Distribution Channel Strategies

Distribution channel strategies are designed to maximize the sales of products as they enter a market. The strategies are most commonly discussed and planned by the end retailer, who is selling direct to the consumer. Numerous questions loom over the retailers. Where do we source products? How do we get products from the manufacturer to our customers? How can we reduce cost and maximize profitability? How and when to we market these products?

Moving inventory and purchasing through distribution channels is an investment for retailers. Managing inventory requires that retailers purchase in bulk and make estimates about sales. If they over purchase and do not sell, then margins take a major hit. If they under purchase and misjudge the demand, then earning opportunity is diminished. Knowing that demand exists liberates businesses to use a purchasing strategy, which involves ongoing marketing cycles. Demand drives marketing at phase. A business that does not know demand, will market ahead of purchasing to test the market and safeguard purchases.

Pushing marketing activities ahead of orders is a strategic distribution channel strategy used to test demand, while preventing mismanagement of orders. Pre-orders are on strategy that's used to know the exact production and order quantity used to meet demand. Drop-shipping distribution models also have a strategic advantage. The model not only has a reduced margin but also has less risk and overhead. The drop shipper markets and sells products from wholesaler catalogs, and has the wholesaler or a logistics channel manage and deliver the inventory. They never touch the product and are completely sales focused.

A multiple distribution channel strategy works for retailers with diverse product lines. Diversifying distribution channels reduces the risk associated with an single channel, by ensuring sourcing is running smoothly across several alternative channels. It also leverages pricing flexibility, as products are sourced and moved to market, using different methods. The retailer can price shop, using each strategy, and ultimately capitalize on the lowest cost option. Alternatively, the retailer can leverage the channel with the least amount of lag time to quickly source and meet demand.

Sales models and distribution channels are interconnected. The ability to source and sell will always be tied together. High-ticket items are often divided into sales regions or territories, where dealers are guaranteed access to their markets without same-brand competition. This model has moves from the manufacturer to the distributor. The distributor manages dealers and delivers inventory. The dealers focus on consumer sales.