How to develop a service or product distribution strategy
Leverage direct or indirect channels to build a distribution plan that's right for your business.
You've developed a great product or service. You're sure customers will want to buy it. But how will you connect that product or service to those customers?
The answer to that critical question is your service or product distribution strategy, which should be an integral part of your business plan. While the details vary widely among businesses and industries, there are two fundamental ways to deliver products and services:
Directly to your customers on your own
Indirectly using someone else’s services
Sometimes the nature of your offering will decide for you: A gourmet food truck is a direct channel by definition, while a mobile app virtually requires the use of a distribution platform. If you're somewhere in between, you'll need to evaluate the pros and cons of each approach.
Is a direct service or product distribution strategy right for you?
Handling everything yourself avoids the markup a distributor would charge.
Staying closer to your customers encourages them to engage with your brand, and can give you the information and access you need to drive repeat business.
Direct access to customers gives you greater control over the service experience.
You can better understand what your customers need, want, like, and dislike.
Going it alone also has potential disadvantages. While doing your own distribution may save you money up front, the costs of storage, packing, shipping, and administration — not to mention staff to handle these tasks — can add up. You'll also be tasked with marketing your product or service to potential customers. If you're in doubt, get some bids, do the math, and find out whether handling your own distribution is right for you.
For all these reasons, direct distribution might be the best option:
If you're just starting out
If you sell a low volume of a high-value product or service
If the nature of your product or service lets you focus on a local market, target a specialized one, or cultivate a base of repeat customers
Is an indirect service or product distribution strategy right for you?
If direct distribution isn't right for your business, indirect methods might offer several benefits:
Retail distribution: A retail approach can put your offering in front of many potential customers right away. In this case, you’ll have to build your own relationships with individual retail stores that will carry your product or allow you to provide your service. These include both well-known big-box retailers with multiple chains across the country, and small retail stores in your local area. The downside is you may face head-to-head competition on the shelves or the site. Usually, you’ll have only a narrow window to succeed: If your product doesn’t sell, you won’t get another opportunity.
Wholesale distribution: While working with a wholesale distributor adds an additional markup, such a partner may have a wider reach than you can achieve on your own, and relationships that can give you a foot in the door. You may also benefit from industry, sales, and pricing expertise that can elevate your business. By handling the logistics of delivery, a wholesaler lets you focus on creating the best product or service possible. You can find a wholesaler at trade shows, in trade magazines or by asking others in your industry.
eCommerce platforms: Online platforms have created a wealth of possibilities that blur the lines between direct and indirect distribution. From Ebay to Etsy, e-commerce sites may offer a cost-effective way to reach a worldwide audience. By choosing the right platform(s), you can tailor your distribution strategy to meet your needs and your customers'. The buying experience may be much like a traditional retail site, or more personalized and interactive. Tools for advertising and promotion are often available for an additional cost, as well as sophisticated analytics about sales and customers. Features such as reviews and social sharing create additional opportunities in a landscape that’s evolving rapidly.
A distribution strategy that’s all your own
Given all the possibilities, weigh the costs and benefits of different approaches — in time, effort, and dollars. Craft a strategy that leverages your strengths and the capabilities of others. Then test, refine, and evolve it as your business grows.
Want to measure your strategy's potential? Here are five tips to help you create a sales forecast.