15.04 – Considering Offline Distribution Strategies
Beyond building your own e-commerce site or setting up storefronts on third-party platforms like eBay or Amazon, there are several offline distribution options to consider.
Retailers
You can build your own network of retailers that carry your product, or you can contract with a middleman distributor to place your product in retail outlets, chains, or independent stores. The downside of selling via retailers is the high commissions paid to them directly and to brokers, potentially giving away 30 to 50 percent of your product revenue with this model.
Multi-Level Marketing Representatives
Multi-level marketing, or network marketing, involves individuals selling products as 100 percent commission-based representatives of the brand rather than as salaried employees. They also recruit others to sell, receiving a percentage of any sales made by their recruits.
This model, often referred to as pyramid marketing, can sometimes focus more on earning money from representatives and their recruits than developing high-quality products. Often, the products are inferior and overpriced because the price must cover multiple commission levels. This can taint your reputation before you even start. Prominent multi-level marketing companies include Amway, Avon, Herbalife, and Mary Kay.
Value-Added Resellers
A value-added reseller (VAR) is a company that purchases your product and sells it to consumers at a higher price, often by bundling their value-added services or products with yours. For example, an auto dealer buys cars from a manufacturer and adds warranties, financing, maintenance programs, high-end floor mats, and other extras to increase profit.
Retail and Distributor Considerations
The quality and quantity of retailers and distributors are crucial for business-to-consumer (B2C) and business-to-business (B2B) companies, impacting not only access to your product but also the prestige and perceived value driving your pricing limits. For luxury goods, where you sell them is critical. Selling at high-end retail stores like Saks Fifth Avenue or Neiman Marcus maintains a luxury image, whereas selling at discount department stores can lower perceived value.
Channel Strategy and Product Presentation
Your channel strategy should address how products are presented at distribution points. In retail, this involves purchasing prime display space, such as end-aisle displays at grocery stores and kiosks near main entrances to department stores. End-aisle displays (end caps) are highly coveted, often determining product visibility and attention.
Online distribution promotion focuses on purchasing search terms for browsers, pop-up ads via programmatic marketing, and mentions on shopping cart pages, triggering the fear of missing out (FOMO) and capturing emotional sales.
Distribution Strategies for Growth
Distribution strategies are key to launching and growing any business. For B2B marketers, strategies include building a strong reseller network and focusing on getting products in front of purchasing managers at industry conventions, trade show expos, and similar events.
Your distribution approach can also influence your pricing strategy. Consider these options:
Selective Distribution Strategy
Select a few outlets representing the image and values of your product, charging a high price to compensate for lower sales volume and establishing a luxury image for your brand.
Exclusive Distribution Strategy
Sell through one or a few specialised distributors to create a sense of exclusivity, justify a high price, and secure low distribution costs.
Intensive Distribution Strategy
For mass-appeal retail products, this strategy makes your product widely available through many outlets, involving getting accepted by giant retail chains like Target and Walmart. Ensure you can scale production to meet demand.
Parallel Distribution Channels
Parallel distribution channels, or competitive channels, involve selling directly to consumers, not just through distributors or retail outlets. This can put you in direct competition with businesses that distribute your product, potentially souring relationships. Carefully evaluate the implications before choosing this option.
Expanding and Enhancing Distribution
Expand Your Distribution Network
Continuously seek new outlets for selling your products through community events, e-commerce, and trade shows.
Increase Your Visibility
Boost sales by enhancing product visibility within current distribution channels through better display or communication strategies. Retail chain stores may offer better shelving (end cap displays or eye-level shelving with signage) for special promotional discounts or cooperative advertising fees.
Shelf Strategies to Maximise Visibility
Getting products noticed on the shelf is crucial for success in brick-and-mortar retailers. Use data analytics to understand what drives your target customers to specific stores and what other products they may be shopping for. Negotiate with retailers for shelf space on shoppers’ traffic patterns and above foot level, maximising visibility among competing products.
If you can demonstrate that your products generate higher revenue than competing products, you can likely negotiate better shelf placement.
