Getting your product into the hands of your target customer begins with ensuring you’ve chosen the right distribution channels.
The distribution channels you choose will tell customers a lot about your company. You may opt to handle fulfillment on your own, either through your own website or through a third-party online e-tailer like Etsy. Or, you may choose to go with a fulfillment company that specializes in end-to-end distribution. You may also need to work with a couple of distributors to take advantage of market gaps or to handle direct interaction with customers.
But how will you know?
Download this template to help you gauge whether your distribution efforts are focused on the right channels and if channels are functioning properly.
Before You Begin
Your choice of distribution channel will determine how your products are handled and how quickly they are delivered. To that end, there are a few things to consider before assessing your existing or future distributors
- Product. If your product requires special handling due to its fragility, perishability, or stability, you’ll need to take speed and extra care requirements into consideration. Assess the needs of your product before assessing the needs of the channel. Does it require refrigeration? Is it easily broken or made of fragile material? Does it contain potentially hazardous materials, such as lithium, paint, or aerosols?
- Market. If you’re selling to consumers, rather than other businesses, you’ll need to factor in the overall customer experience from beginning to end. Will your customers be able to track deliveries? Will they interact with someone in person? Will it be easy for them to process returns?
- Middlemen. Obviously, a third-party logistics partner (3PL) can help you save time and resources by efficiently and effectively distributing your goods on your behalf. However, making sure the 3PL you choose has the proper certifications, long-term stability and the capability to adapt to your changing needs should not go overlooked. Does this 3PL have the proper certifications to handle a potentially volatile, delicate, or perishable product? Can it integrate seamlessly into your supply chain? Will it be able to scale with you?
Completing the Worksheet
As you complete the worksheet, you’ll want to ask several questions about each of the distribution channels you’re assessing. They include:
Costs: What are the financial implications associated with the distribution channel?
Obviously, you want to use the channel that gives you the best opportunity to reach the widest possible market. However, that’s not always feasible from a financial standpoint. Does this channel adversely affect profits? Will it require you to hire more staff? Will you need to offer financial incentives to have your product prioritized? How does the channel affect your overall bottom line?
Ease of Entry: How does the distribution channel’s ease of entry factor into your operation?
When considering a channel’s viability, you need to determine what potential barriers exist in terms of access and entry. Will using or switching to the channel have an adverse impact on retail price? Will you need to overcome the channel’s loyalty to your competitors? Will it lengthen or delay the distribution process? Will it be too costly or logistically difficult to access?
Geographic Proximity: How does the channel’s location(s) impact your overall distribution funnel?
The right distribution channel ensures your customers get the same level of service no matter where they are located. This means you must choose channels that are easily accessible to your target market or, at the very least, can ensure timely delivery of your product. Ask yourself whether a centrally located distribution center is preferable or whether a more geographically diverse distribution network makes more sense.
Competitor’s Positions: What are your competitors doing within the distribution channel?
Overcoming a channel’s loyalty to your competitors isn’t the only barrier to working with a distributor that deals with multiple vendors within the same industry. Sometimes, the channel can become oversaturated with competing products of the same type. Having a competitive advantage can be critical in these instances, so if the competition has a firm foothold within the channel, or if the channel has an abundance of products from competitors, you’ll need to determine whether the retail benefits outweigh the competitive drawbacks.
Management Experience: How well is the channel being managed both internally and externally?
Implementing a winning go-to-market strategy depends largely on the management of your distribution pipeline. Is the channel moving products to the end customer in the most efficient manner? Are costs being controlled properly? Is there an effort to shorten delivery times or fulfill orders? Is product movement being streamlined effectively?
Staffing Capabilities: Is the distribution channel properly staffed? Do you have the right internal staff to manage the channel?
Good channel management begins with ensuring the right fit between manufacturer and distributor—and that starts with the internal and external teams. Just like any business operation, good relationships are critical, as is making sure there are enough people to handle the workload. Does the channel have enough staff to adequately and efficiently fulfill orders? Is there enough experience and expertise to make sure operations run smoothly? Do you have the right players on your team guiding the process and paying attention to the details?
Marketing Needs: What are the marketing needs or challenges of the distribution channel?
Part of assessing the strength of a distribution channel is determining how much (or how little) you need to be involved in its marketing efforts. Obviously, you must support the channel with your own branding, advertising, promotional training, and public relations efforts, but you want to make sure your channel partner can track performance and offer suggestions for improvement. By identifying the needs and challenges of the channel, you can better score its overall viability as a potential or ongoing partner. How well does the distribution channel connect with your target audience? Will it partner with you on promotions, sales, or giveaways? What role will it play in promoting your product?
Small businesses have to be extremely deliberate when choosing their distribution channels because very often they only get one chance to get it right. Answering these questions will help determine the viability of the distribution channel partners you’re working with or the ones you plan to work with.
Once you’ve completed the worksheet, schedule an appointment with your SCORE mentor. Our knowledgeable and experienced mentors can help guide you through the process of making practical decisions about your distribution channels.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.