Channels of Distribution are key alliances a business can enter into. As pointed out by Shark Tank’s Kevin O’Leary on almost every episode, not getting distribution kills a company. Channels of Distribution move your product to potential customers.
For manufacturing companies, your distribution channels will be wholesalers and retailers or you may establish multiple levels of distribution. For service companies, your distribution channels can include strategic partners (a landscaping company can partner with a cleaning company to build company accounts together), industry groups (hotel chains) or more. No matter your product, having the right distribution channels will increase customers (and therefore profit). Having the wrong distribution channels stagnates or causes a decline in customers.
How can you tell if your distribution is poor?
- Impressions – If people meet with your distribution channel and have no idea your goods or services are available, this is a warning sign. Survey systems, salespeople and customer response questions are all ways to determine what your potential customers are seeing.
- Consignment – Using consignment processes can give you information about how goods are selling at different retailers and wholesalers, because you retain ownership until it is sold.
- Un-predictable and un-reasonable changes in sales – If a distribution channel member has recently changed the way they market your goods, it will show in sales. For example, if your best-selling holiday sweater sales drop in the beginning of November, instead of the expected ramp-up, check positioning and competition on your main distribution channels.
- Product Mistakes in the Market – We all try to do the best job we can, but sometimes mistakes happen. If your distribution acts as a true alliance partner, they will send back obvious product mistakes before putting them in front of customers. This increases your product quality in the minds of consumers. On the other hand, if your distributor doesn’t care enough to return obvious mistakes, what else are they doing poorly?
- Unsold Inventory – If your customers purchase large amounts of inventory, find a way to track how fast it leaves their warehouse/storefront. If the inventory is not moving, this is a warning sign.
- Customer Complaints – This is obvious. If your customers tell you that your distribution channels are causing problems, listen to them.
If your distribution channel has one or more of these issues, then your distribution channel is likely slowing you down. The good news is you can improve the system you are currently using.
Distribution channels that are more your niche (specialty retailers/wholesalers, similar service organizations), more aggressive channel members, and distribution channels without a glut of competing products can all improve your company’s sales.
Work with channels. Treat them as true partners and set mutually acceptable goals. Then make it happen. Measure the results.
Please contact us to see if we can build a better strategic alliance for your distribution needs.