Every day, some lucky person creates a new product that can change the world. However, many of these products go to the wayside simply because the manufacturer cannot effectively distribute them in the ever-changing global market.
This can be due to a lack of resources or, more commonly, a lack of information on production and distribution.
There are several product distribution methods for different products, as every company has particular long-term needs. With this in mind, here is some information on how to distribute YOUR new product in today’s market.
Two Types of Distribution
The distribution strategy your company needs will largely depend on the products it sells. The two main types of distributors are direct distributors and indirect distributors.
Both direct and indirect product distribution strategies have commonalities, but differently sized companies should use different methods to bring consumer products to market.
Direct Distribution
This distribution model is singular: your company delivers products directly to customers.
This method uses direct communication between the manufacturer and the consumer to ship the ordered products right to their doorstep. Typically, this form of distribution can be good for budding businesses and smaller companies with mainly a local consumer base.
These companies that use direct distribution have to handle all marketing and fulfillment for their products (including pricing, storage, packaging, and shipping), including everything online.
Cons for this distribution method include slower growth rates that may not allow for recouping development costs (higher overhead and inbound marketing costs).
However, this method offers the benefit of working directly with the customer, enabling faster product refinement.
Indirect Distribution
Indirect distribution can be called the “middlemen” in the process. These distribution partners can include distributors, wholesalers, retailers, and brokers/agents.
These outsourced companies buy (or have a share in) the products from the manufacturer and take them to the broader marketplace, leaving the manufacturer to keep making their products without having to fulfill orders or market them. These product distribution services also handle pricing, packaging, and shipping for your business.
Other elements in the indirect distribution process can also include logistics companies, sales teams or sales reps, tech support for websites and social media, and marketing companies.
This distribution method is beneficial for medium- to large-sized businesses with room for significant inventory growth, as many companies that outsource these services want to focus on building more units to sell.
Indirect product distribution centers are also well-suited to longer-term client relationships, as they take a vested interest in your company’s well-being and want it to succeed.
Product Distribution Channels
Sometimes it is easy to forget who does what in the distribution process. In most cases, only businesses that use the indirect distribution method will use these outsourced channels.
Here is a list of definitions to help you get on the right track on who to outsource to:
Manufacturers
- A company that takes raw goods and turns them into a finished product to sell in the world market.
Wholesalers
- Resells large quantities of goods for manufacturers. Buys your products in bulk and sells them to other businesses. Only deal with distribution in terms of storage and delivery of goods.
Distributors
- A wholesaler who actively sells products. Performs tasks such as market analysis and promotion. Known for their relationships with their customers.
Retailers
- Outlets/stores where customers can buy products. Sales channels include brick-and-mortar stores and online shopping.
Brokers/Agents
- Make it easier for producers and manufacturers to sell their products to wholesalers and distributors. They also provide services in getting products to retailers. Deal with contracts, specialized shipments, and general customer relationships.
Three Types of Indirect Distribution
The scope of indirect distribution is far-reaching. Businesses, with their distribution partners, can distribute to many locations at once or only a few.
With such a significant portion of indirect distribution being broad in nature, we have broken it down into three different types:
- Intensive – as many locations as possible.
- Exclusive – partnering with a single retailer or manufacturer sells through its own retail locations.
- Selective – limiting how many stores sell your products, only using a particular kind of retailer. Determining which section you are distributing to for the product should directly impact the revenue generated by hitting the right target markets.
Without knowing how your product sells best or how to position it in the market best, it will receive no traction. Finding a distributor with the experience to fulfill your distribution needs is critical to getting your new product into consumers’ hands.
Questions For Manufacturers Looking For Indirect Distributors
These questions will help you set up the right product distribution network for your products:
- What product category is your product in?
- What demographics are buying your products?
- Are you looking to expand inventory significantly within the next 5 years?
- Is your ideal market intensive, selective, or exclusive?
- How are you tracking your metrics?
- Are metrics being used effectively to reach target markets?
Marketing your new product can be hard, and finding ways to reach consumers can be even more challenging, especially for companies looking to grow within the next five years.
Businesses need to remember that without the distribution side of their product line, no one will be able to buy that product, so making that longer-term investment will undoubtedly be worth it in the end. It will keep you, the distribution network, and your customers happy for years to come.
We know that establishing a distribution management solution can be highly complex, and that creating an optimized process order flow across multiple channels requires specific industry insights, all at your price points.
NewStream Enterprises has the expertise in transportation, warehousing, and inventory management to optimize YOUR distribution network.
Contact our experts today!