Keys to a Successful Distribution Business

A distribution business, often referred to as a wholesaler, helps move goods from a manufacturer to a retailer in a traditional distribution process. To operate as a distributor, you typically need a warehouse to store goods, employees to manage incoming and outgoing shipments and a transportation system. Success is based on a handful of core factors.

Distribution is much more than just the transport of goods. You are first and foremost a sales organization. Distributors are often called the "middle man" in the typical distribution process because of their role in buying goods from manufacturers and then reselling them to retailers. You need dedicated sales staff, awareness of the value that you offer in selecting, organizing and moving goods, and effective sales support and follow-up to maintain relationships with buyers.

Distributors play a vital role in deciding which goods have the muster to make it in the marketplace. Designers and manufacturers create products, but they need distributors to understand the value they potentially offer to business buyers or consumers. Successful distributors have a discerning eye for distinct or high-quality merchandise that retailers can subsequently sell to consumers. A relatively high rate of efficiency in hitting the marketing on products increases your potential to operate a profitable distribution company.

As a distributor, you must understand the needs and preferences of both retailers and consumers. Retailers rely on distributors to fulfill orders quickly, on time and accurately. They also prefer more flexibility in responding to new orders. End customers ultimately decide whether all players in the distribution system win, though, so you need to spend time and money to research the marketplace, in collaboration with retailers. This research helps you better identify needs and interests of consumers, which aids in product selection and distribution process improvements. A common factor for any distribution system is the efficiency with which you operate to meet demand from retailers and consumers.

To earn a profit as a distributor, you must control costs as well as have adequate markups on goods. This factor requires familiarity with operational efficiency and financial management. Successful distributors set up shop in locations that offer access to the retail and consumer market, but at the lowest cost possible. You also need to plan and adjust to changes in equipment, transportation costs and work processes to constantly get the most production from the least amount of labor and equipment investment. On the financial side, getting low-rate loans and negotiating reasonable price points with manufacturers are keys.