Anyone whose business deals with moving materials and goods knows how much goes into getting your products in the market. Having the right distribution channels — or the chains and intermediaries through which your products are transported and sold — can make or break your business.
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The concept of distribution channels may seem overwhelming, especially given all the logistics involved. But they mostly fall into a few categories, which aren’t hard to make sense of once you’re familiar with them. In addition to having a solid understanding of how these channels work, the right software can help pinpoint every step of the channels you use, helping you determine the most efficient ways to increase sales.
In this article, we’ll go over what distribution channels are and how they help businesses get their products to more customers in more locations. We’ll also discuss how software can help your business leverage these channels and keep your flow of goods working smoothly, from product creation to the warehouse to order fulfillment.
What Are Distribution Channels?
Distribution channels are the ways that products are put in front of potential customers, either directly from your company or through one or more intermediaries. In this case, distribution refers to more than just the delivery of products to customers — it’s also how you get attention and make sales, using different methods of sharing your products to attract and hold the interest of the audience you’re trying to reach.
A department store that stocks your product is a a distribution channel. The store acts as an intermediary between you and buyers, helping convert them from interested party to paying customer. Some channels are more direct while others are indirect and involve more intermediaries between you and the customer.
Depending on what you sell and what audience you want your products to reach, different channels will yield more lucrative results for your business. Picking the best and most sustainable distribution channels for your business involves considering the demographics and purchasing habits of your customers, so you can make sure your products are available to them where they shop.
Types
Distribution channels can be direct or indirect, with each category having its benefits and drawbacks. Let’s look at the different types of distribution channels, and how you can use either or both to improve the reach of your business.
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Direct Channels
A direct distribution channel refers to one that uses as few intermediaries as possible, eliminating any middlemen between the business and the consumer. These channels can be any method of directly selling products, from online storefronts to physical catalogs, and can even incorporate physical storefronts if your company has the means to open them.
Depending on the kind of storefront you use, direct distribution can be utilized for businesses of any size. For example, smaller businesses without as much capital can exclusively sell their goods through an online store, something that services like SquareSpace make relatively easy to open even with limited coding knowledge. Larger businesses may also opt for an online channel to supplement their other sales.
The forms direct channels take are also influenced by your target demographic. If you’re selling your products to an older audience that isn’t as familiar with technology or online storefronts, physical catalogs and mail orders may be the best option to maximize sales. If your audience spends a lot of time near shopping centers, opening a physical store may be a good use of resources.
However, when using a direct distribution channel, your company will need to stay on top of every element. You’ll need to coordinate warehouses and manage properties, and ensure deliveries are getting where they need to go when a customer puts in an order. Some companies prefer this level of control, while others opt to forgo this type of channel and work with an intermediary instead.
Indirect Channels
Any method of getting products in front of consumers that utilizes one or more intermediaries is an indirect distribution channel. This often takes the form of a business partnering with a larger company to sell through the larger company’s storefront. Indirect distribution can work both online (such as partnering with an online retailer like Amazon) or in person (such as partnering with a department store like Target).
While indirect distribution requires you to relinquish a certain amount of control over the process, it also means you’ll have access to your partners’ and intermediaries’ support and distribution networks. This can help smaller businesses put their products in front of a much larger audience if they don’t have the means to build brand recognition or a following on their own.
Considering a target audience’s demographic is also necessary for any business working with indirect distribution channels. For example, are they more likely to shop in person or online? What retailers do they return to most frequently? Partnering with a channel that improves your reach to the right audience can be mutually beneficial because it drives sales for the intermediary too.
However, indirect distribution channels can become very complicated very quickly when dealing with chains of multiple intermediaries. If your company is wary of this, you may be better off with a direct distribution channel instead.
Combining the Two
Most businesses are likely to use more than one distribution channel to get their products out into the market and maximize their reach. We’ve explained the benefits of each kind of channel above. So what happens when a business decides to use a combination of both?
With a high enough budget, your company can opt to use both direct and indirect distribution channels to get as many eyes on your product as possible. This could take the form of having your own online store while also distributing your products through a department store, allowing customers to purchase directly from your site or find your products in person on their next shopping trip.
The most prominent concern with combining distribution channels is budget. Each channel comes with its own costs, so businesses using several different channels for distribution need to invest in only the methods and intermediaries that will help them reach their target audiences. Without a targeted distribution strategy, you’ll just be wasting money on channels that don’t get results.
How Software Can Help
Incorporating the right distribution software into your business’s workflow can help streamline sales and delivery processes, and make it much easier for you to manage multiple distribution channels at once. Thanks to subscription models, cloud software has a relatively low cost of entry, allowing even small businesses to access the potential benefits.
Here are some of the key ways the right distribution software can help your business.
Visualization
Incorporating distribution software into your sales and delivery processes gives you real-time insight into how your distribution channels are performing minute by minute. This helps you identify which of your channels are getting you the best results and which ones might not be worth the investment. It can also help you pinpoint slowdowns and bottlenecks in your general distribution process.
Centralization
When managing several distribution channels at once, you can use distribution software to make them easy to locate and organize by any metrics you desire. For larger businesses, this capability can help you keep track of direct and indirect channels all at once and ensure they’re performing at top efficiency, regardless of what distribution strategy you may be using.
Accuracy
Synchronizing your distribution software with your accounting software will allow your business to automatically log transaction data for outgoing payments to partners and incoming revenue. This eliminates any human errors that may occur and ensures your databases are up-to-the-minute accurate, as well as helping you make recurring payments to partners and suppliers that may be necessary to keep channels flowing.
Next Steps
By now, you should have a solid understanding of how leveraging the right distribution channels can benefit your business, and how implementing distribution software can take these channels even further. Get our free software comparison report to select the right platform for your business.
What distribution channels and strategies does your business use? Let us know in the comments below.