What is a distribution strategy?

Every business needs a way to get products, goods and services to their customers or end-users. A distribution strategy describes how that’s done. 

Selecting a distribution strategy is crucial to keep your customers happy and your business running smoothly. There are several methods to choose from, and each has its own perks and drawbacks. 

If you want to learn more about distribution strategies and how they work, you’ve come to the right place.

This guide will help you understand:

• What is a distribution strategy?
• What are distribution channels?
• What kinds of distribution strategies can I choose?
• How do I develop a distribution strategy?

A distribution strategy is a business’s method to bring products, goods, and services to customers and end-users. As a business owner, you want to develop a distribution strategy that is efficient and cost-effective. 

To achieve that, it’s important to be familiar with the different types of distribution methods and channels so you can select the best solution. You can choose to use multiple distribution strategies to reach different audiences. 

When developing your strategy, you also need to understand how distribution channels work and select one that’ll work for you. 

Distribution channels are the flow of business that happens between a manufacturer (in this case, you) and a consumer. In other words, it’s the path that transactions follow from purchase to delivery. 

A distribution channel happens in two forms: direct and indirect. 

In a direct channel, you (the manufacturer) sell and send your products or services directly to the consumer without involving third parties. In an indirect channel, you use another business to help get your items to the consumers. 

We’ve also explained the best options your small business can use for your distributions channel below:

Here, a wholesale business buys items in bulk from a manufacturer and then sells them to retailers. This is often great for securing products for less money since you place large orders.

Wholesalers store and deliver the goods and act as a trader between the manufacturer and retailer, but rarely interact directly with the customer. 

Unlike wholesalers, retailers sell items directly to customers. Retail distributors typically buy their products or services from wholesalers or manufacturers directly. Then, they markup the price to earn a profit. 

People usually associate retailers with physical storefronts, but they can also be online websites, catalogue companies or phone-order businesses.

A distributor collects and transports items from manufacturers to retailers and other locations. Distributors can also have multiple clients that overlap, creating product groupings that generate more sales.

For example, the distributor might pick up home-made furniture from your business and create a living room package deal by getting rugs from another company. 

There are several distribution strategies you can use, and the trick is knowing which one will help you achieve your business growth goals. 

Here are the three methods of distribution manufacturers can choose to get their goods delivered to the market. 

• Intensive distribution – Using as many distribution outlets as possible with the goal of penetrating as many markets as you can.
• Selective distribution – Selecting outlets in specific locations, often based on a particular good and its fit within a store. This lets you pick a price point that targets a particular consumer market and provides a more customised shopping experience.
• Exclusive distribution – Using limited outlets based on anything from luxury brands to special collections only available in a particular area or store. This method helps maintain a brand image and luxury product. High-end designers like Chanel are a good example of this.

Now that you know how distribution strategies and channels work, it’s time to pick the solution that will work best for your needs. 

Depending on your business, you may need more than one distribution strategy. Go through the steps below to figure out which solution would be best for you.

A good way to determine which distribution strategy to use for your small business is to look at your competitors. 

If there’s a distribution channel your competition appears to have overlooked, you can gain a competitive advantage by using it. 

For example, let’s say your competitor only sells directly to customers from their store. In that case, you could also sell your products directly to consumers online to generate more sales. 

See also: What is competitor research?

It’s also important to consider how much you can reasonably spend on your distribution channels and compare that to the benefits you stand to gain. 

Once you choose a distribution channel, it’s difficult to reverse it. You can add another one, but that costs money. 

So before you commit your resources to a specific method, carefully weigh the costs and benefits to make sure you can profit from it. 

To figure out your distribution budget, you’d benefit from using an accounting app like Countingup.

Countingup is the business current account and accounting software in one app. It allows you to track and manage your income and expenses with just a few taps on your phone. 

Knowing exactly where your money comes from and goes to will help you determine how much you can reasonably spend on your distribution.

You can also use the app to track your profits to determine how your strategy works for you. 

Start your three-month free trial today. 

Once you know which distribution methods are available to you, rank them in order of how much revenue you can make, minus the associated costs. 

When you’ve completed this step, choose the option that allows you to reach the highest number of customers without exceeding your budget. 

As your business grows and evolves, you may find that your distribution strategy no longer works for you. So it’s important to have a plan for how you can adjust to maximise efficiency and profits.

Keeping up with market trends and competitors enables you to make informed decisions about your distribution strategy. That way, you can ensure that your strategy continues to serve your business and customers as the market grows.

For more information on how to create a successful business, you can check out these guides:

• How to reach financial goals in business
• How to budget when starting a business
• How to successfully run a business alone
• How to create a long-term business strategy