What are the Different Distribution strategies for a Company?
Given the fast-paced world of today’s times, distribution strategies of the company are of crucial importance. Most companies are driven by the goal of reaching out to their customers far and wide, by expanding in various markets. This will help them balance out the rising costs and aid them to get a higher turn-over, and consequently, a higher margin. With the right product distribution strategies in place, you can ensure that your products are delivered to the customers, far and wide. Otherwise, you will lose money on marketing and also in the form of opportunity costs. Besides, when the customer wants to purchase the product still cannot find it, it adds to the loss of the brand. Distribution strategy can be summarized in the 3 main points:
Product distribution
a. How the product will reach from the manufacturing point to the end customers
b. Saving time and costs while executing the strategy
c. Building a competitive advantage through distribution
The following are the various types of distribution:
• Indirect: this implies the product reaching the end customer through numerous channels in between. It is a long chain; for example, the product goes from manufacturer to C&F, then to wholesale distributors, followed by the retailer and finally to the customer.
• Direct: this involves the company either directly sending the product to end customer or when the channel length is very less. Besides, distribution strategies are also determined by the level of penetration that the company wants to achieve. This in turn is determined by product, price, and promotions
• Intensive: this is used by companies having a mass marketing product, trying to cover as much of the market as possible. The best examples include, typical FMCG and consumer durable goods.
• Selective: brands such as Zara, Armani etc. follow this distributionstrategy, as they are likely to have limited outlets in a particular city. Wholesale food distributors also follow the same strategy.
• Exclusive: imagine if Zara has 4-5 outlets in a city, a company like Lamborghini will probably have one in a region of 5-7 cities. If a company gives a big area to a single distributor, it is known as exclusive distribution strategy.
In some cases, a distributor might be appointed for a complete country, and there would be no one else other than that distributor operating in the company. While premium products may need selective distribution, mass products will need intensive distribution. Needless to say, the strategies for both types will be different.
