Types of Distribution Systems

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Distribution systems encompass every aspect of getting your product to your customer. Distribution systems can be as simple as street vending or as complex and sophisticated as international shipping networks. They are central to a company's success because they are directly related to keeping money flowing in, and they provide the final link between creating a product and making it available to its target market.

Direct Sales

Direct sales involve a transfer of goods between producer and buyer, without the participation of middlemen. When a baker sells you a loaf of bread, he engages in direct sales by providing it without an intermediary. Direct sales enable skilled and committed producers to provide the best possible value to their customers because most of the purchasing price goes into creating the product rather than marketing it. But direct sales limits a company's reach to the sales that it is able to make itself, either in person or online.

Wholesale Sales

Wholesale sales involve selling a product to a merchant or middleman who makes it available to customers. Wholesale distribution enables a producer to reach more customers by delegating the selling process to a store or representative. This arrangement also allows a producer to focus on production rather than marketing, enabling him to be more productive. But wholesale distribution systems can hurt a product's sales because sometimes the best salesman for a product is the producer who knows it best and is most passionate about it.

Distributorship Sales

Distributing a product via a distributorship involves providing it to a large outfit with multiple wholesale accounts and a considerable geographic reach. A distributorship can open new markets for products by making them widely available. But working with a distributorship also considerably reduces the amount that a producer gets paid for his product because it must be marked up by a series of middlemen before it reaches the end user. A working relationship with a distributorship is a good idea for a manufacturer, but not for an artisan.

Products vs. Services

Another way to distribute your company's offerings is to market and deliver in terms of services rather than goods. A company that manufacturers furnaces either can sell equipment for other companies to install, or it can enhance the value of what it provides by making available a complete package including equipment, installation, service and maintenance. This practice of marketing and distributing a process (heating), rather than a product (a furnace), builds customer relationships and enables your company to creatively expand.