Many businesses put the distribution strategy in the background. Is this a mistake and why? You may have more important concerns, but never underestimate the development in this direction. Improving the efficiency of distribution channels will open up great opportunities for your business to increase profits and stimulate business growth.
Why worry about your distribution channel strategy?
The distribution channel, generally speaking, is the way in which products travel to the end customer. This is a particularly important point because it plays an important role in improving service and hence increasing the satisfaction of all participants in a transaction. We can point to a typical movement for a store that deals with retail.
Each product goes through the following path:
- ➢ Manufacturer
- ➢ Distributor
- ➢ Retailer
- ➢ End customer
In e-commerce things are a little different. There, sales go directly into the hands of consumers. This method of buying and selling is very modern, efficient and convenient. Consumers’ ways of thinking, as well as their expectations, change dramatically over time. If you do not focus on a good distribution channel strategy, you will lag behind the competitive niche.
Do not miss opportunities, but do everything possible to achieve a good level from which only to develop forward!
Improving the efficiency of the distribution channel
There are several key points that improve the efficiency of distribution.
The following tips apply to any small, start-up, or established company:
- ➢ Identify the strengths and weaknesses of your distribution channels
- ➢ Control your costs and save while passing products through the distribution channel
- ➢ Effectively move a product or products to the end customer
Understand your distribution channel strategy
Prepare a plan for your current strategy and follow it strictly. It is important that it is very well thought out and implemented specifically for your business.
Distribution channels can be categorized along the supply chain or the level of market penetration, distinguishing five main categories:
- ➢ Direct distribution
- ➢ Indirect distribution
- ➢ Selective distribution
- ➢ Intensive distribution
- ➢ Exclusive distribution
Direct distribution
In direct distribution the path of the product is direct – it moves from the manufacturer to the customer. This is perhaps the most complex process because the company is required to have vehicles, a logistics team and its own storage facilities. All this requires high capital investment.
Direct distribution as a choice for distribution channel is recommended for more expensive and perishable goods, large farmers and others.
Indirect distribution
Indirect distribution is the complete opposite of direct distribution. Multiple parties (intermediate channels) are involved until the product reaches the end-user. Disadvantages include the following – complex organization, high final price for the product and the likelihood of delivery delays due to a number of errors while the goods pass through the various participants. It is necessary to achieve greater harmony and to consider improving the efficiency of supply.
All countries (wholesalers, distributors, retailers and manufacturers) specialize in one task. Indirect distribution of goods is lower initial costs.
Selective distribution
Selective means products that are distributed selectively – to a number of endpoints. These distribution channels are halfway between exclusive and intensive distribution, which we will look at later.
Intensive distribution
Intensive distribution applies to mass products, such as fast-moving consumer goods. This strategy is most widely used in businesses with many competitors. The greater the visibility of a product, the more it would be bought by the customer, because it is not expensive. The customer is often inclined to make a direct purchase without much thought. An important detail, relying on intensive distribution, is to avoid the risk of improper distribution.
Exceptional distribution
Exceptional manufacturers work in a completely different method. They sell their product to exclusive distributors. The products on offer are not mass-produced. They belong to the luxury and rarer goods, usually characterized by a higher price.
The strategy, in this case, aims to reach a certain circle of consumers who appreciate a brand and its product range and are willing to order from a distant place, to wait longer for delivery, etc. That is why the products are offered in much fewer places.
Streamline product movement
Every business strives for rationalization. This saves a lot of manual labor and financial resources. In this regard, we advise you to consider the following improvements:
Optimization of warehouses
Storage of goods is one of the most important things in a growing business for trade. Each product starts from a warehouse, where the process is very important. In case you have not organized your warehouses very well, you can waste a lot of time preparing the shipments, and therefore delay delivery.
Optimizing the storage space to the maximum and maintaining it in perfect condition will save you a lot of time and effort in searching for the right products. This will allow you to respond very quickly and efficiently when a merchant’s stock runs out or an online order needs to be executed.
With a well-concentrated storage scheme, the products can be very easily distributed to the final location. This can be achieved with proper organization in the warehouses – arrangement, packaging, inventory tracking and shipping.
Using shipments from direct suppliers
Have you ever wondered how useful this strategy is? Yes, it is, especially with unpredictable demand and supply to wider areas. Here you can find a higher fee, namely for transport costs, but there will also be positive dividends in terms of lower costs for storage or management of goods, such as storage in their own warehouses.
Delivery of packages to automatic lockers
Intelligent parcel terminals are devices that streamline the entire process of delivery and receipt of products by customers. They are characterized as a very reliable tool. They are also a key step towards the improvement of BOPIS, where they are gaining even more popularity.
Using parcel terminals with personal cells, you improve your distribution channel many times over, and the positive thing is that they can store many different types of retail shipments. Lockers automate some processes, make orders more reliable and efficient. Customer satisfaction also increases.
BOPIL systems offer several important advantages:
- ➢ Self-service
- ➢ Reliable and efficient delivery, which reduces important business costs.
- ➢ Product inventories are easier than ever. It is due to the fact that the parcel terminals record information about the products that are stored or returned.
- ➢ Less manual labor on the part of employees – sorting products and finding them in the large pile are eliminated
- ➢ Losses and thefts are drastically reduced through this delivery method
Final Tips for the Distribution Channel Strategy
- ➢ Monitor your distribution channel constantly and evaluate it adequately – a strategy is not a universal solution for the whole life of the business. As working conditions, consumer demand and expectations change, so does the strategy that must be constantly researched and readjusted to work well for you.
- ➢ Match the distribution channels with the type of product sold – here it is important to answer a few important questions. Are the products we sell perishable? Is it a mass product or a niche product? Each of these answers will direct you to different distribution channels to make them as effective as possible.
- ➢ The distribution must be arranged – you must act so that customers are satisfied with the delivery time. Otherwise, the strategy will not be successful. Do you know how to streamline distribution? The right steps are reviewing the efficiency of your warehouse, collaborating with direct suppliers, and installing smart shipment lockers.
- ➢ It is important to know that distribution channels are much more than just moving physical products from place to place. They actually represent the path your name takes. Achieve high efficiency with well-maintained and improved distribution channels. You can offer the best products and have developed very good marketing channels, but that is not enough. A good distribution strategy is needed to deliver the product.
By following these principles, your business will thrive. You will enjoy good profits and loyal customers.
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