Clearly Identify Your Distribution Channel During Business Startup Planning

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Depending on the type of product your startup offers, the best distribution channel may be obvious, or you may have multiple viable routes to choose from. For some, multiple channels may provide the best reach. Clearly identifying your distribution channel is critical — this is who your target market will be. Marketing to other  businesses  (wholesalers) is very different than marketing to the general public, so be sure your selection plays an important role in your overall marketing  plan . The basic distribution alternatives are:

Wholesale Distributors

Wholesalers play an enormous role in the supply chain. If you are manufacturing a physical product, you may choose to go through wholesale distributors to get your product out. Wholesalers buy product from you, then sell to their customers, retailers, to get your product to the public. If you want to join the ranks of wholesalers, you must market to both manufacturers (to get product) and to retailers (to sell the product). Wholesalers generally carry an inventory of product, and are often specialized — they provide various lines of similar product to competing retailers within the same niche.

Brokers

Brokers make the deal between manufacturers and wholesalers or retailers. They negotiate contracts and put the right people together, but they don’t generally carry inventory. These third-party distributors tend to be excellent resources, especially when you are just entering the market. They are always looking for the next big thing and already have the contacts and influence to get good products placed. The best brokers have an enormous rolodex and are experts in networking.

Retail Distributors

If your business idea is to sell directly to the end-user, and that end-user is the general public, retail is your channel. Whether you open a brick-and-mortar storefront or sell through your website, retail sales are the final step in the supply chain. Your target market is much bigger than through other distribution channels, but also harder to reach. And, you will need to find good wholesalers or brokers to help you develop a balanced, relevant inventory.

OEM (Original Equipment Manufacturer)

OEMs manufacture or distribute products that are intended to be built in to another business’s product. The target market is other businesses that will bundle your product with other products for the end user or use your parts to manufacture something bigger. Often, companies that offer a single product (or limited line of products) use the OEM distribution channel in addition to direct sales or retail, especially if the product has obvious complementary products that the end user would logically buy together.

Direct Sales/Contact

Direct sales and direct contact encompass any sales method in which your company contacts the customer directly, but not through a retail store. Direct contact includes in-person sales calls, phone calls, email, and snail mail — any route to reach your customers and convince them to buy.

Manufacturer’s Representatives

There are professionals, who work as 1099s, that represent multiple companies that produce similar products. The rep’s time is divided among the companies he sells for, and often pushes multiple products to each of their targets. Generally, they are paid through commission only – you pay them when they sell your product.

Online Sales

Technically, online sales are retail or direct sales, or both. Online businesses are developing every day, and there are more and more business models available to entrepreneurs. The most basic, and somewhat overused, model is the website that provides free content and makes money from ads. Here, there are two target markets to focus on — the businesses that will pay you to post their ads and the traffic you need to drive to your site. The amount you can charge for ads is dependent on the number of people who visit your site AND click on those ads. There are also a proliferation of subscription websites, in which you market to your target and provide worthwhile content that they will be willing to pay to access. Of course, there are also retail product sites, from big box stores now trying to take over the internet as well to one-off product developers. Whatever online business you might consider, it is important to understand that simply posting a website is not enough to succeed. With millions of web pages competing with yours, it takes time and effort (and a little cash doesn’t hurt) to even make your site available for your market to find.

The distribution channel you choose for your startup will have an important effect on developing an effective marketing plan. Fully understand who it is you are planning to market to and select distribution routes that will make the most sense for those targets.


Source by K. MacKillop

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