No two businesses selling products or services are exactly the same. If you’re in charge of the supply chain for your own business, you have to choose a distribution strategy that fits your specific needs. But with so many strategies to choose from, how do you decide which is best for you?

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In this article, we’ll take a look at what sets different distribution strategies apart from each other, and how each one can benefit specific kinds of businesses. By the end, we hope you’ll be able to make an informed decision to help improve your business’s supply chain.

Article Roadmap

• What Is a Distribution Strategy?
• What Are the Different Types of Distribution Strategies?
• What Are Some Common Distribution Channels?
• How Do I Select the Right Distribution Strategy for my Business?
• What Are Some Technologies that Aid in Distribution?
• What Are Some Common Distribution Software Features?
• Conclusion

What is a Distribution Strategy?

A distribution strategy describes the way you get your products in front of potential and repeat customers, based on their shopping behaviors and how they discover and use what you’re trying to sell. The role that an item will play in a client’s life and the type of purchase decision associated with a product are important aspects to consider when determining a strategy.

You’re not limited to only one distribution strategy to make sales. Some companies use multiple distribution methods to reach different consumer bases. For example, if you’re selling to an audience of age 60 or older, you might directly sell products via catalog. For a younger customer base, you might indirectly sell them through an online retailer. If your product appeals to both, there’s no harm in selling through both channels.

Types

There are two categories of distribution strategy: distribution channel strategies and marketing channel strategies. Most businesses use a combination of the two kinds. Let’s examine some of the factors that go into each of these cutting-edge distribution strategies so you can determine which combination of practices works best for you.

Distribution Channel Strategies

Distribution channel strategies refer to how you offer your products to potential customers looking to buy. These strategies differ slightly from marketing channel strategies, as they are more focused on giving people opportunities to find and buy your products rather than just getting them in front of their eyes.

There are two kinds of distribution channel strategies: direct distribution and indirect distribution.

Direct Distribution

Direct distribution refers to selling your products directly to customers without any need for a middleman. There are a few different ways to implement this method. Some organizations opt for a direct online storefront when selling to an audience that’s familiar with technology, while others make use of catalogs or phone orders for a more low-tech customer base.

It’s important to consider how much your company will need to invest when implementing a direct distribution strategy. For example, manufacturers will need warehouses, vehicles and delivery staff in their portfolio to effectively distribute goods on their own.

Indirect Distribution

Indirect distribution strategies refer to using intermediaries, or “middlemen,” to help sell your products or services. This strategy usually works best when what you’re selling is a routine purchase that customers make without much regard for brand loyalty.

For example, if you manufacture toothpaste, you might want to partner with multiple department stores as your intermediaries to stock your brand in areas where customers are already looking for similar products.

We’ll discuss the different types of intermediaries and their specific benefits later in this article, but business needs, targeted clients and type of product are typically behind the reasoning for using this strategy.

Marketing Channel Strategies

Marketing channel strategies are distribution strategies that involve how you get your products in front of customers’ eyes rather than straight into their hands. These strategies tend to focus more on the number and kind of locations that your products end up in, and often work hand in hand with distribution channel strategies.

There are three kinds of marketing channel strategies: intensive, exclusive and selective.

Intensive Distribution

Intensive distribution strategies involve putting products in as many locations as possible. Typically, this strategy works for products that are smaller, routine purchases a customer is less likely to actively seek out in a store. For example, the company manufacturing the breath mints you might see at the checkout counter at a major chain store might use this strategy.

This strategy isn’t as useful for more considered purchases that require heavier brand loyalty, but for smaller products, it can increase exposure by maximizing the number of sales channels.

Exclusive Distribution

Exclusive distribution strategies refer to making a deal with a retailer to only sell your product or service through their specific storefront. This strategy works especially well for high-priced items with high brand recognition, like Apple products.

Businesses using exclusive distribution strategies may also sell goods directly through their own branded stores. For example, Apple has a number of storefronts specifically for their own products.

Selective Distribution

Selective distribution strategies act as a middle ground between intensive and exclusive distribution. When implementing it, your business finds multiple considered and strategically selected venues to distribute products.

Rather than focusing on the most widespread reach possible or targeting one or two specific venues, this strategy lets you identify which venues will best reach your target audience, then make distribution deals with those storefronts.

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Common Distribution Channels

There are a variety of ways to get products into the hands of customers using indirect distribution strategies. Here are some of the most common venues businesses use to sell their products.

Wholesalers

Wholesalers source products in bulk for a relatively low cost from manufacturers and sell them at a markup to retailers, who then mark up item costs even more to make their revenue. Wholesalers typically have a catalog of items that retailers can order from their warehouses. Many wholesalers require retailers to buy a set amount of product and obtain goods in bulk.

Retailers

Retailers are the final step in the distribution channel before customers purchase an item. They buy goods either directly from a manufacturer or indirectly through a wholesaler, typically at a low price that is then marked up to gain a profit. Retailers can use an array of different methods to resell these goods — storefronts, catalogs, and e-commerce websites are all potential avenues for retail.

Franchisers

You’re likely familiar with the idea of franchising — your local McDonald’s restaurant may be owned by a franchiser who is licensed by the McDonald’s corporation to sell goods in the company’s name. These individually owned businesses can use company branding to gain sales and, in exchange, pay a flat fee and ongoing royalties to enter an agreement.

Organizations and manufacturers with brand recognition benefit from this strategy by gaining revenue without having to manage the granular day-to-day tasks associated with a brick-and-mortar shop. A 2022 study by the IFA found about 775,000 franchises operating in the United States as of 2021, with $788 billion in monetary output in total.

Distributors

Distributors specialize in obtaining and transporting goods from manufacturers to other intermediaries. The benefit of using a dedicated distributor is that manufacturers don’t have to deal with the logistics of transport or the cost of maintaining shipping staff and materials.

Distributors may also be able to package diverse goods into one entity for sale to a retailer. For example, your company may produce television remotes, while a different organization creates batteries. By packaging these items together, the distributor can create a more attractive, comprehensive product and improve the likelihood of a sale.

How Do I Select the Right Distribution Strategy for my Business?

Selecting the correct distribution strategy for your business depends on several factors. Let’s take a look at some of them.

Purchasing Decision Type

The optimal distribution strategy for your business may differ based on the decisions customers typically make when purchasing the product you sell. There are three types of purchase decisions: routine, limited and extensive.

Routine

A routine purchase is something that customers spend relatively little time selecting and is generally low-priced, such as hand soap or paper towels. With these items, an indirect and intensive distribution strategy might work best as customers aren’t necessarily loyal to specific brands, and expect these products to be accessible at various locations. For these products, a high number of available items can lead to higher sales.

Limited

Limited purchase decisions generally deal with moderately priced items that customers may spend a bit more time comparing to each other, such as clothing and small appliances like toasters. Customers don’t put as much effort into these decisions as they might with a big-ticket item like a house or car. A selective distribution strategy usually works for these products.

Extensive

Generally, as the cost of an item goes up, the intensity of the purchase decision increases as well. Extensive purchase decisions refer to high-priced items that customers spend the most time deliberating the purchase of, such as cars, large appliances and even college educations. Exclusive distribution strategies work well with these items due to the high cost of producing them and the lower frequency of purchases.

Customer Base

To get more detailed about which distribution strategies most effectively apply to different customers, we need to drill down to some of the ways companies use direct distribution.

E-commerce is the most recent of the direct distribution channels, using website storefronts to make purchasing easier. It has a relatively low barrier to entry for companies, and many consumers are already familiar with web-based technology. This method also eases the process of purchasing a product because consumers don’t have to leave their houses to buy items; they just need an internet connection and their credit card information.

Physical stores, on the other hand, are still a popular venue for selling products. Customers can easily find and purchase related goods in brick-and-mortar locations, allowing you to increase sales if your product is located near relevant other products. Additionally, consumers can look at and try out products in person, which is especially beneficial when the price of a good and the intensity of a purchase decision increases.

Catalogs and phone-in purchases are less relevant in the age of the internet, but aren’t worth completely counting out as a direct distribution method, thanks to older customer bases already being familiar with buying goods through these channels.

Warehouse Capabilities and Logistics

Whether your company uses a direct or indirect distribution strategy depends on whether you are willing or able to invest in aspects such as a transportation fleet, shipping personnel, and a warehouse for storing goods. This isn’t something that a manufacturer should enter into blindly — acquiring these necessary factors involves a considerable investment, and the costs are important to factor in.

Your business will need to weigh the pros and cons of conducting your distribution versus using an intermediary when deciding on a distribution method. Indirect distribution may cost more in the long run, but allows you to outsource many of these duties to a third party.

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What Are Some Technologies that Aid in Distribution?

Many businesses turn to distribution software in order to improve their distribution strategy. Whether you’re a manufacturer conducting your distribution or a distributor looking to improve operations, a software solution can be a beneficial option. Let’s take a look at how this software can benefit you.

Automation

Automation capabilities can increase the speed at which work is completed and free up employee time. This ability is offered for various tasks, and specific functionality differs based on the distribution software vendor that you go with. An example of how this might look in practice is through the automatic assignment of items to a vehicle based on where the other materials in that vehicle are going and its planned route.

Internet of Things (IoT)

The internet of things is especially helpful in increasing productivity in the distribution process. Many distribution systems include RFID tracking that enables users to scan items and track their locations geographically and within the workflow. This helps users visualize the movement of inventory in real time.

Cloud-based System

The proliferation of cloud-based distribution software enables users to access solutions anytime and anywhere. This is especially helpful in the distribution industry where employees may need to look at data during both desk work and hands-on work. This option enables flexibility and accessibility.

Key Features

Distribution software contains many different features to aid in the distribution process. Here’s a quick overview of some of the commonly included features in these programs.

Sales Order Management

Sales order management functionality often includes the ability to input orders and then transmit them to manufacturing so that items can be produced to meet customer needs. Some programs enable this process to occur automatically and can receive customer information from different touchpoints.

CRM

CRM tools can assist users in looking at customer information in real time to see historical purchasing information, products that are currently being waited on and payment method. This can improve the customer experience along with keeping distributors knowledgeable of varied customer expectations.

Inventory Management

Inventory management features include the ability for employees to look at capacity, shortages and on-hand stock. This assists with planning and review of demand processes. Some distribution programs can use inventory information and demand planning to automatically reorder materials needed to meet anticipated needs.

Ecommerce

E-commerce features assist companies in developing an online shopping platform to manage and coordinate sales with customers. These tools often contain support for web analytics so that organizations can track the products that clients are most interested in along with other relevant data points.

Logistics Management

These features enable transportation management and route planning. This may include selecting which items should be shipped together for the most efficient shipping process along with helping delivery drivers optimize their driving hours.

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Conclusion

Creating an effective distribution strategy depends on factors such as ideal demographic, item type and current logistical setup. Whatever method your business chooses, it’s essential to make sure that customer needs and purchase decision levels are accounted for, as these factors will help determine the optimal distribution strategy.

What distribution strategy do you use, and why? Let us know in the comments below!

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