Finding the right retail distribution methods can be a daunting task for any business. You have to figure out the channels and processes that will get your products into the hands of consumers.
The stakes are high, too. If you choose the wrong path, be ready for missed opportunities and wasted resources.
But a strategic approach can boost sales and enhance brand loyalty.
This comprehensive guide discusses retail distribution in detail to help you learn what it is and how to do it well. We unpack the channels, strategies, and best practices needed for success.
Let's dive right in and discover how to get your products to market in the best way for your company.
What is retail distribution?
Put simply, retail distribution is the process of getting products to consumers.
It covers:
Transportation
Warehousing
Inventory management
The actual sale
At its core, retail distribution bridges the gap between production and consumption. It makes sure that products are delivered to the right places, at the right times, and in the right quantities.
Part of this process is choosing the best distribution channels. The other part is finding the right strategies to maximize product availability and meet consumer demand.
What are the 6 main retail distribution channels?
You can think of the different channels for distributing retail as methods for connecting with buyers. Let’s break down the six ways most businesses send out their goods.
1. Direct-to-consumer (D2C)
D2C means selling products directly to customers without middlemen. In this approach, brands control the entire customer experience.
Examples of successful D2C brands: Brands like Warby Parker and Glossier thrive using the D2C method. They create personalized shopping experiences and build direct relationships with customers.
Pros: Higher profit margins and direct customer feedback.
Cons: Requires a strong marketing strategy and the handling of logistics on your own.
2. Retailers
Retailers buy products from manufacturers or wholesalers and then sell them to consumers. They can be brick-and-mortar stores or online shops.
Examples of successful retailers: Think of big names like Walmart, Target, and Amazon. They provide wide distribution and have large customer bases.
Pros: High visibility, which creates customer trust and loyalty.
Cons: Lower profit margins and less control over the customer experience.
3. Resellers
Resellers purchase products to sell to customers. They often add value through additional services or product bundles.
Examples of successful resellers: Electronics stores like Best Buy and smaller niche shops are considered resellers. They often provide specialized knowledge and customer service.
Pros: Niche market penetration and using services to add value.
Cons: Dependence on the product’s brand reputation and less control over pricing.
4. Wholesalers
Wholesalers act as intermediaries, buying in bulk from manufacturers and selling in smaller quantities to other businesses.
Examples of successful wholesalers: Companies like Sysco and McLane Company are wholesalers. They purchase products in volume, allowing them to sell products at lower prices to retailers.
Pros: Large purchase volumes and a lower cost per unit.
Cons: Smaller profit margins and the need for enough storage space.
5. Online marketplaces
Online marketplaces are platforms where multiple sellers can list their products for sale. They have built-in traffic and marketing, and they integrate the selling process.
Examples of successful online marketplaces: Sellers like Amazon and eBay are online marketplaces. These platforms offer immense reach and customer trust. Sellers can access a global audience without having to set up their own online store.
Pros: Access to a large customer base and ease of entry.
Cons: High competition and fees taken by the marketplace.
6. Hybrid channels
Hybrid distribution combines multiple channels to maximize reach. These channels can use both D2C and retail partners. Or a business could have both a physical store and an online shop.
Examples of successful hybrid channels: Companies like Nike use their own stores and have an online presence, along with retail partners. Their strategy covers more market segments.
Pros: Broad market coverage and flexibility.
Cons: Complex to manage multiple channels at once, and potential conflict can arise between channels.
What are the 4 different retail distribution strategies?
There are four primary strategies for delivering within your chosen distribution channel. There’s no single “right” one. However, there can be alignment or misalignment between your consumer and how you distribute your product, so it’s important to consider the best strategy for your needs.
1. Intensive distribution
Intensive distribution aims to place products in as many places as possible. This strategy maximizes product availability and exposure and is ideal for fast-moving consumer goods (FMCGs), such as toiletries or household items.
Examples of intensive distribution: Coca-Cola is a classic example. They make their products available in supermarkets, vending machines, and convenience stores worldwide.
Pros: High product visibility and convenience for consumers; products are easy to find and purchase.
Cons: Higher costs for managing vast distribution networks and potential loss of brand uniqueness due to overexposure.
2. Selective distribution
Selective distribution focuses on a limited number of outlets in a specific area. This strategy balances product availability with brand positioning.
Examples of selective distribution: Sony and Apple are available only in select stores and online platforms.
Pros: Better control over the brand image, better relationships with retailers, and a more specialized sales approach.
Cons: Limited market reach, especially compared to intensive distribution. It may restrict sales volumes but can also lead to higher profit margins per unit.
3. Exclusive distribution
This distribution strategy grants exclusive rights to a single retailer or distributor. It’s often used for high-end or luxury products.
Examples of exclusive distribution: Highly regarded brands like Rolex and Gucci are given exclusive distribution.
Pros: Maintains a high-end image, allows close relationships with distributors, and allows for a premium customer experience.
Cons: Limited exposure and reliance on a few retail partners, which can be risky if the partner underperforms or moves on.
4. Franchise distribution
Franchise distribution allows independent operators to use the franchise company’s brand and business model. In turn, the operator pays fees and royalties. This method helps companies expand rapidly without bearing the full cost of new outlets.
Examples of franchise distribution: Fast-food chains, like McDonald’s and Subway, use the franchise distribution model.
Pros: Rapid expansion and leveraging local market knowledge allow businesses to scale quickly and tap into regional expertise.
Cons: Potential inconsistencies in customer experience due to different local management and the need for ongoing franchisee support and oversight.
How does international retail distribution work?
When retail goes international, its distribution involves navigating different markets, regulations, and consumer behaviors.
Domestic distribution doesn’t require an understanding of various cultures or adapting to the same level of logistics. International businesses deal with customs, tariffs, and global shipping. Each of these adds layers of complexity to how they distribute their products.
How to work with international distributors
To work with international distributors, you need to find reliable partners who understand local markets.
These distributors should have the capacity, reputation, and market knowledge to represent your brand effectively. Build strong relationships through regular communication and mutual agreements. These relationships are essential for long-term success.
Navigating regulations and legal requirements is also critical. Each market has local laws to adhere to regarding product standards, packaging, and labeling.
Additionally, businesses must consider the logistics of international shipping. You have to manage transit times and deal with potential delays. Fortunately, effective inventory management makes sure that products are available in a timely manner across multiple marketplaces.
How to measure international demand
The stakes are higher in international markets. There are more customer nuances to sort through, more risks to avoid, and more decisions to be made.
That’s why you need to be able to measure international demand — so that you can act strategically and effectively.
Forecasting this demand requires thorough market research into the following:
Local trends
Consumer preferences
Economic conditions
Businesses can use tools like surveys or focus groups and gather information through market analysis reports. Tracking sales data from similar markets can also provide valuable insights into possible demand.
Lark can help communicate with international partners
Businesses can successfully expand their global reach by leveraging Lark’s tools.
Lark Messenger and Lark Meetings, for example, facilitate real-time communication and help overcome time zone differences. Plus, Lark’s translation capabilities make sure that language barriers don’t hinder effective collaboration.
These features and others help maintain strong relationships and coordination with international distributors.
How do you pick the right channels and distribution strategies?
Not all channels get your products to market effectively. Here’s how to make informed decisions when choosing a distribution strategy:
Get clear on your business
There are three main factors that help you understand your business and how to distribute your retail.
Product type: Different products favor different distribution channels. For example, perishable goods need direct or intensive distribution to maintain their freshness.
Target market: You must know where your customers shop or where they’d be looking for what you offer. For example, if you sell luxury goods, they might do well in exclusive boutiques, but everyday items would need wide availability.
Resources: Consider your available resources, such as your budget, workforce, and technology. Smaller companies might start with fewer channels and expand as they grow.
Conducting a retail audit on your business can help give you clarity on these factors.
How to make your decision
You’ll make your decision based on your business, your bottom line, and your customer. Consider doing the following:
SWOT analysis: Conduct a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis to evaluate your business’s best options. Strengths and weaknesses focus on the business itself, and opportunities and threats focus on the market or industry you’re operating in.
If you find that your strength is your brand reputation, you can favor strategies that align with that.
Similarly, if you discover a weakness in low-volume output, you can avoid channels that don’t align with that.
Cost-benefit analysis: Evaluate the setup costs and benefits of each channel and strategy. Determine potential revenue by looking at market research and past sales data. Consider the ongoing costs of warehousing, logistics, and marketing.
Customer journey mapping: Understand and map out the typical customer journey for your product. Identify where customers are most likely to purchase, and make sure those channels are optimized for easy buying.
Looking at some examples
Let’s consider some hypothetical examples to see how these decisions could play out:
High-end fashion brand: For a luxury brand, an exclusive distribution strategy works best. It maintains the brand's prestige and provides a tailored shopping experience.
Organic snack company: An organic snack company should consider intensive distribution. That means getting products into as many health food stores, supermarkets, and online marketplaces as possible to reach health-conscious shoppers everywhere.
Tech gadget startup: A tech startup might benefit from a selective distribution strategy. They could place their innovative gadgets in specialty electronics stores and reputable online platforms to ensure knowledgeable salespeople and a tech-savvy audience.
Real-world examples
Let’s also take a quick look at what real, successful companies have chosen for their respective distribution strategies:
Tesla: Tesla uses D2C to sell cars online and through its own network of stores. This approach gives Tesla control over the customer experience and builds direct relationships with buyers.
Starbucks: Starbucks employs a hybrid distribution strategy. In addition to their cafes, they sell products like coffee beans and ready-to-drink beverages through grocery stores and online platforms, which broadens their market reach.
Unilever: Unilever uses an intensive distribution strategy for many of its consumer products, such as Dove and Hellmann’s. These products are widely available in supermarkets, convenience stores, and online. The company’s goal is to provide maximum accessibility.
9 best practices for retail distribution
Let’s tap into some of the best practices for making sure your distribution strategy is robust and effective:
1. Scale wisely
Consider how scalable your chosen channels and strategies are. As your business grows, your distribution methods should be able to expand without significant headaches.
Make sure that your infrastructure can handle increased volume and that your processes can adapt to market changes.
If you’re not using them already, automated tools can power inventory management and order processing for you.
2. Build strong relationships with your distributors
Reliable partnerships ensure smoother operations and mutual growth. Schedule regular meetings to discuss performance, address issues, and plan future strategies to keep everyone aligned and proactive.
Offer incentives for distributors that meet or exceed sales targets, too. Also, regularly train them on new products and how to market them.
3. Stay on top of demand
Accurate forecasting helps maintain optimal inventory levels. Use historical sales data and market trends to make predictions. Pay attention to demand signals from social media.
Be prepared to adjust quickly to changing demand. You may need to ramp up production or adjust stock levels in response to market shifts.
4. Work with a 3PL
Choose a third-party logistics (3PL) provider that aligns with your business needs and values.
Consider the following qualities when choosing this provider:
Reliability
Scalability
Technological capabilities
3PLs can streamline your logistics, manage warehousing, and handle distribution, allowing you to focus on your core business activities.
5. Make sure your deliveries are quick
Optimize your supply chain to reduce delays. Route optimization software plans the most efficient delivery routes.
Work with reliable carriers and use technology to track shipments. Keeping customers informed about their orders builds trust and improves customer satisfaction.
6. Use software
Leverage software tools like Lark for real-time inventory tracking, demand management, and more.
Lark’s inventory capabilities can help prevent stockouts and overstocking, and its communication tools coordinate with your team and distributors.
7. Track your performance
Monitor key performance indicators (KPIs), such as delivery times, order accuracy, and customer satisfaction. Regular tracking helps identify areas for improvement. Set performance goals based on these metrics, and ensure your distribution processes remain efficient.
8. Incorporate sustainability
Incorporate sustainable practices into your distribution strategy. This can include using eco-friendly packaging, such as biodegradable or recyclable material. Optimizing routes and installing modern energy systems in warehouses also reduces your business’s carbon footprint.
Sustainability is becoming increasingly important to consumers and potential employees. Your brand’s reputation — along with the environment — will benefit.
9. Continuously improve
Always look for ways to improve your distribution processes. Gather feedback from customers and distributors. Stay updated on industry trends. Regularly review and refine your strategies and train staff accordingly.
Common FAQs about retail distribution
In retail distribution, is drop-shipping the best way to bootstrap an e-commerce company?
Drop-shipping can be a great way to start an e-commerce business with low upfront costs, as it removes the need for inventory. However, it comes with challenges like lower profit margins and less control over outcomes.
Can an online retailer be a distributor?
Yes, an online retailer can also act as a distributor. Typically, they’ll purchase products in bulk and then sell them to other retailers or directly to consumers. That helps diversify your revenue streams and expand your market reach.
Where do I find distributors for high-end fashion products?
To find distributors for high-end fashion products, attend industry trade shows or network with other brands. You can also use online platforms like LinkedIn. Building relationships with established distributors in the luxury market is key.
What are some trends affecting retail distribution?
Trends in retail distribution include the rise of e-commerce, increased data analytics for demand forecasting, sustainability practices, and integrating advanced technologies like AI and blockchain for supply chain management.
Move forward with Lark
Once you understand the channels, strategies, and best practices for retail distribution, you can choose the best options for your business and start selling to your markets.
You can also streamline retail management and monitor your progress with Lark. Take advantage of Lark’s all-in-one software. Our superapp can fuel productivity and keep team functions aligned.
Try out our free starter plan today!
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