Making your offering available to more customers is one of the most solid growth strategy. Many companies get stuck with the same distribution model for decades, although it might be obvious that a change is needed. The most common reason given: channel conflict.
Distribution partners don’t like competition. They want exclusive products and always better prices. In the case of family-owned businesses distribution has been built on personal relationship so the decision to expand is even more difficult to make.
Why You Should Revisit Your Distribution Strategy
The increased popularity of some channels such as big box stores stores and the Internet has left many Brand Managers wondering if they are missing an opportunity to reach more customers.
Challenges such as the rise in popularity of distributors’ private labels or the lack of sophistication of some channels make the issue of finding alternative channels even more pressing.
Below are some opportunities to try alternative distribution models and assess the impact on the business:
Reason 1: The Company Enters a New Market
If you decide to explore a new market that the existing distributors do not service, you have the perfect opportunity to start fresh. Since the existing distribution don’t service it there is no channel conflict to be worried about. If you currently sell through distribution it is now the time to try selling direct to the end user, and vice-versa. If the Internet looks tempting, why not give it a try?
Reason 2: Distribution is Loosing Business to Competing Channels
It’s a fact: some type of retailers just can’t keep up with the modern day competition. For example small mom and pop shops are loosing business to big retail chains that are able to provide a wider product assortment at much lower prices.
If you sell your products through these smaller distributors, you are probably experiencing flat sales. While they might represent a solid foundation because of their loyalty, in order to grow sales you will have to complement this channel with a more dynamic one.
Reason 3: Existing Distribution Does Not Provide Enough Margin
Selling through big box stores might look like the ideal model because of the volume they generate. However, they are also famous for squeezing the manufacturer of the last marketing dollar for things such as advertising and product placement. Their strict product placement rules, aggressive promotion of their private label brands and lack of loyalty are also well documented.
So if you find that the existing distribution channel does not provide enough ROI then it’s time to explore more profitable channels such as the Internet.
How to Avoid Channel Conflict
Many companies have started to adopt a hybrid distribution strategy in order to avoid channel conflict. Such strategies include:
- selling top of the line products through specialized distributors or direct, while the more affordable ones via big box stores.
- developing unique products for a particular channel, so price comparison is not possible.
- making the existing distributors part of the new distribution model. For example, if you decide to sell over the Internet you can use your distributors to ship the products and provide localized service to the end customer and pay them a commission.
In conclusion, don’t be afraid to make chances to your distribution channel. In today’s economy the consumer has plenty of choices and is more difficult to reach than ever. As a result adapting the distribution model and making your products available everywhere your target customer shops, at any time, is almost a must.