right distributor for your business and building a strong relationship can skyrocket your company from a small business to a powerhouse. Once you’ve secured a distributor, your future success will hinge on that relationship.
Here’s how to make that relationship last for years and encourage mutual success:
Communicate early and often.
Introduce yourself, and talk to the owner.
Get to know your distributor when the relationship begins, and make sure you keep in touch as the company starts selling your products.
Focus your energy. Each distribution channel has unique needs.
Once distributed, don’t sell directly. It’s not fair to the distributor. Don’t compete with your distributor.
List your distributors on your website, and link your products to them so customers know where to purchase your products.
Advantages of Working With a Distributor
Distributors are pretty complex organizations and there are some nuances you should know before working with them.
1. Wider Distribution
Allows you to get your product to the widest possible audience. When working with the right distributor, you can quickly expand your business’s footprint.
2. Provides Resources
Provides third-party sales, delivery, and infrastructure capability to your business. Your sales and delivery force might be a small team, so you can see how a distributor could help.
3. Saves Time
Creates more supplier bandwidth to invest time in product development and manufacturing. You can invest time back into yourself, your brand, your product, and your company because the distributor is handling the sales capability.
The Disadvantages of Working With a Product Distributor
Of course, before signing on the dotted line, there are a few things you should consider about the cons of working with a product distributor.
1. Negative Impact on Profit Margins
You probably have an idea for how much you’d like to sell your product for at retail, and what your profit margins are. You’ll have to take that into consideration when trying to figure out what price to sell your product to a distributor for, and then the distributor will sell your product to retailers. The con: working with a product distributor will negatively impact margins on product sales.
2. Someone Else Tells Your Brand Story
You’ll have to rely on a third party to “tell the story” of your product as well as you do or your direct sales team would. Ultimately, no one is more passionate about your business than you are or your direct sales team. Therefore, it’s critical upfront that you train the salesforce of the distributor and show them that passion so that they have the tools to tell your story.
3. Difficult to Gain Traction
When it comes to distributors, many of them are already working with a large number of products. It can be difficult to generate and maintain “share of mind” or product popularity when a product is young, not established, and with no proven track record. It’s important to be consistent in pursuing sales channels with distributors to try to develop consumer awareness.
Many Distributors only accept new clients if they maintain a RangeMe account. Hoi Polloi Advisors has extensive experience with product distribution including creating and maintaining a RangeMe account. RangeMe is the industry standard online platform that streamlines product discovery for CPG (Consumer Packaged Goods) retailers and suppliers.
RangeMe is a product discovery platform used by retail buyers to source new products for their retail stores. Suppliers can create free product profiles that detail all the key information buyers need to know when considering your product.
Once you have completed your first product listing and it has been approved, RangeMe matches you with retail buyers looking for new products in your category. These buyers have the option to express interest in your product by connecting within RangeMe.
Click this logo to visit the RangeMe website to learn more.