Running a retail business feels more complicated today than ever before. To survive in a competitive market, brands must be agile. They also need to make many crucial decisions. Add in a global pandemic and its economic impacts, and success can seem an impossible task.
At heart, though, retail remains straightforward. You must provide products that consumers genuinely desire. You need to make customers aware of those products. Then, you have to make it as easy as possible for them to purchase and receive them. It’s in delivering that third element that distribution strategy comes in.
There was a time when selling products was simple. You made or bought your items and popped them in your brick-and-mortar store. Then you waited for customers to arrive. Your biggest concern was how best to display the products to entice visitors into buying. Those were the days.
Today, consumers expect to interact with brands via many channels. They want to buy in-store, via a company site, from third-party platforms, and even on social media. An optimized distribution strategy, then, has never been more critical to businesses.
Read on to find out:
What a distribution strategy is.
Which types of strategy exist.
Why properly optimizing your strategy is essential.
How to create a plan that will help you win more sales.
What is a Distribution Strategy?
The principal aim of any retailer is to get their goods to the customers who want them. Not only that, you must make them available in the manner in which they wish to buy them. Then, to cap things off, you have to ensure any purchase is as seamless as possible. Your distribution strategy is how you reconcile all those necessities.
Your strategy is your plan to speed the connection between your offerings and their end-users. That’s whether they’re consumers, businesses, or a mixture of the two. There are many considerations to account for when defining a distribution strategy. The following are a handful of the most notable:
Consumer needs and demands.
The nature of your products and how they must get sold and used.
Your direct competitors and how they serve customers.
Your budget and the costs associated with different distribution channels.
We’ll get into those considerations in more depth later. First, though, let’s look at one of the fundamental building blocks of an optimized distribution strategy—those being distribution channels.
You might think distribution channels are self-explanatory. It’s the different places you sell your products, right? Wrong. That’s a common misconception. Your website, a third-party platform, or a physical store is not a distribution channel. However, each can form parts of your distribution channel.
A distribution channel is the entire journey a product takes to get from you to its end-user. It could be that your store or website is all that’s involved. That’s the case if you’re a direct to consumer (D2C) brand. You sell your lines straight to their end-users. Not all distribution channels are as straightforward, though.
Lots of channels, in fact, include intermediate steps between your firm and consumers. The principal players in such more complex chains are as follows:
Producers – These are the manufacturers who make products or their constituent parts.
Wholesalers – Firms specializing in broad distribution of products to multiple retailers.
Retailers – Businesses that sell products to their end-users. Sales can happen online or offline.
Consumers/End-Users – The final purchasers of an item. They’re buying it to use, not to sell on.
Your business can exist at different points of these channels. If you sell many different products, too, each may have their own channel. You may also utilize more than one - or even more than one type - even if you only provide one product line. That’s where three principal varieties of distribution strategy enter the picture.
Intensive, Selective, and Exclusive Distribution Strategies
An optimized distribution strategy is one tailored to your brand and customers. You don’t have to choose from a limited number of prescribed alternatives. There are, however, three categories into which most strategies fall:
Intensive strategies – Many brands adopt this type of plan. It involves implementing as many different channels as possible for a given product. The most notable advantage is that this enhances market penetration for the product. It can be an expensive choice, however.
Selective strategies – This is when firms pick and choose different channels for specific products or services. They might, for instance, only sell an item in a certain geographic area. Or they may restrict sales of particular lines to only their own website. The idea here is to match channels to consumer behavior and demand. That, thus, is more cost and time-efficient for the brand.
Exclusive strategies – Companies may restrict the provision of some items even more. They could, for instance, use only one very narrow channel for a particular line. When brands use this tactic, they’re trying to stoke scarcity and thus demand. It’s how companies make products seem higher-end and more desirable.
Defining a distribution strategy is more complicated than choosing from those three options, of course. You must consider product characteristics and consumer demand. You also need to think about geographical and demographic differences in your target audience.
The best distribution strategies, too, account for and encompass other elements, such as:
Your brand’s content marketing and SEO – How does this impact or align with different distribution channels?
Advertising – Which types of ad (online or off) best support your broader strategy?
Business operations & tech – Could the best order management software make a direct channel a better option? Is your logistics good enough to reliably supply a retailer on the other side of the world?
Brand identity – Does it fit your brand’s positioning to have your products in every store under the sun? If you have a higher-end reputation, should availability be more limited?
Why an Optimized Distribution Strategy is Essential
We mentioned above that you can’t merely choose one of the three principal types of strategy. You must better optimize your distribution planning. That’s because your brand is unique, and so is its target audience.
The most successful companies are those who create a genuine connection with consumers. You can’t do that with a scattershot approach to distribution. You must tailor your strategy to those you wish to serve. That way, you ensure your target market gets the customer experience they desire.
Deliver that experience, and both customer satisfaction and loyalty will follow. Loyal customers are like gold dust for businesses. They spend more, and it costs less to keep them on board than to attract new ones. That’s why optimized distribution is essential.
How to Create an Optimized Distribution Strategy to Win More Sales
Optimize your distribution strategy to suit your audience, and you’ll see results. Most notably, in your bottom line. By delivering a superior experience, customer loyalty will increase. Your buyers will return to you more often and spend more.
On top of that, more of your customers will also become brand advocates. They’ll sing your praises to friends, relatives, colleagues, and more. You got them the products they wanted, when and how they wanted them, after all.
An optimized distribution strategy, then, can aid both customer retention and acquisition. Thus, winning you more sales in two distinct ways. How, though, can you create that kind of strategy?
Check out the following tips for creating an effective distribution strategy.
1. Selecting the correct channels.
An integral part of your distribution strategy is your choice of channels. You must decide on the most efficient way of delivering products to your audience. Lean on as much customer data as you can find to answer these questions:
How, when, and where do your customers prefer to shop?
If you’re not the manufacturer, from where can you get your products?
How much post-purchase support might end-users need? Would third-party retailers or providers be able to offer it?
Do you need to explore different channels for particular products? Or in other geographical areas or territories?
Staying focused on your customers is always a good rule of thumb. When defining a distribution strategy, though, you should also consider your commercial goals. Your chosen channels must be viable as regards your budget and future plans.
For instance, you may find that consumers like to buy your kind of products directly online. That could suggest a direct channel where you sell through a dedicated online store. Say, however, that you’ve never dabbled with eCommerce before.
Starting to sell online is no small undertaking. There’s far more to it than designing a website, going line, and watching sales come in. You must promote your site and get traffic. What’s more, you have to get the logistics right for shipping and delivery.
If your brand doesn’t have the broader goal of extending its online presence, that could be a step too far. Instead, then, you might consider utilizing Amazon as part of a distribution channel. It’s these kinds of balances that play into choosing the right channels for your firm.
2. Balancing and aligning those channels.
Speaking of balance. Once you’ve chosen chains of distribution, you need to ensure they line up. Each channel must serve a particular purpose, or else it’s unnecessary. What you offer to customers through them all, however, must align.
Consumers won’t like finding out they can get your product cheaper if they buy it in a different way. Pricing, positioning, and promotions across channels must get carefully balanced. You must, too, consider how best to satisfy demand via all avenues. Your supply chain needs may vary by channel.
3. Combining and integrating departments and processes.
Your distribution strategy will, by nature, be multi-faceted. For each channel, you must consider diverse elements. Things such as marketing, sales, logistics, customer service, and more. It’s vital to have all business areas pulling in the same direction.
Make sure that your departments all share information. Customer service agents must know about marketing promotions for particular products. Your sales staff have to get told about logistics issues- especially if they make delivering certain lines more difficult.
The best way to achieve cross-organizational integration is by breaking down data silos. Make sure all customer and company information is accessible by all departments. Solutions such as unified communications or customer data platforms can help.
4. Building and nurturing your network.
Once you decide on the channels to use as part of your strategy, you need to make it a reality. That means creating a network of partners to help you distribute your goods as you desire.
You may have to reach out to manufacturers, wholesalers, or retailers, for instance. That’s not to mention other firms or service providers. People like web developers or third-party logistics (3PL) specialists.
Once you’ve made connections, too, you should keep working to develop them. Keeping cordial relations with suppliers or retailers is just common sense. It makes them more likely to help you out if and when needed.
If you’re a manufacturer, it could help you, too, to provide product training to retailers. When they know your products inside-out, they’re better equipped to sell them. They’ll also be able to offer better support to consumers.
5. Evaluating and improving your strategy.
Business, whatever your niche or industry, is never static. That means that even once you’ve got an optimized distribution strategy, your work’s not done. You need to keep it as efficient as possible with constant evaluation.
That means continuing to collect customer data. Check in to see how your chosen channels are working out. Do consumers still want to buy online for home delivery? Have their preferences instead shifted to buy online, pick up in store (BOPIS)?
Continually evaluating your strategy lets you make timely improvements. You can add new channels, re-balance your existing ones, and more, as consumer demand dictates. It’s how to stay ahead of your rivals.
If you make or supply products or services, how you get them to your end-users is critical. Supplying the right lines, at the correct time, by the best method is fundamental to success. That’s why it’s essential to develop an optimized distribution strategy.
Follow the tips we’ve outlined above, and you can perfectly tailor your strategy to any target market. That way, you’ll improve the customer experience and thus satisfaction. That's what will help you win more sales both via customer retention and acquisition. Loyal consumers, after all, spend more themselves and extoll your virtues far and wide.
Originally published Oct 15, 2020 8:30:00 AM, updated October 30 2020