What is distribution channel strategy?

Distribution channels can significantly increase the profits of your business and contribute to its development. They represent the steps that products go through until they reach the end customers. You need to think carefully about the efficient operation of distribution channels in order to reap success in your company. 

Improving the efficiency of the distribution channel distribution

Managing channels is not an easy task, on the contrary – it can pose a great challenge to your business. We can give you some universal advice in this regard, whether you have a start-up, small, medium or large scale. 

Here’s what to look for:

  • Understanding the pros and cons of your distribution channels
  • Cost control and optimization of distribution channel time
  • Effectively move product (s) to the end customer

Understanding the advantages and disadvantages of your distribution channels

Build a good strategy in the distribution channel.

Here are the main categories: 

  • Direct distribution – in this type the product moves directly – from the manufacturer to the customer. This process is more complicated because the company is required to have vehicles, a logistics team and its own storage facilities. All this requires high capital investment. This type of channels are best suited for more expensive and perishable goods, farmers and others. Such large-scale sales can be difficult to monitor, but they have direct control.
  • Indirect distribution – this type of channel is the opposite of the transitional one – many parties (intermediate channels) are involved until the product reaches the end user. This whole organization is complex and the final price for the product is higher. Another disadvantage is the possibility of delivery delays due to a number of mistakes 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. 

  • Intensive distribution – this is a strategy applicable to sales of mass products (fast moving consumer goods, such as essentials). Intensive distribution is the path to success for a brand with many competitors. The greater the visibility of a product, the more it would be bought by the customer, because it is not expensive (usually leads to an instant purchase). 

Only, it is important to avoid the risk of improper distribution. Otherwise, high awareness and visibility are the driving force towards more sales.

  • Exclusive distribution – exclusive manufacturers sell their product to exclusive distributors. Here the items are not mass, but rather luxurious and less often bought, at a higher price. The strategy is aimed at a certain group of consumers who value a brand and its product range and tend to order from a distant place, wait longer for delivery, etc. That is why the products are offered in much less places. 
  • Selective distributionit is clear from the name itself that these are products that are distributed selectively – to a number of endpoints. This type of channel is somewhere between extreme and intense distribution. 

Rationalize the movement of products

The rationality of the movement of products lies in the successful development of the business, to a large extent. Therefore, we can advise you to emphasize the following:

Optimize warehouses

Every product starts from a warehouse, and that is where the process is very important. If you do not have a well-organized warehouse, this means that you waste a lot of time preparing the shipments (especially if they include several products that are jammed by others). Optimize storage space as much as possible, keep it in perfect condition. This will allow you to respond very quickly and efficiently when a merchant’s stock is depleted 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. 

Use shipments from direct suppliers

This is a particularly useful strategy, especially for unpredictable demand and delivery to wider areas. In this case, you can pay higher transportation costs, but will provide lower costs for storage or management of goods, such as storage in your own warehouses.

Delivery of packages to automatic lockers

Are you looking for rationalization? You will achieve it thanks to the number of advantages and automatic functions of the parcel terminals. This type of strategy used in BOPIS gained rapid popularity. Its effectiveness is more than known in the world of distribution, at retailers. Using parcel terminals with personal cells, you can streamline the delivery process many times over. They can store all kinds of retail shipments. 

Lockers automate some processes, make orders more reliable and efficient. Customer satisfaction also increases. 

BOPIL systems offer the following advantages:

  • Easier inventory activities – information on products that are stored or returned is stored in the parcel terminals.
  • Less manual labor on the part of employees – less time is needed to sort and search for packages.
  • More efficient and reliable delivery – a number of costs are reduced (transport and labor).
  • Customers are self-servicing – they can pick up and return goods through lockers by scanning them to reduce losses and theft

Summary

Choose a reliable distribution channel strategy. Adjust it correctly, according to the type of products you sell at retail. Answer the most important questions such as: are the products durable or fast-moving? Is it a mass product? Do they have to go through different distribution channels or not? etc. Build a distribution that would be most effective for you and your business. Distribution channels are not just the movement of products from one place to another – they are a strategy for the successful development of your company.

Parcel Hive
Why we are called Parcel Hive – Our goal is to make the movement of Parcels around the local communities, countries and world seamless. Our systems and Terminals give the chance of high automation and communication over distance with Single or Multiple core. This is how we envision to keep up with the changing world. Parcel Hive is company that designs and produces high quality, efficient and appealing Automated Parcel Terminals. We cover the full spectrum from A to Z – from The concept to production, Software, Logistical Deployment, Services for Installation, 24/7 Maintenance and support.

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