The term ‘distribution channel’ refers to a series of middlemen a product should pass through before reaching the customer. Company distribution channels encompass wholesalers, retail businesses, and distributors. Without the appropriate distribution channel, you cannot get your goods to the customer. It is paramount in the case of newly introduced products, service-heavy creations, or innovative goods.
Many things play a part in distribution channel selection, especially for an established company selling products having demand. Here are some questions you should look at before choosing a distribution channel for your business.
In What Way Is The Market Operating Presently?
You should look into the market well before selecting it. You must analyze how similar goods are developed. If you will begin selling packaged food items, you would need to go down the FMCG distribution route, like other businesses in the sector.
Deviating from the established course might result in a situation where customers are not adjusting to your channel of distribution. You should analyze and find out which one is the most appropriate when it comes to reaching customers. You should then embrace that channel.
Ecommerce is presently working pretty well, but most jewelry pieces are sold through retail shops because customers wish to properly preview jewelry. For an uninitiated, to preview means to look at and feel an item before making the purchase. Do you belong to the jewelry sector? Have you analyzed the jewelry market? If your answers to those two questions are a yes, then remember that having stores present in convenient locations and having an easy shipment are equally important.
What Costs Of The Channel Are You Expecting?
You should consider distribution channel-related costs because these have an effect on your business’s operations. Almost every recent startup supplies their offerings directly to customers through online marketing, but even in this route, sales work, telecalling, shipment and setup will all cost you.
One can sell to the customer or do it through distributors and dealers. There are several benefits to going through intermediaries, including instant shipment and convenience. However, when intermediaries enter the distribution process, maintenance will turn into a big hassle. It then becomes difficult to confirm that your business’s promise gets to your target audience. Furthermore, you have to reduce margins considerably to satisfy your distributors and dealers.
So, direct sales cost goes up, yet the profit margin is rather high. There is not much profit in distribution, but you might have higher market coverage when many motivated individuals work for your business. According to your bearable cost, you can determine the form of product distribution channel to have for your business.
What Is Your Whole Range Of Products On Offer?
Products will considerably affect which distribution channel you choose. You can have either a short or a long channel on the basis of the products you offer to customers. In the event the product line is rather technical, needs after sales setup and frequent service, the channel will generally be short. Conversely, when the item requires low maintenance and have low value, like kitchenware, it will generally be long.
The choice will also depend on your product’s length and line. In the event you have a huge product line with a big length, it is sensible to distribute it through a much longer channel for best performance. Certain company distribution channels may help to sell a part of that product line in a better way compared to another part, according to local demand. However, when it is a small product line, choosing a smaller one for it is a more sensible option.
What Is Your Product’s Scope For Profit?
In some cases, choosing a longer product distribution channel ultimately contributes to more business revenue, but in other cases, it generates higher revenue and reduces total profit.
According to your product’s profit potential, you can choose between a longer channel and shorter channel of distribution. The shorter the channel, the more will be the profit earned. However, for fast moving consumer goods, plus consumer durables, it should be longer so that that revenue becomes higher.
What Is Your Competitors’ Present Channel’s Structure?
You should look at the present distribution channel’s structure before choosing a fresh channel. In the event your rivals have a strong channel structure, a startup will have difficulty entering the market. That is particularly applicable to a startup having products requiring customer service.
Where Is Your Product In PLC (Product Life Cycle)?
A developed product should pass through five phases: introduction, growth, maturity, saturation and decline. At what stage is your product in?
A new business’s product will have to get by with whatever distribution channel it gets at the start. The startup should do push marketing, and for it, they require initial presence in the market. However, with time, and when the item establishes, it will have more demand.
At these times, in its growth phase, there should be more members in the product distribution chain. Some of them might have to be there because of convenience, while others might just need to be picked for their expertise. An organization that reached the growth phase looks to expand its channel of distribution, and maintain it when entering the maturity phase.