Selective vs exclusive distribution practices can be confusing. Picking the right one for your business is important, but finding a distribution strategy that works is a challenge. Understanding these two methods on their own can help.
Selective distribution means you sell products through a limited number of retailers. Exclusive distribution gives the rights to sell your product to only a single retailer. According to the American Marketing Association (AMA), both are a type of product distribution strategy, but they target different market segments and retailer relationships.
In this article, we'll explore both and help you get the advice you need to find the best fit for your business.
Choosing a distribution strategy that fits your company goals is important for your business to succeed. Selective and exclusive distribution are two methods often picked by companies looking to have a little more control over their brand.
The choice between selective and exclusive distribution can impact many things, such as:
Learning about the differences between these strategies, as well as the benefits of each, can help you decide which one is right for your business.
Exclusive distribution is when a manufacturer grants a single retailer or distributor the exclusive rights to sell their products within a specific region.
The goal with this strategy is to create a sense of scarcity. If the product is only found in certain locations, demand can go up. Buyers can come to see it as something special worth going out of their way for.
Creating a sense of scarcity and exclusivity is a big part of why brands that want to tout themselves as luxury or ‘one-of-a-kind’ choose this distribution strategy.
The manufacturer can be picky about whom they select as authorized retailers and better control the customer’s experience with purchasing that product. You can also target a specific audience when distribution is limited to a single location or area.
Looking at the benefits more closely, you can see that a big part of why it works comes down to customer perception.
When you have a product image you want to protect, exclusive distribution does provide many benefits.
There are risk factors to think about as well. When choosing a single distributor, you are placing your trust in their ability to keep up a specific image. If a high-end retailer suddenly faces financial issues or isn’t seen as reliable, that impact can be passed on to your brand.
Other risk factors of exclusive distribution include:
If you can overcome these risks, exclusive distribution just might be the way to your company’s success.
Selective distribution strategy is a method in which a manufacturer chooses a limited number of retailers to carry their products.
As a manufacturer, you still keep a certain level of control over the brand. In the meantime, you’re also reaching a broader audience than what an exclusive distribution strategy would allow. It’s a good balancing point between market expansion and brand control.
As mentioned, selective distribution still gives product manufacturers a good range of control over their products. Brand perception is a big deal, so picking who gets to sell your product takes a bit of market research.
When choices work to your advantage, strong growth is possible.
Growing a brand requires some trial and error. Selective distribution gives you the freedom to expand. Keeping an eye on the brand’s performance will then allow you to further refine your marketing to a specific audience.
Depending on what your business goals are, you can aim for small boutiques that make it more exclusive, or go for mass-market, nationwide appeal. Both paths can lead to success for you and your company.
It is very important to keep a hands-on approach with selective distribution to avoid the downfalls of this particular strategy. Advantages can turn into negatives if not managed correctly.
This could lead to:
A selective approach is still an effective distribution strategy. You can reduce the risks by choosing channel members with care and setting up a management system early on.
Going with an exclusive distribution network can help you create a brand that gives customers a sense of luxury and rarity.
We'll go over when exclusive distribution is the best choice for your business, and outline the steps to successfully use this strategy. By understanding these factors and following a clear roadmap, you can harness the power of exclusive distribution to drive growth and elevate your brand.
Once you’ve gone over the advantages and disadvantages of different types of distribution, it’s time to take a closer look at your actual product. The product itself, and your company culture, have a role in which distribution and marketing strategies work best.
Exclusive distribution may be the right choice for your business if:
Choosing this strategy can lead to premium pricing and early product adoption. To succeed, you need to set up a system for retailer selection and marketing.
Rolling out your product with exclusive distribution in mind means careful planning and follow through. From the start, you should consider how you want the business to expand.
Look for a dealer with a strong track record in sales. They might already carry something similar to your product, so make sure your marketing strategies are in place. Study their customer base to make sure it matches up with your intended audience.
There should be a clear agreement outlining the responsibilities and expectations of both parties. The goal is to draft something that benefits both you and your preferred retailer. Double check with your logistics team to make sure you can meet inventory deadlines. Set standards for consistency in the quality and quantity of what gets delivered.
Regularly evaluate the success of the partnership. Your market reach with exclusive distribution is limited, so tracking product performance is critical. Be ready to make adjustments as you get a better idea of how items are selling and how customers are feeling about them.
If you’re looking for expert guidance, working with a distribution consultant can help by offering useful tips and smoothing out logistical issues.
What’s the difference between a supplier a distributor and a wholesaler? Not sure? Check out our article and discover how each could impact your business.
Deciding to work with a selective distribution approach will give you a wider market versus an exclusive approach. You can keep the ability to manage your brand control, but you need to be careful about which sales channels you select.
Take a look at specific products and situations where selective distribution is the best choice. Then, we'll examine the steps to creating a selective distribution strategy that with your goals.
Companies that want to keep a sense of exclusivity but still reach a wide market do well with selective distribution.
While there are many luxury brands that use this approach, it’s also common when products are complex enough to require specialized retailers.
For example, if you are looking for retailers for professional cameras, you would most likely try to find a place that can provide technical explanations. The more complex a product is, the more likely you are to need a sales force that can explain the benefits and features to potential buyers.
Anyone looking to distribute the following products is likely to benefit from a selective strategy:
Not only are these items complex, but they tend to target groups in niche markets. Selective distribution widens out the field of potential buyers, which is necessary when targeting a niche market. Once again, success comes down to the retailers you do end up choosing.
Building a successful selective distribution strategy involves a step-by-step process. There is going to be more to manage, so staying organized from the beginning is a must.
Whether the products are complex or not, chances are you are aiming for a niche group. Take the time to study that group’s needs, preferences, and especially their buying habits.
Look for retailers that cater to your target audience and have marketing strategies that can help you. It’s also critical that they share your brand values.
An easy way to avoid issues with retailers in the future is to set expectations early. Set standards for how your product should be displayed and promoted.
Keep a close eye on the success of your selected retailers. Just because you start with one set doesn’t mean you can’t change. Adjust as needed to match the customer base.
Poor sales performance might not be the retailer’s fault. Take the time to provide marketing materials and even training for employees charged with selling complex items.
Establish strong communication channels with your retail partners. Share updates, marketing campaigns, and other information to encourage useful feedback for improvement.
Your business is going to change as you grow. Consulting with a distribution specialist can help you plan out product distribution strategies that work best for you.
When deciding between selective vs exclusive distribution, it's necessary to look at various elements. The strategies are similar, so it really comes down to the details and company culture.
Factors to consider when deciding between the two strategies include:
Target audience: Find the time to study the preferences and expectations of your customer base.
Product type: Consider the type and expected use of the items to plan promotions.
Brand image: Plan out the kind of reputation you want to establish.
Market competition: Assess the level of competition in your industry.
Growth goals: Look at your long-term business objectives.
By answering these questions, businesses gain a better understanding of their unique needs. With those in mind, determining the most suitable distribution strategy for their products and goals is much easier.
If you’re still questioning these strategies, you may need something that provides an even wider reach. Intensive distribution for widespread mass marketing might be the strategy you’re looking for.
Please note, however, that between intensive, selective, and exclusive distribution, only the last two give you a decent measure of control over brand perception. It might be wise to take some time to establish your brand first and then go after the wider market.
Interested in the differences between direct and indirect distribution? Read our article to learn more!
You should also check that the logistics of distribution makes sense. The more places you need to deliver to, the more you are going to spend on shipping your products to distributors.
Imagine you are launching a luxury watch brand. You need to choose a region with the right demographics and available retailers. Then you have to decide whether you’re going to focus on a specific retailer or a series of related ones.
Consider the comparison between the number of a specific high-end jewelry store, Boutique A, and the number of jewelry stores in general within an average sized city. Excluding some densely populated areas, the average large city in the United States has a population between 300,000 to 600,000 people.
The high-end store, Boutique A, has a limited number of stores within a city, all of which can be reached by a single delivery truck in one day. Only having Boutique A distribute your watches is using exclusive distribution. Using selective distribution, you may have Boutique A and five other jewelry stores.
|Number of Retailers||Number of Possible Locations per Area||Average Shipping Cost*||Total Cost|
|1||3||$50 per stop||$150|
|3||9||$50 per stop||$450|
|5||15||$50 per stop||$750|
|10||30||$50 per stop||$1,500|
*Estimate varies by delivery dimension and location
While this breakdown is simplified, it does highlight that greater complexity comes with greater costs. Should you choose to expand to other cities and regions, those distribution plans will become even more complex.
The choice between selective vs exclusive distribution is tough. The decision ultimately depends on your product, target audience, brand image, and business goals. As you navigate the complexities of product distribution, partnering with an expert can make all the difference in ensuring your success.
At Product Distribution Strategy, we specialize in helping businesses like yours find the perfect distribution strategy that aligns with your objectives.
Our team of experienced consultants is ready to help you make solid decisions for your unique needs. Don't leave your success to chance; let us be your guide on this crucial journey.
To learn more about how Product Distribution Strategy can help you achieve your distribution goals, contact us today at (855) 863-7672, or schedule a personalized, 1-on-1 consultation with one of our experts!
Don't wait—take the first step toward a successful product distribution strategy by reaching out to our experts now!
Choosing the right distribution channels for your business can be a difficult and confusing process. Whether your business is a small scale custom t-shirt design company or a giant producer of goods, you will need a distribution strategy. Determining the right channel will impact your company’s marketing strategy, business model, and more. Will it solely be an e-commerce business or will it have a brick-and-mortar storefront? That is just one of the questions a distribution strategy will answer.
The different types of distribution channels are:
Which distribution channel(s) a business uses will be based on overall business goals and structure. Both B2B and B2C companies alike need to weigh the pros and cons of each channel before choosing which one to utilize.
A distribution channel is the method that producers use to get their products to consumers. The idea is to bridge the gap in the most efficient and effective manner. Distribution channels function whether the gap is a few miles or a few thousand miles. Groups that utilize distribution channels are manufacturers of products. They can be any kind of person from farmers to a creator of handmade embroidered hats.
There are four types of distribution channels that exist: direct selling, selling through intermediaries, dual distribution, and reverse logistics channels. Each of these channels consist of institutions whose goal is to manage the transaction and physical exchange of products. Those institutions are the manufacturers, consumers, and middlemen.
The consumer can be an individual, household, government, or business. Additionally, middlemen function at the retail or wholesale level. The goal of a channel is to perform specific functions. There are transactional functions which consist of buying, selling, and assuming risk. Logistical functions consist of assembly, storage, and transportation. Finally, facilitating functions are recalls and maintenance, financing, promotion, and leadership.
Moreover, depending on the type of channel you utilize you can eliminate the institution that performs a function, but you can not eliminate the function itself. For example, if a producer decides to set up an online storefront they are removing the retailer from the distribution channel. However, the producer takes on the function and responsibility of storage, sorting, and risk functions that the retailer normally would perform.
Essentially, there are several factors you should consider when determining your distribution channel.
The first of the four types of distribution channels is direct selling. In a direct selling model, a company distributes products directly to customers without using any intermediaries. For example, Amazon utilizes direct distribution when it sells Kindle products on it’s own website. Apple uses this method as well when it sells Iphones out of its own retail stores. Direct selling can be any method that doesn’t utilize intermediaries. These approaches can include brick and mortar locations, online storefronts, door-to-door sales, telemarketing, and more.
According to the United States Direct Selling Association (DSA), direct selling represented $35.4 billion in retail sales in 2018. Additionally, there were 6.2 million direct salespeople and 36.6 million customers in that same year.
Direct selling is a good way to manage costs, especially when you own a small business. It allows you to sell your product without having to pay for other individuals to handle marketing, sales, or shipping needs. It also means that those responsibilities belong to the producer. A business that uses direct distribution may set up an online storefront and promote their products through social media. They are fully in charge of all the marketing, packaging, and shipping of their goods. The same business might set up at an artisan market, fair, or even at local public spaces such as a coffee shop to sell their product.
There are many avenues for direct selling and it gives owners much more control over their company and products. However, as the business grows so will distribution needs. Business owners may need to implement other means of distribution to reach a larger consumer base so as not to remain stagnant. It is difficult to sell large quantities of your own product when you don’t have an extensive distribution strategy. Similarly, tackling the global marketplace is easier when you have intermediaries to help.
Selling through intermediaries is the second type of distribution channel. It is also known as an indirect channel of distribution. This is where a manufacturer utilizes wholesalers and retailers to make their product available on the market. The wholesalers and retailers purchase the product from the producer and take on the risk if the product sells poorly.
One important thing to note about wholesalers is that they will buy your product in bulk at a lower rate than the retail price. Wholesalers do not usually sell the product to the end customer. Normally, a wholesale buyer will store and warehouse large quantities of your product to then sell them to other middlemen in small quantities for a profit.
Retailers, on the other hand, are store owners. The main difference between wholesalers and retailers is their size, retailers operate on a much smaller level. For example, your local grocery store is a retailer. They buy the products from wholesalers or other distributors to then sell to the end customer at a profit margin.
As a manufacturer, if you decide to use this type of distribution channel, you should try and maintain good relationships with your wholesalers and retailers. Make sure you create a large base of wholesalers and retailers because they can drop you at any time if your product doesn’t sell well. Know how your resellers business is doing and discuss the connection between their success and your products. Make sure they understand the profitability of your products. Give them information about your product so they feel connected to the brand and always gather feedback. Feedback will teach you how to better market your product and develop brand perception.
If you have ever seen a Coach purse concession counter within a larger department store, such as Dillards, you have seen an example of dual distribution. Dual distribution is where a manufacturer sells its product directly to customers and indirectly through third-party distributors and retailers. They use more than one distribution channel to reach the end customer and it allows the product to reach a larger market. In the case of Coach, they sell their luxury handbags through the “shop-in-shops” method, online, specialty stores, factory outlets, and regular retail stores.
With a direct distribution strategy, the manufacturer can interact directly with customers. When using the indirect distribution strategy, manufacturers will choose to work with distributors or brokers. In this method, they are delegating some of their tasks directly to intermediaries. These intermediaries are an extension of the manufacturer and most of the time represent the product before the end customer. Brokers tend to handle the sales of the product to retailers while distributors deal with the transportation of the goods. Distributors buy products from a manufacturer to then sell on a profit margin to retailers.
Using the direct distribution strategy can be expensive so most companies will choose to use dual distribution and vary their types of distribution strategies. Apple uses direct distribution when they sell their product out of their Apple stores, but they also use indirect distribution when they sell their phones out of stores like Sprint. While the direct approach gives the manufacturer more control over the customer's experience and with the product, it is pricey.
Dual distribution is the alternative to this and is generally a good decision when starting out as a manufacturing company. There are several advantages when working with either a broker or a distributor.
When working with a broker, a producer will sign a contract with them, the broker will then be responsible for selling the product to retailers. Brokers usually do not handle the actual shipping of the product, only the selling of it. A broker’s goal is to close the sale. Additionally, experienced brokers will have a portfolio of manufacturers they work with as well as retailers they sell to. When looking for a broker, look for one that has strong relationships with retailers and a portfolio of products from the same industry as yours. This will ensure they have quick access to retailers and a higher likelihood of successfully selling your product. Brokers usually offer other services such as invoicing and inventory control as well.
Similarly, when working with a distributor, the manufacturer has the advantage of assuming less risk. A distributor will directly buy the product and then resell it to retailers using the direct distribution strategy at a profit margin. The distributor does everything, from purchasing, shipping, and invoicing the products. Distributors are more likely to introduce new products to retailers because they are incentivized to sell their goods.
The disadvantage of working with brokers or distributors is that they can drop your products at any moment. Brokers are expensive to contract and if the sale of one of their manufacturer’s products goes down, they will likely be dropped from the broker's portfolio. Likewise, a distributor runs the risk of underselling and if a product ends up doing poorly, the distributor is less likely to buy from that manufacturer again.
The first three types of distribution channels discuss how the manufacturer gets their product to the end customer. But, in the reverse channel of distribution the direction changes. The direction of the product runs from consumer to another consumer or another company in a reverse flow channel. A traditional distribution channel will look like this:
Company → Warehouse → Distributors → Dealers → Consumers
But, a reverse channel will look like this:
Consumer → Intermediary → Company
So, who engages in the reverse channel of distribution? People who sell waste to companies so that they can be recycled use a reverse channel or people in the second hand sale business. For example, Goodwill utilizes the reverse channel of distribution when it resales goods that have been donated. Technology can also be sold back to the original company that manufactured it. Here are four ways in which the reverse channel of distribution is used.
Additionally, one other important difference between the traditional distribution methods and the reverse channel is that there is no producer. The reverse channel introduces a beneficiary or user of a product. However, there is no producer of it as the product or good already exists.
When selecting a distribution channel you should keep in mind your organization’s brand, profitability, and the scale of operations for your product. Choosing the right distribution channel is paramount to your company’s success and should be carefully considered. You should first understand that a distribution channel represents the relationship between the manufacturer and the user. A strategic alliance with a retailer will influence that relationship.
Additionally, you need to understand your target audience and what their preferences are. Will you be selling to an audience that is technologically savvy and thus open up a digital storefront? Or maybe your target audience is older and more traditional? Again, think of the cost of the different types of distribution channels. Consider your profit margin and desired volume when choosing a channel.
Another important aspect of selecting a distribution channel is the brand of your organization. Don’t forget to think about the audience's perception of your product and if it needs to be sold in high-end designer stores or if department stores will do. Finally, opening strategic channels of distribution in local markets may or may not enhance the profitability of your products and should be duly considered.
Before choosing a distribution channel, know that there are three things a distribution strategy influences:
When an optimal distribution strategy is chosen a strategic alliance between a manufacturer and a retailer is struck and both entities profit from the relationship. It will also impact how your target audience will interact with your product. For that reason, there are several things you should consider when choosing that distribution channel.
One thing to consider in-depth when selecting a distribution channel is the consumer’s preferences. As mentioned earlier, a distribution channel will influence product branding and the buyer and producer relationship. As you move your product from the manufacturing stage and into the distribution stage consider your audience. Who is the product for and why will they buy it?
Research your consumers' habits and behavior to help you choose the correct distribution channel. For example, if your consumer regularly buys products from department stores like Sears or Macy’s you should consider stocking those stores with your product. On the other hand, if your products are rare antique rugs you might want to consider selling them at specialty stores.
Similarly, if you are a publisher of audible books and most of the target audience listens via Amazon Audible you should consider a strategic alliance with Amazon. Know where your consumers generally find goods they want in a given channel and try to utilize that channel for your own organization.
Not all costs of distribution channels are equal. Some channels are more expensive than others. For example, a product that doesn’t cost very much to manufacture and sells for a lower price will do better at a low-cost retail store. Additionally, If you are just starting out and are still a small business you may want to consider the direct distribution model. Directly selling eliminates many intermediary costs between the producer and the user, however, you do have to deal with other aspects of distribution yourself that may be costly. For example, you’ll have to deal with logistics, packaging, and shipping.
Another option if you are just starting out or if you are trying to establish your product is to sell to wholesalers. They are willing to buy outright large quantities of your product, although it will be at a significant discount. Your profit margin may not be as high when selling to a wholesaler. However, they have a larger incentive to sell your product so it will certainly enter the market. Selling to a wholesaler can be beneficial when you are trying to get your product established. When considering costs make sure you know your financial situation and know that if you start with low distribution you can always increase it as your product succeeds.
Overall branding of your product relies heavily on the channel of distribution that you choose. Organizations work together to create strategic alliances that appeal to consumers and result in an overall profit for both entities involved. For example, if an online retailer stocks vintage handmade goods the consumer will associate that retailer with those products. Etsy is a great example of this. This then has an impact on how the consumer views both of those companies.
Similarly, a high-end makeup company will not want to stock their goods at a drugstore retailer as that will reduce the quality of the makeup in the eyes of the consumer. The consumer will not want to spend money on a good that doesn’t match the quality of the requested price. Branding has a huge effect on the profitability of products. Producers should consider how they want to brand their products and how choosing a distribution channel can impact that brand.
Finally, another avenue to consider when selecting a distribution channel is localization. In today’s global economy producers have many options of markets to choose from. Through effective marketing distribution, a company can enter new markets successfully. To do this, however, companies need to know how to localize and choose retailers in the new market that will appeal to their consumers.
As a producer, it is necessary to learn how to make your brand recognizable and understood when entering new foreign markets. Localizing through strategic channel alliances is one way that producers can achieve this.
Distribution strategies and the distribution channel chosen will change based on the target audience. There are two types of markets that use distribution strategies and for each market needs are different.
For a B2C, or business-to-consumer market, the sale of goods transfer from the business to the end-user. The business will either produce its own product or buy it at a wholesale price, they will then sell it to the consumer at a retail price.
In B2C markets the producer must identify the needs of a target audience, position and price the product to align with that audience, and communicate and sell it in a way that shows its value to the audience. There are two main methods that a B2C business sells products:
On the other hand, B2B markets place a greater emphasis on personal interaction. B2B means business-to-business sales or commerce interactions between businesses. It refers to the sale of goods between manufacturers and wholesalers or wholesalers and retailers.
Most of the time it occurs because the producer of a good needs to buy the raw materials to make that good. B2B sales utilize the same methods as B2C markets, however, they also use additional channels. For example, many businesses will utilize a representative from a selling company to nurture relationships that will lead to sales.
Additionally, many B2B sales occur at trade shows. Trade shows are less common in B2C sales and allow businesses to show off their products, learn about rivals, and monitor industry trends. They are usually industry-specific.
The main difference between B2B and B2C sales is that in B2B the purchaser expects an ongoing relationship with the seller. Meanwhile, in B2C after the consumer purchases the product, the transaction is complete.
You have been learning all about distribution channels, what they are and how to select the right one. But, it all sounds disarmingly similar to a supply chain. The confusion is understandable, but a distribution channel is not the same thing as a supply chain. Their strategies may sometimes appear similar, however, a distribution channel is mainly concerned with bringing a product in front of a customer. Especially customers that are ready and willing to buy that product.
Meanwhile, the supply chain is concerned with all the details surrounding planning, manufacturing, and logistics. It focuses on the process of purchasing raw materials and transforming them into an end product that a customer will buy. Sometimes, the supply chain will also become part of the distribution strategy. For example, when the manufacturer needs to control the full customer experience right down to choosing the location of the retail stores.
The main difference between the distribution channel and supply chain management is that distribution channels specifically involve the demand chain. Whereas, the supply chain is concerned with supply and demand.
The difference between the supply chain and the demand chain is a difference between internal and external operations. For example, the supply chain deals with sourcing raw materials, managing inventory, and moving the product from production to the final customer. The demand chain is focused on creating demand for the product by utilizing strategic alliances through distribution channels.
Moreover, the supply chain looks to reduce costs for the manufacturer by enhancing efficiency in the chain. Meanwhile, the demand chain looks to increase profit for a manufacturer by enhancing demand for a product. They are sometimes interchangeable and do work together to develop a more successful business.
Amazon is a great example of the blurred lines between a supply chain and demand chain. Amazon’s supply chain has very efficient inventory management, which allows them to expand their distribution channel to allow third-party sellers be part of the Amazon network. It increases the products available to their customers and increases demand for Amazon goods. The company’s supply chain strategy combines with its distribution strategy.
To reiterate, the supply chain focuses on the processes of production while the demand chain focuses on the customer and creating demand. Demand chain management revolves around the relationships between sellers and customers, and how that relationship intersects to grow the demand for a specific product.
Ecommerce has essentially “leveled-up” distribution for several reasons. It has evolved from what it was many years ago through data influences and a fluidity companies now have through e-commerce. A company that utilizes e-commerce may consider itself the manufacturer, wholesaler, or even retailer. In fact, the United States is of one of the top ten largest ecommerce markets.
Companies also don’t have to go through as many intermediaries. Storage location needs are reduced and products are available to a larger customer base. Companies who might have paid for research into their target audience can now research it themselves through predictive and prescriptive data analysis.
It is by far the most efficient distribution strategy for a business. There is no longer a need for multiple distributors and brokers to sell your product to a retail store because you can own your own digital storefront. There aren’t as many employees which means the payroll is reduced saving the company even more money. It even gives the producer the opportunity to cross expose products by selling the printer with the ink or the computer with the computer case.
However, all forms of trade become digital. This means integrated databases, online marketing, and user-generated feedback are all things you will have to learn how to manage. If you don’t have the necessary training it may be difficult to set up an e-commerce distribution channel, but it is well worth looking into.
When creating a supply chain network it needs to express the company’s long-term strategic goals. A supply chain network will impact the company’s efficiency and customer satisfaction. It is paramount that it supports a company’s growth.
Your supply chain network should not just be about the buying and selling of products but the differentiation of the product and profitable growth. Customer demand, channels of distribution, competition, supply risks, and product development are all things that go into creating a successful supply chain network. The suppliers of raw materials, production plants, warehouses, and flow of products to end customers all come together to create a supply chain network.
Due to the increasingly global and complex market, supply chain networks are imperative to the success of a company.
Whatever stage your business plan is in, if you need guidance determining the types of distribution channels that will work best with your company, R+L Global Logistics can help. Our experienced professionals will give you advice on how to approach distribution. We will identify the different types of distribution strategies and determine the most effective and profitable one for you.
Learning the best practices for evaluating the economic impact of your distribution channel and how to measure distribution performance are just a few of the things you will learn through our consulting services.
Contact us today to receive a quote or to learn more about how we can support your distribution channel needs.
You’re not alone if you’re asking yourself, “what is a strategic plan in business and how do I get one?” Business planning is vital to ensure the longevity of a company by positively impacting the company’s growth and its success. To that end, a strategic business plan gives the company the appropriate tools to track growth, determine a budget and be prepared for any unforeseen changes within the market place.
A strategic business plan is a comprehensive guide on how the given company can manage company objectives in order to improve financially. A strategic plan in business requires that the business be able to clearly define its goals as well as conduct extensive research in order to accurately understand industry trends. Asking “what is a strategic plan in business,” creating one for your business and analyzing the results requires several key elements and ongoing evaluation to determine its success.
A strategic business plan is a written document that combines the company objective or objectives with market place needs. A strategic plan is essential in order to maximize market research and understand how the market does and can affect the business, as well as achieve optimal market share for the business.
A strategic plan is able to provide the company with a more streamlined approach to attract its customers by determining who and how to market to them. The plan enables the business to focus on an area in the marketplace that the business can serve. The business can then tailor its sales, advertising and customer management to that area. This allows the business to know their target audience and the gaps within the marketplace that they can fill.
The overall purpose of a strategic plan is to set overarching goals for the business and develop a plan that details how to meet those goals. It requires a big-picture mode of thought, as opposed to day-to-day operations, that asks the questions:
Shifting from a day-to-day focus to a comprehensive viewpoint enables effective strategy development towards a more broad and long-term business plan and options. A strategic plan determines at a high level which direction the business should go in.
A strategic business plan is similar to a traditional business plan, with the difference that the strategic plan is more comprehensive and in-depth. The strategic plan defines the company goals in relation to how best to reach them in accordance with available business opportunities. The importance of strategic planning and its long term significance to the business cannot be overstated.
Both plans use goal setting as a means of tracking success, but the time periods within the goal-setting vary. A business plan sets short-term or mid-term goals and outlines a path that is needed to reach them. A strategic plan, on the other hand, is focused on mid-term to long-term goals and basic steps that are to be utilized to accomplish them.
A business plan answers the question of “what do I want to do?” Oftentimes it is the blueprint and founding document of new businesses and includes the following pertinent company information:
A business plan contains more preliminary, broad information that starts the company in the right direction. The document answers key questions that a potential partner, investor or banker may ask. It accurately summarizes the broad scope of the business and why the business is a viable concept.
A strategic plan answers the question of “how will I do it?” It is comprised of a detailed action plan for the next several years that outlines how the company will achieve its goals. Many aspects of a business plan can be part of a strategic plan. The difference is that the strategic plan sets a roadmap for the company to follow over the next several years in order to achieve the objectives laid forth in the plan.
Therefore, the strategic plan is an action plan with specific undertakings, due dates for those endeavors and who is responsible for each venture. The strategic plan is built to ensure growth objectives in a coordinated, systematic and informed manner. This increases the odds of success for all parties involved.
A business plan and strategic plan are both active documents and proposals that should be reviewed continuously. They should be evaluated annually in the least, although ideally a strategic plan would be reviewed every time a major event occurs that impacts the business. Such an event could be:
A business plan and strategic business plan have different functions, depending on which stage the company is going through. Regardless of their discrepancies, both should feature a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) in order to create an optimal plan based on the situations and desired objectives.
Business owners and company leaders must have a deep understanding of how their business works in different ways in order to develop a strategy for growth. They should understand the business internally and in relation to the external environment of the market and competitors. There are three questions that should be answered with the elements of strategic planning.
This means the owners and company leaders must have extensive knowledge of the business, including:
It is important to be realistic, critical and detached when answering this question.
This is where the highest priority objectives are decided. The business must work out the following criteria to outline the next five to ten years.
Other aspects to consider are the focus of the business and how the business has an advantage over its competitors in the marketplace.
This question lays the groundwork for the next several years as the business advances towards its goals. The business must ascertain:
All three questions must be considered in the context of each other. The second question, where is the future of the business, is the core of the strategic plan but the other two are equally important in the planning process.
The vision for the business should be balanced against the practical realities of the current situation. Account for implications of any changes, such as increased investment into resources or capital, and have contingency plans in the event that expected changes don’t occur. In order to be fully effective, a strategic plan should be realistically achievable and take internal and external factors into consideration.
A strategic plan provides a sense of purpose and priority to everyone involved in the business. The process of developing the plan helps the owner, manager and employees to stop for a moment, examine the present, see where they want to go and understand the path to get there. Work can still be done without a plan, but the plan provides clarity and structure to the day-to-day operations in the grand scheme of the business.
The strategic plan as a document can be one page, several pages, a notebook or a binder depending on the complexity and details given. At a base level, a strategic plan has nine fundamental sections that make up the framework. More specialized sections can be included, but the nine are a good starting point and can be adjusted and fleshed out as needed.
The mission statement can either broaden or narrow the company’s choices. In addition, those within the company can reach the vision by focusing on the mission each day.
The goals should coincide with the vision and mission statements. Long-term goals should be considered milestones set by the company to guide operations towards far-reaching objectives.
The one-year objectives can be further broken down into short-term goals which then define the actions and plans over the next three months, again, to reach the yearly goal. These types of plans are called action plans.
Furthermore, the financial plan can help to map out the short and long term goals. Numbers can serve as a baseline for when a given goal is met, such as how many new customers the business must obtain in order to reach a certain revenue for a specific month.
Any business committed to long-term growth should partake in some type of strategic planning. Therefore, smaller businesses should be just as invested in strategic thought and actions as large companies. A small business that does invest in strategic planning may very well move ahead of its competitors by thinking ahead of possible problems and solutions.
The strategic planning process, within a large company, can be a time-consuming process that usually involves the company owners and leaders, with input from staff within the organization. The plan is often written by executives that may not reflect the necessary work and commitments that must be done by lower management. For that reason, implementation of the plan may fail.
A small business has an advantage when going over strategic planning strategies because they can simplify the process and tailor resources and needs to make the plan practical and relevant to its own business. Including the strongest employees within the small business and discussing strategic issues, concerns and general hot topics within the industry will involve them in the process and also serve to improve the business environment. Those employees will feel a sense of ownership in the business and its future.
The criteria when strategic planning for a small business is different than for a large company. The small business strategic planning doesn’t have to be as long, formal or detailed. The most important aspects that should be covered are fully analyzing your competitors and having open discussions with investors, employees, customers and vendors.
A strategic plan should leave you prepared for future events and lower the chances of the business facing any unexpected surprises. Successful planning becomes a way of thinking, correcting and adjusting to business conditions in order to reach those long term goals while staying true to the company mission and strategic goals. A company that is small, with possible tight resources, should still make planning a cultural mindset that is fostered or risk spinning its wheels instead of progressing forward.
A small business that makes use of a strategic plan with many internal contributors is able to voice its long-terms goals and logistics strategy within the company. The strategic plan then becomes more than a company announcement or speech by management, it is an ongoing effort from everyone.
A typical business document that outlines a template approach will not produce buy-in or commitment from those employees or people who can produce long-term results. Instead, a company produces better and more realistic operating guidelines when it can think long term and combine that thinking with a short-term planning process.
The factors that make a successful large company are the same factors that can make a successful small company. A business that can incorporate long-term goals, performance objectives and forward-thinking strategies into short-term goals, performance targets and the company budget is one that will thrive in their market and prosper on all fronts.
A large business has the benefit of already reaching some level of success, giving it some cushion in the case of hard times. A small business generally has less cushion and room for error, making it more vital to achieve annual budget goals and performance milestones. That is why it is necessary for the company culture to establish a sense of shared accountability. Every employee must feel that their effort and performance will directly affect the business as a whole, which is likely the case.
Strategic management is an ongoing process that analyzes internal procedures, processes and resources to meet goals and objectives. It is used in the creation and execution of the strategic plan. There are four primary phases that must be utilized for each strategy and each phase’s purpose should be understood by leaders within the organization. The four phases of strategic management are:
The formulation phase entails formulating, or choosing, the most profitable course of action needed in order to achieve success when reaching goals. Objectives are set and pathways are identified as a way and means of accomplishing short-term and long-term goals.
This is where the SWOT analysis takes place to identify company strengths, weaknesses, opportunities and threats. The SWOT analysis should reveal critical areas pertaining to company products and services that need more work and attention.
Implementation is when strategies are executed to meet the objectives. Strategies are able to be executed successfully when employees understand their roles and responsibilities. The work that is done should be measured in order to provide needed feedback with facts to pinpoint positive impacts and possible areas that should be adjusted. It is vital that the company pay attention to details within the objectives in order to monitor the process and make any quick changes that are necessary.
This is when strategies that were used in the implementation phase are evaluated to get performance feedback. An analysis can be used to compare how the company performed when meeting the short and long term goals. The company can determine if new products are needed or if additions must be made to existing products by analyzing the present state of the company as compared to the desired future state.
This phase is essential when fixing any weaknesses or failures discovered during the evaluation phase. Any new strengths that are found can then be implemented in other areas of the company, thereby streamlining the solution process.
A strategic plan is not a “one size fits all” document and can come in varying forms, shapes and sizes depending on the company, market, resources and goals. Some strategic plans are more simple and mainly include goals, objectives, strategies and tactics while other complex strategic plans have those sections plus other multiple levels and layers.
The most simple, basic, strategic plans should have three levels that serve specific functions.
More complex strategic plans have additional levels that are in addition to the three listed above. A fully developed plan also has two additional two sections, both of which come before the objectives:
A complete and complex strategic plan would then look like this:
Strategic Theme: Client Satisfaction
Goal: Be considered a trusted partner by the company’s clients
Objective 1: Increase client satisfaction from 85% to 93% by January 1
Strategy 1.1: Implement an annual client conference
Tactic 1.1.1: Choose date and venue
Tactic 1.1.2: Develop an agenda for the conference
Tactic 1.1.3: Select and invite speakers
Tactic 1.1.4: Create social events within the conference
Tactic 1.1.5: Decide on a menu
Tactic 1.1.6: Design invitations
A company can develop various strategic themes, goals, objectives, strategies and tactics depending on how in-depth and detailed they want to go into the business. It’s a good idea to first tackle the largest, most pressing and time-sensitive issues before getting into smaller areas of concern within the business. The company may find that addressing the larger issues may resolve or change the dynamic of any smaller concerns.
It’s one thing to think of what to put in a strategic plan; it’s another thing to actually get it down on paper in a clear and concise format. Writing and developing a good strategic plan means sifting through all of the ideas and content, deciding what’s pertinent and making them into a good outline. Consider these general tips when writing a strategic plan:
The length of the strategic plan depends entirely on the company’s goals, how much they want to accomplish and the length of time they are covering. A company can choose to have a shorter strategic plan that is only a page long and that addresses one or two concerns that they want to tackle over the next year.
On the other hand, a company can also choose to create a strategic plan to spans the next five years and has multiple areas they want to change with multiple methods they want to implement. There is no right and wrong answer as there are many different variables involved in the process.
Companies often use a three-year to five-year model when creating a strategic plan. This also provides a longer roadmap to follow that gives the company direction several years into the future.
Evaluating the success of a strategic plan is essentially evaluating the success of the overall business and its procedures and processes. There are a few simple benchmarks that can be used as a meter towards success.
Also, compare business expenses to prevent any escalating upward trends due to any changes in operation. Both comparisons should have positive progress. If they don’t, go back to determine why and reevaluate the business approach.
R+L Global Logistics offers logistics, shipping consultant and supply chain solutions for operating in a global marketplace and becoming a wholesale distributor. Your strategic plan will likely encompass the logistical side of your business operations. Speak with one of our R+L Global Logistics consultants if you would like some guidance on how to answer your question, “what is a strategic plan in business” when designing, improving or implementing your current logistical structure.
Our product distribution strategy consultation services cover complete supply chain solutions on transportation, warehousing, trade shows and more. Call us today at 855-863-7672 to start the conversation with one of our professional consultants.
Being a wholesale distributor can be a lucrative profession, one that accounted for $6 trillion in 2018 alone. Hearing numbers like that can be mind-blowing, but someone just entering into this business segment has a lot to learn to ensure he or she is ready to grab a piece of the pie.
To become a wholesale distributor, there are important steps to follow. These steps include securing the proper amount of capital funds, obtaining an EIN from the IRS, and establishing partnerships with relevant manufacturers and retailers. Researching the wholesale distribution industry beforehand is essential to this process.
Take a look at our comprehensive guide below to learn the steps to success in becoming a wholesale distributor.
A wholesale distributor handles the distribution of products from a manufacturer and then sells those products at wholesale prices to a retailer. The wholesaler always sits in the middle portion of the supply chain.
Wholesale distributors deal in large quantities of goods and are set up to have a warehouse, distribution center and shipping logistics to get the items to the next phase of the distribution channel.
The vast majority of the time, the wholesale distributor will then ship directly to the retailer, who has purchased the item and will decide on how it will disperse the goods to its customers. A less common method is dropshipping, which is where the retailer buys the product from the wholesaler but the wholesaler is still responsible for processing and shipping the order to the customer.
Dropshipping is most common in e-commerce, where a company like Amazon or eBay will see a portion of its sales employ the method. So even though Amazon (for instance) is responsible for the entire customer experience, the trillion-dollar company uses dropshipping for as much as 33 percent of its business and is still culpable for any hiccups in the product reaching its customers.
It is rare that a wholesaler would sell directly to consumers but it is possible. There are some hurdles associated with selling directly to customers but it can also be profitable under the right conditions.
A retailer sells the manufactured product directly to the customer. Because of this, the retailer is also responsible for having a retail store if it does in-person sales or a website or a presence on an e-commerce retailer’s website.
A wholesale distributor’s customers are the retailers. The wholesaler is selling its product to the retailer and then shipping it either directly to the retailer or on behalf of the retailer to the customers. Even if using dropshipping, a wholesaler will never deal directly with the retailer's consumer though — the retailer will always be fulfilling that responsibility.
An example of this dynamic is if the customer has a problem with its order. Even though the wholesaler filled the order and the retailer never handled the product, the retailer is on the hook for making it right with the customer. This means it’s on the retailer to work with the wholesaler to correct the mistake and get the right item in perfect condition to the end customer.
Conversely, the wholesaler is never going to deal directly with an average person walking into a big-box store to buy soap. At that point in the distribution channel, the wholesaler has already sold the soap to the retailer for the retailer to sell.
Starting a wholesale distribution business is really like starting most kinds of business. You have to begin by formulating a solid initial plan to put yourself on the right path. Of course, there are going to be some moments of trial and error but the time before taking the business live should involve careful planning.
Once that occurs, you will need to compile a list of all of your expenses — warehousing, staff, packaging, shipping, etc. Only once that happens will you have a list of your projected total expenses. From there, you can set a profit point you want to hit in order to make the entire enterprise worth it to you.
Next, do market research to see if you can sell the items for the price you want to achieve desired profits.
Hypothetically, it would be most advantageous to be close to the manufacturer (s) of your products. Also, this is a time to consider carving out administrative operations at the warehouse and purchase office equipment.
Once you’ve checked off those boxes, it’s time to put in your first order to a manufacturer and start moving product.
The same steps for starting a wholesale business above will be applicable here as well. So let’s go over additional tips that are specific to launching a wholesaling solution from your house.
Developing an online presence is probably important all around, but a critical factor that will help your business if you’re running it at home. You will be responsible for building or having someone build a website, which should load quickly and be aesthetically pleasing while also being easy to navigate. The last thing you want as a business is to run a sluggish or unattractive website that frustrates customers and makes them look elsewhere. Your contact information should also be included.
You will need to register a domain name for your new website and also further build out your brand on social media.
If you are starting out a small operation, you can probably use your garage, a large shed, an attic or a basement on your property, at least initially until your business grows. This will cut down by lowering some of the overhead costs but will be very limiting if your operations need to expand.
You can also try dropshipping. In this scenario, you would take the order and forward it to a supplier, who would then ship the product. This approach has its pros and cons though.
The biggest pro is that you can start up your operations for very little upfront cost. The downside, though, is while your cost might be lower, so will your profit margin since you are doing less of the actual work.
Registering your wholesale business is not challenging but steps need to be taken in a certain order to complete the process:
The basic way wholesalers make money is by purchasing products from a manufacturer at a low price and selling it to retailers at a higher price than it was purchased. The way the wholesaler gets lower prices is by purchasing in large volumes.
Having a good relationship over a long period of time with a manufacturer could pay dividends in the form of additional discounts. If you prove to be a stable partner who buys a lot of their products, the supplier will view you as a reliable way to make a guaranteed profit and slightly lower their price. Also, the more a wholesale distributor orders at once, the lower the price will be per unit, allowing the wholesaler to bump up its overall profit.
At the same time, it’s simply good business to constantly evaluate your relationships with your suppliers. If they are not fulfilling your needs or a better price can be had elsewhere, it’s worth exploring.
But making money can be achieved by finding ways to reduce your own costs at every turn. Some tips include:
For office supplies and packaging materials, buying in bulk — surprise! — will save money in the long run. In fact, try to go paperless in any instance you can. That will be a potentially sizable source of savings.
If you are using a company credit card or took a business loan from the bank, the interest rates could even be renegotiated after a period of time to a more favorable rate, saving you additional fees.
Also if you’re starting a wholesale distribution business, you can try to look for second-hand equipment, which would be cheaper than brand new.
Leveraging Facebook, Twitter or even your company’s newsfeed on LinkedIn are all free and might be able to reach a good amount of people. If you really feel like you need to spend money on job postings, Craigslist offers job postings for as little as $10 depending on the area.
Once you have employees, also ask them to refer people they know to apply for open jobs at your business. This will be a free way to find workers and comes with the added benefit of a bit more certainty in who you’re hiring.
You can consider doing your own marketing as well, which will eliminate the cost of paying for outside help.
Manufacturers need to concentrate on producing a great product, often in vast quantities. In many cases, they don’t require the additional headache of trying to ship it to retailers and also shipping it to retailers in more manageable units.
That’s where a wholesaler comes into play. There are myriad benefits for the manufacturer’s relationship with the wholesaler.
A wholesaler, on the other hand, is much more likely to cover a smaller area and will know the current market conditions for their specific zone.
There’s no way around it — wholesalers add more cost to the end product consumers buy at the retail level. But if a manufacturer had to hire its own sales team and then worry about additional logistics, the added cost of that expense to the manufacturer would inevitably be passed on to the customer anyhow.
This suits manufacturers and retailers too, since manufacturers can get their products closer to retailers. The retailers also experience less interruption in their supply chain. Also wholesalers are in constant contact with retailers, taking another thing off the plate of manufacturers. These examples in the floral industry highlight why wholesalers are used.
There is no restriction on who a wholesaler can sell to. And if selling directly to a customer is profitable, a wholesaler should at least consider it.
Anything that builds your brand as a business has to be seen as a positive and you could legitimately be offering a solution to a customer’s problem that can’t be solved immediately by a retailer, like a last-minute need for a large amount of one item.
However, there are a few aspects of wholesaling that could make selling directly to consumers less than ideal. If you’re selling directly to a customer, chances are it will not be in the volume a wholesaler would enjoy in dealing with a retailer. Wholesaling is often a high-volume setup with low-profit margins per unit, so selling 50 picture frames to one customer might not be worth the time and effort.
A wholesaler would also run the risk of alienating or harming the business of their retail partners. In actuality, the only reasons a customer would choose to deal directly with the wholesaler is to get a product in very large quantities or to get a cheaper price. Other than those two instances, there’s little reason for a consumer to go directly to a wholesaler.
Furthermore, this undercuts the wholesaler building relationships with the retailer and it’s not a good business practice for a wholesaler to possibly eliminate its biggest customers.
Another possible pothole for a wholesaler is the expectations of an individual customer. It might be a one-off order but the individual may have different customer service requirements than a retailer would, like individualized care and constant communication. This is not very efficient for a wholesaler.
None of this is to imply a wholesaler should not sell to the public. But it might be wise to take a big-picture view before you decide whether it is truly beneficial to your operation.
Wholesalers have a place in the supply chain for valid reasons. While the practice can be simplified by being called a “middleman”, manufacturers and retailers would not use a wholesale distributor unless there were true advantages.
Allows access to goods: This is beneficial for retailers and customers, especially those that are not in very heavily populated areas.
While Amazon is unique in the world of e-commerce and is not a like-for-like example, the setup in place is to shorten the timeframe of each step in the supply chain, including wholesale distribution.
Amazon uses the same principle so it can have a product to any consumer in the country in two days. It has distribution warehouses all over the United States in strategic locations to be able to react quickly to nearly anything a customer can order.
For retailers and customers, a wholesale distributor follows those lines in the sense that it has purchased the product and can more quickly get it into the hands of retailers, who can now turn around and sell more quickly to customers.
Theoretically, this also benefits consumers because they have access to a greater variety of specific products. This allows the consumer buying choice and also increased buying power, because manufacturers and retailers both have to offer more competitive prices if there is a huge selection on the market. It also allows small businesses to get their hands on goods they otherwise would not be able to access.
Provides manufacturers market reach: This is like a trickle-down effect for makers of goods. Manufacturers can concentrate on producing its items and then instead of worrying about how to get it to all corners of a country, or even globally, it can sell its finished product for a profit to a regional or national wholesalers in a much quicker manner and immediately continue production.
Manufacturers don’t have to spend additional time, money and effort figuring out how to get its products into the hands of consumers.
The biggest disadvantage to being a wholesaler is the large amount of capital that could be required at any time.
Buying products in enormous quantities can be risky if you’re not able to move the product in a speedy fashion. The wholesaler will have laid out a lot of money upfront to the manufacturer for the goods.
In the same vein, many wholesalers give retail businesses goods on credit and payment can take anywhere from 15 to 30 days after delivery of the items to the retailer. This can be frustrating and your business should be set up in such a way that it can account for this delay.
At some point, space could become an issue. Both the amount of real estate needed to house vast amounts of the type of product you’ll sell and the high cost of commercial rent could combine to make warehousing a big expense.
The goal of setting your price as a wholesaler is two-fold: move your product and turn a profit. In order to do that, picking the price you charge is a very delicate balance between trying to realize the biggest profit possible without scaring off your customers.
The wholesaler’s opening move should be to do market research to see what it could possibly sell its item for. This will dictate what it can charge the retailer and how much of the product can be moved at a time.
The simplest way to quickly calculate how to set your price is by figuring out your cost per unit from the manufacturer and the profit margin you’d like to see.
For example, you spent $10,000 on 1,000 items. The price you paid per unit is $10 each and you want to make a profit margin of 20 percent on each item. So $10 x 1.20 means you’d need to charge the retailer $12 for each item in order to realize your 20 percent profit goal.
That is a basic way to understand the principle, but competitors’ pricing will also play a huge role in how you’re able to set your prices.
There is also differentiated pricing to consider. This is where the same product costs different prices to different customers due to various circumstances. Supply and demand is one of these: if you are the only one with the availability of an in-demand product, you can set the price higher. Or if a retailer is ordering in a smaller quantity and you’re not able to disperse the shipping costs as much, you might charge a higher per-unit price.
This works both ways: if a customer is buying 100, you might charge $15 an item. But if that same customer tells you they want 10,000, it might make financial sense for you to charge them $12 an item because you can ship it all in one order and you can pass on some of the savings to your customer without affecting your profits.
Overall, wholesale distributors look for 15 to 20 percent profit margins on sold products.
Let’s say you buy $80,000 worth of products from the manufacturer and sell them to the retailer for $100,000. That is a gross profit margin of 20 percent.
The way that is calculated is ($100,000 - $80,000) ÷ $100,000 x 100 = 20 percent.
This gross profit margin doesn’t mean your business will realize 20 percent overall profitability. You still need to factor in all your overhead costs (like labor, delivery and warehousing) for the net profit.
The net profit margin a business should aim for is about 10 percent. There is no certain number you have to hit; you might be under that mark and be fine, or able to achieve greater.
But 10 percent is a good number to hit for a couple of reasons: a wholesaler might want to expand operations later or reinvest money in the business in some other way. Most likely, that will be a reinvestment of profits. If it’s not, then you need to be able to show a lender you either have a plan for solid profitability or that you’re currently profitable.
Also the profit margin is really going to depend on what you’re distributing. An example of this can be seen in different kinds of beverages: alcoholic drinks saw a 24.35% net profit margin while soft drinks were at 8.76 percent.
Also, conditions completely out of a wholesaler’s control can negatively impact its bottom line, like the economy and the stock market.
Now that you’re becoming a wholesale distributor, let R+L Global Logistics help you with your warehousing and logistics needs.
R+L Global Logistics can offer you valuable information on how to set up your wholesale business. Once you’ve set up your wholesale distribution operations, you can lean on our more than 30 years of experience in the industry via the following services:
To schedule a consultation with one of our distribution and logistics experts to discuss order management, wholesale distribution and more, give us a call at 855-863-7672. We’re ready to help you launch your wholesale business.
If you’ve ever been unable to help a customer that wants to return a product to your company, then you’re already aware of the nightmare of not having a good reverse logistics strategy. Maybe your business is just starting out, and you haven’t had to deal with many returns in the past, or maybe you simply put off building up a strategy for too long and now it seems too daunting to get started. No matter where you are with your business, you could benefit considerably from having a good reverse logistics strategy. But how do you do it?
When creating a reverse logistics strategy, you will need to consider more than just transportation. You will need a good SCM system in place and good customer support agents to ensure that your customers have the best possible experience. Working with a 3PL can automate the process for you, and take the problem out of your hands.
Reverse logistics, also called aftermarket logistics, is the process of moving things backwards through the supply chain. Think of when a customer returns a product they are unhappy with, or when a manufacturer or construction company returns excess materials to the supplier. That is reverse logistics. It is an important yet often overlooked part of managing a company, and if it is handled appropriately, it can really reduce company losses.
Reverse logistics relies on the existing logistics and supply chain structure that is in place already, yet it can still pose a challenge to many companies. Just because a product has been returned and refunded does not necessarily mean that it will cost the company money.
When a customer decides to return a product, it must make its way back to the manufacturer, a warehouse, or the distributor, and then the customer should be reimbursed for the product. Usually, companies issue a refund, a replacement, or a voucher worth the value of the original purchase. Then, the returned goods have to be dealt with, either by reselling it, recycling it, or disposing of it.
The typical supply chain journey follows a series of steps. Although not every product follows each step, the steps always follow the same order.
Reverse logistics turns this entire process around, but how far back in the supply chain the product needs to return to depends on the condition in which it was received, and where. There is no need to send a product back to the manufacturer if there is nothing wrong with it.
The process for reverse logistics is as follows:
The difference between forward and reverse logistics is clear, just like it is clear when a car is moving forward or in reverse.
Forward logistics, often just called logistics, is the process of transporting something to its final destination or end customer. It involves the transportation, storage, and delivery of products to the people that purchase the product. It can also refer to the transportation of just about anything to a specific location, like military personnel and equipment to a war zone.
Reverse logistics also deals with transportation, so it isn’t a complete opposite of logistics. This kind of logistics deals with product returns, after-market transportation, and the removal of products, goods, and people from what was intended to be the final location. The departure of the military after a war deals with reverse logistics as well, since the soldiers and supplies are being removed from the area and returned home.
Forward and reverse logistics are not opposites, since they both deal with transporting goods or services. However, forwards—or regular—logistics deals with all the processes involved with getting the products and services to a customer. Reverse logistics, on the other hand, deals with the processes for getting the products and services away from a customer.
There are many reasons why reverse logistics would need to be utilized. Especially with large-scale operations, mistakes are going to happen, and things will need to be returned eventually.
Damaged or unsatisfactory items are the most common reasons for a product being returned by the customer. If a product is unusable, the customer will not want it, and many will go to great lengths to get rid of it again—especially for a refund. Usually, this is handled by the customer by bringing the products back to the store, or by shipping them back to the distributor. Regardless of the method, companies will need a plan to deal with these returns.
Sometimes, when dealing with eCommerce, customers can get sent the incorrect item. Products that are consolidated into a single package can occasionally end up with a misplaced item. Other times, entire packages can get sent to the wrong person. These things can happen, even if there are policies in place to prevent situations like that. When it does inevitably happen, the company will need to effectively sort out the problem, so all the customers involved get the correct products quickly.
If your company makes floor tiles, a construction company is more likely to purchase your product than an average person. In this case, products may be returned because the construction company overestimated how many floor tiles would be needed to finish building a house. The extra materials would need to be returned to the place of purchase, for the convenience of the customer.
Reverse logistics doesn’t only happen after reaching the final customer. Sometimes, products can go back in the supply chain earlier on in their journey. If a retailer receives a bulk package of products to sell that has been squished because of improper handling or packing, then the products will be returned to the manufacturer or producer long before it would ever reach the potential consumer. This is to ensure that only good products make it to the customer, to reduce the likelihood of returns later on.
There are many different ways that reverse logistics is utilized in the supply chain, so a solution that works in one situation may not work in a different one. However, in a lot of ways, reverse logistics relies on the structures already in place because of regular logistics.
If a pallet or box of products gets damaged as it is in transit from the manufacturer to the warehouse, the goods would likely return to the manufacturer before it even reaches the retailer or customer. Shipments get sent back mid-shipment all the time, and it is fairly easy to deal with at that point. The problems mostly arise when dealing with products that have already reached the customer and need to be sent back.
The most common application of reverse logistics is with customer returns, which causes the most trouble for companies. This is especially true of newer, smaller companies. Without any guidance, it can be easy to simply brush off the idea of customer returns and say that you won't do that despite how it could hurt your business.
Unfortunately, there is no easy way of applying a single formula to your process and calling it a day. There are many different variables to consider. Does your company have multiple channels? Will customers be able to buy goods at one store and return them to a different one? If a customer orders a product online, can they return it in a store? You will also need to consider the size, profits, and other factors of your business, as well as how to align your strategy with your mission.
Reverse logistics is often ignored by companies until it is needed, which can make the process messy and complicated. It is often given little thought, and as a result, many companies do not know how to handle it when it is needed. However, there are many common issues that can arise that would require utilizing reverse logistics—and if you aren’t prepared with a good strategy, those problems can end up costing a lot of time and revenue.
One of the most blatant examples of why reverse logistics is important is product recalls. When a product is released and is later found to have a harmful defect or contaminant, then the company must issue a recall to have the harmful products sent back to the company. When a recall is issued, the company must be prepared to receive hundreds, thousands, or millions of product returns, all coming from different places, all at the same time. This could be chaos if they haven’t devised a solid strategy for collecting, storing, examining, replacing, and disposing of the defective products.
Besides recalls, there are plenty of other reasons why reverse logistics would be needed. Some companies, like those that manufacture rechargeable batteries, may collect items that are at the end-of-life stage, to recycle the parts or appropriately dispose of the items. Although it is not as common as recalls, it is still an important consideration. If your company is going to collect the products sold after they reach the end of their life, you are going to need to consider this unique situation in your strategy.
Finally, returns can cost the company a lot of money. If reverse logistics is utilized correctly, some of that lost profit can be recovered by reselling, recycling, and refurbishing.
Having a good reverse logistics strategy is instrumental in running a successful business, but there are more benefits than just the obvious ones. By focusing on your reverse logistics strategy, you could improve profits, customer retention, sustainability, and brand reputation!
The number one benefit of utilizing a reverse logistics strategy is the potential to reclaim the value of the unwanted items. If a customer demands a refund for a faulty product, and you do not have the means of accepting returns, then you may have to refund the customer without recovering the item, essentially doubling the revenue lost in that transaction. Even if your company states that you do not issue refunds, you still lose the value of the customer, who will likely never buy from you again.
With a good reverse logistics strategy and customer returns plan, you can prevent as much loss as possible. If you offer an unhappy customer a refund and an easy process for returning the product, you are not only retaining that customer’s loyalty, but you are getting the item back. If there’s nothing wrong with it, you can still sell it at full price. Even if you have to sell it at a discount or break it apart to salvage the parts, that still minimizes the potential losses. Even a faulty item can be at least a little valuable.
No one wants to be stuck with an item that doesn’t work, or isn’t what it was advertised to be. If a customer receives a faulty, broken, or unsatisfying item, it can be extremely frustrating. If they reach out to your customer support team and are told that your company does not accept returns, or if the returns process is complicated, unfair, or just downright inconvenient, then the customer will likely never buy from you again.
Although losing one customer may not sound terrible, remember that it scales to a much larger problem. If one customer had a bad experience with your company, other customers are likely to experience the same.
Alternatively, if a customer reaches out about a bad product, and gets an immediate refund, voucher, replacement, or another reimbursement, then they are likely to remember the experience positively even though it was initially a mistake.
A convenient and fair returns process can put the customer at ease, and make them feel valued by the company. Customers that have a good experience with the company are much more likely to make repeat purchases in the future.
Not only is reverse logistics good for your company and your customers, but it can also be good for the environment if managed carefully. When a customer cannot return a bad product, then chances are the item will end up in the trash.
Obviously, this is a big problem already, but there are several everyday products that the Environmental Protection Agency (EPA) classifies as “Hazardous Materials,” such as:
If these products end up in the trash, they could cause serious damage to the environment and even public health. A good reverse logistics strategy is imperative for keeping these products out of the landfills, but it can also cut down on things like plastics, glass, and other items that could easily be recycled instead.
By accepting returns on faulty or broken products, you can ensure that the different parts can be salvaged, recycled, or disposed of properly. This can help you protect the environment, and build a reputation of sustainability for your brand.
Brand reputation is an incredibly important aspect of business. If the very name of your company strikes consumers as unreliable, unsustainable, unfriendly, or any other negative connotation, then that will tremendously harm your potential revenue. It is important to cultivate a positive reputation with consumers, so that they see your brand as one that they like and trust.
One of the best ways to leave a good impression on your consumers is with a good customer service team, especially when dealing with returns. They are the people that get direct contact with the customers, so they need to be helpful, understanding, and cheerful in order to leave a good impression.
Customer service agents are an important part of the reverse logistics process, and they will be the primary determining factor of whether your strategy is successful or not. By making the process easy, and by assisting customers with helpful information, you will build up a good reputation that will improve customer retention rates.
In order to be successful, reverse logistics requires a strong network between the manufacturers, distributors, and retailers, and a solid Supply Chain Management (SCM) system to execute it smoothly. If something goes wrong in transit, retailers need to be notified of the delay, and suppliers need to know to ship out a new shipment of goods. With a good SCM system, everyone involved in the process can be immediately notified of the problem, so that the appropriate actions can be taken to minimize losses.
Additionally, a good customer support team can improve the customer’s experience, and make them more likely to return for repeat purchases—even if the product was returned for being faulty. Customer support agents are one of the most important aspects of managing customer returns, so it is important to have at least one dedicated representative to communicate with customers. A good representative can make a world of difference, to both the customer and the business.
Once you have established strong ties of communication between different departments, your suppliers, and your customers, you can either manage returns yourself or outsource the problem if you are short on staff. If you choose to manage the reverse logistics yourself, make sure you simplify the process as much as you can for the customer, to potentially turn a negative experience into a positive perception of your brand’s timeliness and dedication to making things right.
Returns are a necessary evil when dealing with selling products. Eventually, someone will want to send something back; it’s unavoidable. How you choose to deal with this situation could substantially increase customer retention and brand reputation. Although it can be difficult, the last thing you should do is ignore unhappy customers.
There is no perfect reverse logistics strategy that will work for every company. There are just too many different types of companies that sell different products in different ways. Even the size of the company could substantially alter how the returns process operates.
With that in mind, it may seem daunting to try to create a strategy for accepting returns. However, there are a few things that apply to many different types of business. Here are some suggestions to get you started:
This all sounds complicated and difficult—and it is. Dealing with returns is often time-consuming and confusing, and can be a lot of work for what seems like a small payoff. Some companies might not have the time, space, money, or manpower to pull it off. There are many reasons why a company would neglect to focus on the returns process, despite compromising their business.
If you are in a position like that, where you cannot reasonably manage your own returns, there is still a solution! You can outsource your reverse logistics processes to a Third-Party Logistics (3PL) company, to let them handle the processes on your behalf. You could even outsource your entire warehouse operation to a 3PL, so you wouldn’t have to deal with keeping track of inventory, fulfilling orders, or accepting returns.
A 3PL is a company in the logistics industry that handles the more complicated aspects of transportation, logistics, and management on behalf of its customers, the business owners. They act as brokers to find the best carriers to move their customer’s freight, the best warehouses to store it in, and the best insurance policies to cover the freight if something bad happens.
Additionally, many 3PL companies offer freight brokerage or transportation consulting, to help get through the daunting paperwork associated with moving goods across state—and international—borders.
Working with a 3PL can also help you with your reverse logistics, optimize your returns process, and give you and your customers the best experience possible when dealing with frustrating recalls and returns. If you struggle to keep up with your reverse logistics processes, or if you just don’t want to have to worry about it anymore, then a 3PL could be the solution you need.
It’s no secret that accepting returns is a tiresome, expensive ordeal. It is great for retaining customer loyalty, but it can cost the company a lot of money. You will never profit off of a returns policy, since it will always cost to ship, store, and repair goods that have been sent back. That is an undeniable fact. You cannot make more money than you originally did off the product by simply selling it again.
It is not about making a profit, it is about cutting costs.
A good reverse logistics strategy can significantly decrease losses. On average, companies that accept returns but do not have a good reverse logistics strategy lose around 10% or more of their potential profits from dealing with customer returns and mismanaging product reclaiming. By optimizing the way returns are handled, companies can reduce those losses down to a mere 1%, gaining back a significant amount of lost revenue.
Companies still lose money on returns, no matter how optimized their reverse logistics process is. However, the benefits of utilizing a streamlined returns strategy far outweigh the costs.
If you already have a reverse logistics strategy, but you aren’t seeing the sort of optimized performance that you were hoping for, then you will need to rethink your plan. The point of a good reverse logistics strategy is to reduce costs and retain customer loyalty. If your strategy does not improve cost savings or customer retention, then it is not well-optimized. However, merely having a strategy at all is better than not, and you can still make improvements to it over time.
If you’re looking to improve your strategy, the first thing you will need to do is understand the plan you already have in place. What is working for it, and what is not? Identify the points that you would like to improve on, and focus on those. Using business analytics is a great way to find the aspects of the strategy that are falling short, and where improvements can be made.
Secondly, it is never a bad idea to look to your competitors for inspiration. Try to determine what they are doing successfully, and decide if it is worth it to try to emulate their strategy. Obviously, no one strategy will work perfectly for every company, but experimenting can help you determine what direction to head in for the future.
Once you have determined some new strategies that you want to try out, make sure you set goals and metrics to measure the success of the experiment. If it does not do as well as your existing strategy, then you will know to move on to a different plan.
Try to imagine how the journey looks for the customer. Examine the process of returning an item, dealing with customer support, and trying to get a replacement or refund. How is the experience for you as a customer, and how can it be improved? How fast is the process, and how long would you be willing to wait if you were already frustrated?
These factors are all important to consider, but in the end, if it still isn’t what you want it to be, you should consider outsourcing fulfillment and logistics to a 3PL. The stress of optimizing your process would disappear, and you could rest easy knowing that your company would be taken care of by experienced supply chain professionals.
The biggest disadvantage of creating and maintaining a good reverse logistics plan is that it is difficult. It is hard to manage, factors are always changing, and return rates change seasonally so it frequently demands different levels of management and engagement throughout the year.
Reverse logistics is complicated, and there are many different factors that influence success, like the time of year, the level of customer service, the weather, freight transportation, and warehouse management, to name just a few. That’s a lot to keep track of, especially on top of all the other tasks associated with running a business.
In addition to being difficult, it can also be tremendously time-consuming. Taking the time to plan everything out and set up an optimized strategy is definitely worth it, but it takes much more time than simply deciding not to accept returns at all. If you can put in the work, it will pay off.
If you’re still not sure about how to create a reverse logistics strategy, reach out to us at R+L Global Logistics. We offer affordable consulting services for all types of businesses and can help you formulate the best reverse logistics plan for your business. We also offer complete supply chain solutions, from warehousing and transportation to reverse logistics and customs brokerage. No matter what you need, we have what it takes to help. Call today!
Reach out to us and we’ll answer your reverse logistics strategy questions and how we can help with your distribution needs.
So you’ve got a killer idea for a product and you are ready to start production so you can start making money. But before you do that, you need to figure out how to get your product from the factory to consumers and the conversation turns to distribution. This could make you wonder, “How do distribution companies work?”
Knowing how distribution companies work is essential to your business since they are the way to get your supply chain humming like a finely tuned machine. A distribution company buys products from the manufacturer and then generally resells them for a profit to a retailer or, in some cases, directly to the customer.
Picking the right one can absolutely affect your bottom line since getting your product to the consumer in the most cost-efficient way is a basic tenet of effective distribution.
Product distribution in its simplest terms is the act of making goods available by circulating them through the market. Distribution itself refers to the manufacturing, packaging, delivery and transport of the product.
With many business models including worldwide sales, it is vital to set up and optimize distribution so that all links in the channel are pleased. Distributors (or wholesalers) are essential to many retailers and even directly to customers. While the biggest businesses — think Amazon or Wal-Mart — will handle their own distribution, there is a huge market to use an intermediary to get the product from the manufacturer to the consumer.
The importance of product distribution cannot be overstated. If a distributor is unable to deliver goods on the timetable agreed, multiple levels in the supply chain (retailers, customers) are disrupted and become upset. Distributors lose credibility and probably profit as well. Nailing down a productive system is key to having a successful product distribution business.
Profitability is definitely there for the taking and the financial numbers back this up. Each year, about 300,000 distributors account for $3.2 trillion worth of commerce in the United States. To get a piece of that pie, though, there is a lot to know about the world of product distribution.
A distribution channel is the flow of business that takes place between a manufacturer and a consumer, in other words, the line proceeded along during the process.
There are two types of distribution channels: direct and indirect. In a direct channel, the manufacturer delivers a product right to the customer. In an indirect channel, there are intermediaries such as a distributor, retailer or an agent.
There are four levels to the distribution channels:
The level zero distribution channel would take the shortest amount of time, since the product is going from the manufacturer directly to the customer while the level three would take the longest because it has the most steps to go through.
There are three different kinds of distribution and which one you choose to pursue will depend on your overall goals.
Selective distribution: This is when a business decides to limit the number of outlets that handle its product. Because this is usually a limited-supply item, the manufacturer can set its price-point to attract a particular kind of customer.
Exclusive distribution: This chain describes a very limited amount of product produced sent to a select group of retailers. This is intended to maintain a brand’s exclusivity and this is generally executed with very high-end companies
Mass (or intensive) distribution: This is distributing your product in great quantities in as many locations as possible. The goal of this style of distribution is to get maximum market penetration.
Depending on your aims, you’re not locked into one method of distribution for the life of your business. For example, you might start as a selective distribution outfit because your manufacturer is only able to produce a limited amount of product to hit a particular price point or it is still working to get onto more store shelves. As their business grows and their needs evolve, they might be able to produce enough of an item that consumers clamor for. As a distributor, you are now able to make the product more widely available and potentially turn to mass distribution.
Production distribution strategy (a part of business logistics) is a critical component of making it all work.
Here are some questions you should ask yourself:
For marketing your product distribution, there are generally two different strategies for product distribution — push strategy or pull strategy. Which one you choose will have important ramifications on how you advertise or promote the product:
Push strategy: This strategy involves strong advertising and incentives aimed at retailers and wholesalers with the objective they will carry your product. Then once your goods are on store shelves, customers will buy them. When a company uses this avenue, they concentrate their advertising.
Pull strategy: This strategy implements marketing directly to consumers with the hope they will put pressure on retailers to carry your products.
Wholesale distribution takes place when a distributor purchases products from the manufacturers and then sell them to retail stores, who then make them available for consumers. This approach works best for businesses engaging in large-scale production, who don’t have the time to produce a good and then preside over selling each item directly to retail outlets or customers.
A typical chain in wholesale distribution goes along these lines:
In order to get low enough prices to achieve profit, the wholesale distributor has to buy in large quantities to be able to negotiate a further reduced price with the manufacturer. That doesn’t mean a good price cannot be bargained for on smaller quantities, but a general principle of business indicates that the more you buy at once, the less the per-unit cost tends to be.
To get your goods on the shelves of retailers, there are some significant factors to consider.
Slotting fees: This is a one-time cost that is generally paid by the distributor to the retailer when its product is first placed on shelves. These fees were first introduced in the 1980s but are now prevalent throughout retailers. Even long-time holdout Walmart finally implemented them in 2015.
The place slotting fees are especially prevalent is at the grocery store, although they also extend to many big box stores and bookstores like Barnes & Noble.
Depending on the scope of your product placement at a retailer and the actual product, a slotting fee can be anywhere from several thousand dollars to hundreds of thousands of dollars. But like most things in the business world, slotting fees can be negotiated to a degree with the retailer. While you will face somewhat of an uphill battle since yours is not the only product vying for shelf space, it is possible to lower the cost.
The first thing to do is have a plan going in and relay that to the retailer. A strong plan will give you better footing in bargaining for the space you need. About 4 out of every 5 products end up failing, so using marketing in the form of promos or coupons can signal to a retailer that a business is serious about seeing its plan succeed.
Another way to demonstrate value to the retailer is having statistics support your vision. Showing that there is a demand for your item and proper placement will increase its viability can make it more attractive to stores.
If you are able to get your product into the store, there is a final tip for possibly lowering the slotting fees. Track the sales of your product in stores and if the numbers are strong, point it out to the retailers, who make money when you make money.
Knowing your retailer: This can make the entire process easier when putting your goods out there for consumers. Do some research on the potential partnering retailer’s floor plans, categories and displays. Get to know the store managers of the locations your product will be (if feasible) and ask for buyer information. The retailer should be incentivized to assist you in these matters because if they sell a lot of your product, it’s good for them as well.
Before you set about finding a wholesale distributor, there are some aspects of your own business you must identify to figure out what would be an exact match for your needs.
If you are the manufacturer and you’re looking for a wholesale distributor, you’re at the first step of the chain and a distributor might be the only part of the distribution channel you deal with directly.
As the manufacturer, you might have minimum order requirements, so you want to find a distributor who is willing to meet or exceed that condition.
Another important consideration is the type of product you’re looking to sell. There might be a wholesaler who specializes in buying and selling the goods you have to offer. But regardless of if you can find a niche distributor, search for a variety of wholesalers. This will check off multiple boxes for you by allowing for comparison shopping and competitive quotes.
As far as finding the wholesale distributor, it will take some effort whether it be a Google search or speaking with industry insiders to find out who they use. Competitors will not be willing to share their trade secrets.
Another good format for finding what you’re looking for is looking for trade shows to attend. The shows are put on specifically so manufacturers, wholesalers and retailers can meet face-to-face and receive more accurate information because of the more intimate setting.
The way a distribution company makes money is simple. The company buys the product at a lower price from the manufacturer and sells it at a higher price to a retailer or customer.
In order for a product distribution company to do the work it does, a Gross Profit Margin of 10 to 15% needs to be attained by the wholesaler. To achieve the 15 percent, the product generally needs to be sold to the retailer at about 18% more than the distributor originally bought it from the manufacturer for. Although distributors can make money from serving smaller customers, the best way to make more money is to sell in as great a quantity as possible in each individual order.
A simplified example would be a product has a Manufacturer Suggested Retail Price (MSRP) of $50. The manufacturer sells it to the wholesaler for $30 and the wholesaler turns around and sells it to the retailer for $40. The wholesaler and retailer each make a $10 profit per item while the manufacturer presumably makes at least that much.
Actually “auditing” your own customers can reveal financial realities that are surprising. A rudimentary representation of this is using two cases:
In the first case, you buy $3.9 million in goods and sell them for $4 million. You realize a profit of $100,000. In the second case, you buy $350,000 in goods and sell them for $500,000. You realize a profit of $150,000.
Those examples are just meant to illustrate that volume is not always king. A smaller customer who might be a small fraction of your business could possibly be worth more to your business than a larger client. Still, the heavy volume customer would also be important as it helps you pay operating costs.
To truly make money, you will need to scrutinize every aspect of the business. Saving money on things as small as your telecommunications (internet, phones) or office supplies can improve your bottom line. Going over your own business with a sharp eye, even if it is a time-consuming endeavor, can improve your long-term outlook. From time to time, it is important to review each part of your operations to see if there are cost-saving measures to implement or time-saving measures that can also increase overall productivity.
Something that will also help a distributor make money is being able to prove that your product is actually worth buying. Unless you’re in the unlikely scenario where yours is the only company in the world that sells a particular item, you will have competition — likely from a myriad of sources. For a wholesaler to want to buy and then sell your items, you will have to demonstrate its usefulness and value. Some questions that could be on a wholesaler’s mind include:
While you may not be asked these questions outright by a wholesaler, you’ll have to show that you have the right answers through your plan and actions.
There are two types of ways to start a distribution business of your own: you can either start one from scratch or buy an existing distribution business.
The pros to buying an existing one include more limited risk in failure since there should already be a solid business plan in place. While there will be a large upfront cost in buying an existing distribution business, if it is already a profitable business, a new owner should theoretically see profits much sooner than starting its own business from scratch.
Also, the business selling you its distribution center could provide you with its list of clients or add value in the form of help getting you set up or offering advice.
In order to run a successful wholesale distribution business, there are several aspects that need careful attention:
Outside of knowing the basics about distribution, there are some factors to consider when trying to set out on your own.
Try to manage costs: This might seem like a no-brainer but there are many factors to consider as a wholesaler in achieving a profitable bottom line.
You are solely responsible for the cost of warehousing the products and shipping them to the retailers. This is pretty important since locking in warehousing costs is relatively easy, but fuel costs fluctuate at a daily rate. So if you’ve locked in a price to sell to a retailer but your fuel costs increase, obviously less profit would be realized and it can negatively impact the cash flow of the wholesaler.
Figuring out a strategic location to store your goods is essential to operations. A wholesaler wants to strike a balance between finding a cost-effective warehousing solution with it being close enough to where the majority of the product will eventually be delivered to. This will make the distribution process more efficient and hopefully cut down on having to use more trucks — and more fuel — than necessary. Many cities have industrial centers with ample warehousing that is located in a way to make it easy and fast to disperse product. This might also be a good fit for your business.
Inventory management is suddenly very important. The distributor is now the owner of the product the minute it’s unloaded from the truck into the warehouse and any damage or loss is now theirs to deal with. Putting measures in place to quickly yet safely process orders can have a huge effect on costs.
Maintaining rapid turnover of product: This is vital for several possible reasons. If you have a warehouse of items and can’t move them, money is not being recouped and your fixed costs are also not disappearing. Also, a product that has a limited shelf life or is prone to spoilage needs to be moved or you could lose money by having to dispose of the items.
Also, the MSRP of a product could decrease after a period of time. This would in turn be sold for less to a retailer, meaning a hit to profit margins or even a loss for the wholesaler. Also the opposite could happen. If the cost of goods rises too much at the retailer level, customers might stop buying the item. The wholesaler would then be unable to move the product it purchased, which would also leave a warehouse full of less desirable items.
Implement an inventory management system: The days of manually writing down or recording data should be over. It is hard to process and keep track of, and unless you’re making copies of the same forms, it’s more difficult to quickly disseminate information.
The vast majority of people own smartphones, which can be hooked up to company WiFi, to quickly manage inventory in real time and send the information to many parties in a matter of seconds. Even if your employees balk at using their own phones, you can provide inexpensive, lightweight tablets that will provide the same function. While the outlay for a multitude of tablets could be a large upfront cost, the much improved efficiency and tracking of inventory could soon recoup the initial investment.
Make customer service a priority: Today’s marketplace is wildly competitive and it might not be enough to just offer the lowest price on an item. In fact, that might not even be possible. But one aspect you can truly control and allow your business to shine in is through excellent customer service.
Customers that do not feel properly valued will eventually leave. Offering a great experience for the customer by engaging with them in a seamless and contemporary manner will go a long way. Also being extremely responsive is crucial to engendering goodwill while simultaneously putting the customer’s mind at ease and immediately fixing any hiccup in the supply chain.
Without a customer — in this case the retailer — you have no business. So make it your business to treat them as important as they truly are to your operations.
Quickly filling orders: This might seem like logistics 101 but it truly matters to whoever your customer is. You need to be able to quickly fill and ship orders to the retailer so they’re not held up on their end.
Again, you might feel like you have the best system in place from start to finish but analyzing each step to spot any inefficiencies can keep the product stream flowing. The old saying “time is money” really comes into play here. If you can ship items faster to the retailer, you can move more product in the same amount of time and therefore realize a greater profit.
Leveraging business relationships: If you’ve managed to successfully do the previous two things, this tip will be easy to achieve. Theoretically, you’re now known as a fast shipper that quickly provides solutions for any problems that arise. You’ve built strong relationships with your current customers, who would be more likely to recommend your services to other retailers if asked.
Even with all the advances in marketing, word-of-mouth marketing is a passive way to generate more business. You’ve already done the good work with your current customer and it may have gotten you a fantastic lead to more customers with no additional cost to yourself.
As you can see, the business of product distribution is no joke. There are many different aspects that need to be carefully planned and accounted for at every turn. With all this new world to discover, let R+L Global Logistics help guide you through the process.
With over 30 years of experience, we can offer solutions to many of the facets a distributor faces in making sure its business thrives. From warehousing to kitting to transportation, there are so many ways R+L Global Logistics can partner with you and help your time as a wholesaler be less of a headache and more profitable.
Ready to take the next step? Contact us today to learn more about distribution companies, wholesale business and what we can do for you.
Wholesalers across the world need to be asking themselves, how can I improve my wholesale business? Running a wholesale business at its heart is about attracting new customers. It is important to think about the best ways of running your wholesale company. This is something you are going to need to work on improving moving forward if you are serious about becoming more of a success. You need to make sure you are constantly coming up with fresh ideas because there are a lot of things you can change in your wholesale business to be more successful and make the right sorts of improvements.
If you want to make a difference to your wholesale business, you are going to need to make sure you market more effectively. A strong and inventive marketing campaign can make all the difference when trying to attract customers. Adhering to things like PCI DSS compliance is so important for helping bring new clients to the brand. Improving your wholesale business is best achieved by looking at new customers, as well as retaining existing ones. Ask yourself, what are the best ways to improve my wholesale business right now. This can be done by marketing the company better, as well as improving relationships with clients and other business owners.
Coming up with ideas for how to succeed as a wholesale business owner is really important. You have got to look at the best ways to stand out from your competitors and make sure you give your business the edge it needs. This means you have to look at the best ways of selling your products on a large scale, as well as securing repeat business as much as you possibly can. There are plenty of tricks and techniques you can use that are going to help you with this moving forward.
For instance, the first step to take is to make sure you hire the right employees for your company. This is something that can really help you provide a worthwhile customer experience, as well as allowing you to improve the day to day operations of the company. The perfect sales rep will be able to help boost profit margins, make your inventory management easier and lead to increased sales.
Another thing you’re going to need to consider is what you can do to keep customers coming back for more. Running a wholesale business is similar to running any commerce business, but with some important additional considerations. For one thing, the success or failure of the brand is predicated by repeat business. As such, you need to look at all the things you can do to secure repeat business and take your company to the next level. Standing out from rival companies by innovating and offering something different is also important and this is something you have to work on improving moving forward as much as you can. Look at what other successful wholesalers are doing and think about how you can do things better than them. This is the secret to achieving greater success in the wholesale world.
So, how do you attract customers to your wholesale business, and what can you do to keep them around? You have to understand that you are in direct competition with other wholesale businesses, and you’ve got to do what you can to make sure you stand out to customers and give them a reason to want to use your company. You need to make this a priority for your business because the market is so competitive these days.
The key is to think about what you can do to make your company a more attractive prospect, as well as giving people a reason to return. Wholesale companies live and die on the way in which they put their customers first and secure as much interest as they possibly can. So, you have got to have plenty of tips and ideas that will help you attract people to the company. If you can work on these, you are going to present a company that is much more appealing and attractive to potential customers moving forward.
Here are some of the best ways in which you can attract more customers to your wholesale business:
At the end of the day, it is essential to make sure you figure out how you can attract more customers to the business, whether they are big corporate businesses or small entrepreneur-fronted startups. By using these ideas, you can be sure you are going to take your business to the next level and attract more customers to your wholesale business.
It is important to think about what you can do to increase your wholesale sales as much as possible. This is something that is going to help you to achieve greater success as a business, as well as allow you to develop strong and fruitful relationships with wholesale customers who will have a big impact on your company moving forward. As business owners will often tell themselves, improving my wholesale business is about improving my wholesale sales. This is something you need to make sure you get right as much as you can.
As a modern business, you always have to look at what you can do to put your business first. There are a lot of factors to keep in mind when you are trying to achieve this and it’s something that can really consolidate your position in the world of business. Too many companies these days overlook what their customers actually want and need and this can cause them to lose a lot of business. Make sure you do as much as possible to put your customers first and to try to look at what you can do to give them the best possible deal.
Using special offers and deals to entice more customers to the business is an age-old technique and one that works incredibly well in the wholesale world. There are a lot of factors that play a role in helping you take things to the next level and this is why you need to think carefully about the offers you’re going to provide as a business. A limited time offer might be the best option here and this is likely to see potential clients act faster in order to make the most of the deals you are providing.
Looking at the best ways of simplifying the order and delivery process is going to ingratiate you to customers in a big way. This is something that will play a big role in helping to build trust between your clients, not to mention presenting you as a sensible and reliable business for the future. Being able to order things quickly and efficiently from your business is something that a lot of people see value in, so it is important for you to look at how you can achieve this moving forward. There are many factors that play a role in this process and this is a key area for attracting people to the brand more effectively.
You also need to look at the way you are running your business and what you can do to improve this. That means looking at how to develop a more streamlined business and focus on getting the best possible outcome for the company. If you can do things faster and more effectively, you will be able to secure sales faster, market the business better and run things on a day to day basis as well as possible. This is something that you need to make sure you think about and there are quite a few things you can do that will help you to improve this moving forward.
Another great way of being able to improve your wholesale business and make more sales is to start focusing on upselling better. There is a lot to think about when you are considering this, and it is important that you try to upsell as much as possible. This is something you are going to need to keep in mind moving forward and there are a lot of factors that play a part in this. Look at the way in which companies like Amazon are able to upsell so effectively and use this as inspiration to be able to achieve the same for your company.
One of the most effective and lucrative ways of making more sales for your wholesale business is via the business to business (B2B) approach. Now, this can be highly lucrative, but you need to make sure you think about the best ways of being able to achieve this effectively. So, you are going to have to come up with as many different ideas as you possibly can for ways of being able to improve the success your company is experiencing. Here are some of the best ideas you can use to improve your B2B lead generation services.
So, as a business, you have to assess some of the best ways of generating leads that are going to be easily converted into sales. Social media is perhaps the obvious place to start when trying to generate B2B leads that can help take your business to the next level. Engaging with people via Twitter or LinkedIn provides a lot of opportunities with which to achieve this. Your website is also a valuable resource when it comes to achieving this as well.
Lead databases and marketing automation can also go a long way toward helping you achieve this and these are invaluable tools for your business moving forward. There are also things you can do to help you engage with existing audiences, and blogger outreach services are an excellent way of being able to achieve this and generate leads from places you might not expect.
As any successful wholesale professional will tell you, “If I want to improve my wholesale business and be a success, I need to have a strong marketing strategy so I can appeal to as many people as possible in the right way.” This is why you need to come up with the perfect marketing strategy as a wholesale distributor. Make sure you think about what it takes to improve your promotional activities and try to figure out the best options to go with. Here are some of the best ideas you can use to help you market your wholesaler much more effectively.
Inbound marketing is defined as any strategy you put in place that sees you draw customers into your brand. This is often the most common form of business marketing, particularly these days, and represents a great way of maximizing opportunities. Examples of inbound marketing include things like social media, blogging, SEO, branding, and other forms of content marketing. Inbound marketing is often passive, and the measures put in place can continue yielding long-term results for some time after they have been deployed.
Outbound marketing is a little more old-fashioned, but it still has a place when you are looking to improve and enhance your wholesale business as much as possible. This is why you have to make sure you are focused on taking the time to fully utilize outbound marketing. There are a lot of different elements involved in outbound marketing and this includes things like cold calling retailers, paying to put advertisements in local newspapers and magazines and even television ads. These are still powerful and popular techniques in your marketing arsenal and you should find space in your budget to use them.
In this day and age, perhaps the most important example of modern marketing, even for wholesalers, is social media. This is the most cost-effective form of business promotion, as well as being one of the best ways of being able to access a global audience of diverse customers and clients. If you can ace social media marketing, it should be an excellent option for you to enjoy success when it comes to advertising and promoting the company. Let’s find out more about the best social media marketing strategy for wholesalers.
There are plenty of things to consider if you are looking to ace and improve your social media marketing as a wholesaler these days. You need to make sure you are focused on doing as much as possible to make the most of social media. Here are some of the ideas that can help you when it comes to promoting your wholesale business across social networking sites.
Using social media marketing in the best possible way is something you need to make sure you embrace. This is the key to success with your wholesale business, and you have to do what you can to get this right as much as possible.
Coming up with a distribution strategy for your wholesale business is crucial. In short, this is your bread and butter, and the best way of making your customers and clients happier. Wholesale distribution plays such a massive role in the business world because this is how you prove your worth as a company. Can you meet the requirements of your customers? Are you able to get products delivered and shipped in the required timeframe? Can you replenish your stock quickly? These are all important questions that need to be asked.
If you want the best possible distribution strategy, you are going to need professional help and guidance. This is why it is so important to use experts like R+L Global Logistics in a bid to gain additional customers with their competitive approach to shipping and handling. If you’ve thought, I need to improve my wholesale business and I need to do it right, then it’s time to take action. Making the most of these services is going to be hugely important for helping to boost the future success of your business.
Reach out to us and we’ll answer your wholesale business and types of wholesaler questions
No one can start a business without first taking the time to understand wholesalers. You could have an astounding business plan behind you and even an idea of how to go about it, and it would get you nowhere if you didn’t first tackle the wholesale world. In layman’s terms, wholesale is really the first port of your distribution chain. This is where you will buy the stock that stands to take your company further. The question is, what are the types of wholesalers, and how can they help you?
We’re going to show you the five major types of wholesalers. Top contenders include:
While wholesale may seem like a simple concept, it’s actually an in-depth topic to get your head around. There are multiple wholesale channels to consider in the FMCG industry alone, and the time you take thinking about each will dictate success. If you’re a small business owner looking to understand your wholesale options, then, keep on reading to find out.
If you’re totally new to the business world, your first question is obviously ‘what is a wholesaler?’ Most of us have some rough ideas here, but there’s no place for rough concepts in business. By dictionary definition, a wholesaler is ‘a person or company that sells goods in large quantities at low prices, typically to retailers.’ So, what does that mean for your company? Effectively, you need to start with wholesalers when it comes to buying and selling your goods.
From specialty wholesalers to those who sell general merchandise, this is where you will purchase large quantities of either your products or the things you need to make them. As such, your relationships and decisions here will directly impact the products you bring to your customers later on.
Instead of rushing into the wholesale process, it’s vital to consider the types of wholesalers offered and the product lines they provide. Rest assured; every kind of wholesaler will provide a very different experience. Get this wrong, and your product supply could soon run into issues. Take your time over your decision and you can develop wholesaler and retailer relationships that last the life of your whole business or at least suffice enough to get your efforts off the ground. Make sure, too, that this is one of the first business processes you take care of to start working towards success.
There are different types of wholesalers, but what exactly are they? Understanding this is vital before you can begin your wholesale journey, so you’d be right to ask. In reality, there are far more types of wholesalers than you might imagine, and this can be daunting when you begin to look for business supplies. Luckily, things aren’t as confusing as they might seem.
Ultimately, your decision towards a specific wholesaler will depend on many factors. Sometimes, it’ll be about little more than how much you prioritize distribution channels. In other cases, the size of your company may dictate your need for multiple wholesalers for many types of products. Even your territory can have an impact, with distribution in the U.S. varying a great deal from, say, China.
These aren’t the only wholesaler branches, but they are the ones you need to know about when it comes to getting business off the ground. From retail wholesales to real estate, your decision here could either make or break your efforts. Getting this right also stands to make your life a whole lot easier moving forward.
We’ve covered what wholesalers are and the types of wholesalers on the market, but we still haven’t broken down precisely what functions a wholesaler has. As such, you may be unsure whether you even want to embark on this option. In reality, the functions of a wholesaler are as varied as the types of wholesaler on the market. Depending on your wholesale selection, you can expect to enjoy one or more of the following functions for your business:
A wholesaler will assemble goods from various places, sometimes even overseas and certainly from numerous manufacturers, ensuring you the best possible deals.
Most wholesalers, especially cash and carry, will purchase goods in advance of demand and then store them in a warehouse or other facility. This ensures the stock is always there when you come to buy.
A wholesaler will also pack items during storage, either in product packaging or storage-safe methods. This saves retailers time waiting on goods and preparing them once they arrive.
Wholesalers will often take care of the transportation so that you don’t have to worry. Many provide their own trucks to carry goods from warehouse to retailer. Others will work with couriers to get stock to you in a timely manner.
The majority of wholesalers, especially merchandise wholesalers, will buy stock upfront. Some will then sell supplies to retailers using credit, providing a line of finance for both merchandisers and retailers in turn.
In part because of their responsibility through the shipping process, a wholesaler also bears the risk of the products in question. As such, products damaged in storage or transport won’t cost the retailer anything, ensuring a satisfactory user experience.
As is the case with anything, you may be at a loss as to how this kind of operation would work within a business setting. Even if the idea of wholesale sounds good on paper, you still can’t be sure of the applications or services it can bring to the working world. That’s where real-world examples come in. These allow you to see wholesale applications in business at the moment and thus paint a much clearer picture.
Some modern-day examples to consider include:
As well as revealing the full value of wholesalers, each of these examples proves just how different their services can be. While some wholesalers, such as cash and carry, provide a more stereotypical retailer experience, alternatives such as full-service are entirely different. Each comes with a different price point and offers a very different user experience all around.
When we consider business, most of us think about the primary and two-toned structure of the company and consumer. These are, after all, the two most pivotal points in the sales process, and often the only ones which need consideration. The moment you bring a wholesaler into your business, though, you change that structure far more than you might anticipate from the outset. In fact, your sales become much more structure-based than they would ever be if you manufactured and sourced everything yourself. This isn’t a bad thing, but it is worth noting.
In a basic sense, the wholesale structure, especially concerning merchandise or limited service wholesalers, goes: Manufacturer - wholesaler - retailer/company - the client. That doesn’t seem too hard to get your head around, right? Until, of course, you consider an alternative wholesaler like a broker, which structure can look more like: wholesaler - client - wholesaler - company. Full-service wholesalers, too, bring a much less straightforward and easy to follow structure as they maintain something of a juggling act for the companies they work in correlation with. Even specialty wholesalers can disrupt this flow, as they return to manufacturers after speaking with retailers who then deliberate with their customers. Rather than the simplistic structure you might expect from this relationship, then, you could quickly end up with something of a tangled and confused operation.
In reality, there’s nothing to fear from these structures. When approached right, they can add both support and ease to your business processes. It is, however, vital that you consider the variations available within even the wholesalers we’ve discussed here. That way, you can arrange for and account for complex structures you might not expect when you enter into an agreement. Arranging for changing business structures is the best way to manage them.
If you like what you’ve heard so far, you may be wondering how you go about buying wholesale. You wouldn’t be alone. This is one of those business tips that even the majority of small business guides fail to cover. Sadly, though, this is crucial information for success moving forward. All the wholesale benefits in the world are never going to be yours if you don’t take care of this, after all. Luckily, wholesale isn’t that complicated.
To prove that, we’re going to look at four essential tips to get you started on your journey here:
Your company is the customer in this process, so make sure to act like one. Don’t agree to anything which doesn’t sound like a good deal, and don’t be afraid to shop around. Wholesalers aren’t hard to find online now, so do your research and find the ideal business match.
As you might imagine, getting the word out isn’t as easy for wholesalers as it is within other industries. Blanket advertising would see wholesalers struggling to reach desired audiences and ultimately failing to pull profits. But the massive wholesale market proves that not to be the case, and various wholesale-based retail and marketing channels are to thank for it. Much like traditional companies, wholesalers have developed a variety of methods to get their name and their goods out into the business mainstream. Retail is perhaps the most obvious option here as it allows merchandise or cash and carry wholesalers to sell stock directly to companies who then sell it to customers. This wholesale to retail relationship is a tried and tested one, and it works pretty well, making it something of a wholesale go-to. Many wholesalers even contact retailers directly to begin such relationships.
Of course, retail isn’t the only wholesale channel, as we’ve already seen. Successful wholesalers such as L.L. Bean are also continuing to make use of tried and tested mail catalogs. By searching for company details online, wholesalers are able to send relevant directories straight to their door and facilitate orders that way. Along a similar vein, many wholesalers also rely on telecommunications to drum up business, though this method does require a much larger upfront workforce for success. Both can still lead to endless orders which a wholesaler needs to keep themselves afloat and appealing to a broad audience. And, of course, online operations such as a website and social media accounts are as vital here as they are within any modern industry of note.
That leads us nicely onto this next point, which is to consider what precisely wholesale e-commerce capabilities consist of. Online operations have changed the face of every industry in recent years, and e-commerce is no different. In fact, many wholesalers find that B2B buyers now prefer to buy online just like any other consumer. In a basic sense, then, the chances are that you already understand wholesale e-commerce to be simply the process or purchasing or repurchasing wholesale goods online or using internet-connected software and systems. But, of course, wholesale e-commerce also goes much deeper.
To keep up with competitors, most wholesalers now also offer in-depth systems which allow consumers to repurchase or add items to repeat orders at the click of a button. No longer does a retailer need to fill in detailed reports or catalogs each time they purchase. Instead, they can enter their search history or account number for faster transactions. This means that even a last-minute order is now straightforward to process. And, of course, online emails, catalogs, and newsletters also guarantee that wholesalers are now able to spread messages worldwide.
Speaking of worldwide, the ability to trade via ecommerce has also led to company-wholesaler relationships, which would never have been possible as little as 10 years ago. Companies are now able to stock wholesale supplies from distribution channels in any country imaginable. Even small business owners are now freely buying and selling stock from merchandise wholesalers based in India and other such exotic locations, all for very little cost to the company themselves. That makes for unique stock indeed, and none of it would be possible without this seemingly innocuous wholesale e-commerce freeing up so many new types of products.
Of course, this expanded wholesale reach is not much use without also thinking about the logistics behind global capabilities like these, which is where we at R+L Logistics come in. Whether you’re a wholesaler looking to expand your reach or a business owner seeking out wholesale distribution channels from afar, we could provide the solutions you need. We pride ourselves in taking every aspect of logistical matters like these into account to ensure that even long-distance collaborations needn’t be at all complicated for our customers.
When you consult with our team, we’ll develop transportation solutions to help you ship or supply even large quantities of overseas wholesale products. Even better, you won’t need to lift a finger to make sure that your product lines arrive where they should when they should. We simply need you to tell us the why, how, and what or your wholesale needs, and we promise to take care of the rest.
Ready to take the next step? Contact us today to learn more about direct distribution, wholesalers and more.
Product distribution methods like direct distribution are an essential part of a successful business. You could have the best products and a marketing drive which cost thousands, but it wouldn’t get you anywhere if you didn’t first think about your distribution process. This is, after all, the method through which you get products out into the world. Without it, all your other efforts will quickly become null and void. To ensure ease in this vital process, many business owners now opt to entrust outside companies with this critical task.
In reality, though, entrusting something so essential to an outside source might not be best for your company. Outsourced services can be long-winded at the best of times. That’s why endless business owners are starting to realize the benefits of direct distribution. This is the process of distributing products straight to consumers, and we’re going to consider why it could be worth your while.
As we touched upon above, direct distribution is the process of distributing products directly to your consumers. This is as opposed to indirect distribution, where outside sources take care of this process for you. We’ll get into the notable advantages of direct distribution later, but it can have significant business benefits for companies of all sizes. As well as simplifying processes and creating better company-consumer relationships, this could lead to economic business moving forward.
Your methods of direct distribution themselves can take on different forms depending on your business model and needs. In literal terms, the action of handing a product to a consumer in a retail store is direct distribution in its purest form. Equally, taking control over product transportation with your own business fleet counts, as do online sales.
For some businesses, the benefits of direct distribution are such that it’s their only model, while others opt for a mixture of both indirect and direct distribution solutions. The option which suits mostly depends on your enterprise and budget. Whatever you choose, though, implementing some semblance of direct distribution can have a significant impact on business processes. That can prove especially vital in an age where many consumers favor local and personable businesses above all. But, you needn’t take our word that direct distribution is the way forward. We’re going to break things down even further to help you decide.
Understanding the basic concept of direct distribution isn’t enough to implement it into your business strategy. As mentioned, distribution like this takes various forms, and some are sure to suit your needs better than others. If you’re to stand any chance at developing a successful distribution process, then, you must delve a little deeper into your options. We’re going to help you do just that by breaking down a few examples of the most common direct distribution channels.
To understand which direct distributions could serve you, it’s vital you consider things like business goals and budget. Direct distribution can range from the affordable and easy to achieve in even small business, to methods guaranteed to set you back a great deal. Taking time over your decision here is essential for ensuring you don’t bite off more direct distribution than you can manage.
We’ve already touched upon a few advantages found with direct distribution, but you may still be on the fence about whether this method could benefit your company. That’s why we’re going to consider some of the more actionable and verifiable benefits of implementing this distribution process as opposed to an indirect distribution strategy. The most notable advantage for small business owners especially is, of course, the cost-saving possibilities of direct distribution. When you take the right channels such as online sales, it’s possible to start distributing products for comparatively minimal upfront cost, making it much easier to get started.
Cost-saving is also possible once a company begins to grow. Indirect distribution through outsourced couriers can, after all, be a financial strain. Once a company can afford in-house couriers, they stand to save a great deal with every distribution.
Cost-based benefits aside, direct distribution can also have a significant positive impact on business to consumer relations. While large impersonal companies have come top of the race for the last twenty years or so as e-commerce comes to the fore, consumers are now shifting back to more personable businesses.
Independent businesses who work to build loyal and lasting customer relationships are certainly seeing more success than those who attempt to take on the retail giants. By keeping your distribution efforts direct, you too can begin enjoying a niche market which is ready and waiting for your products.
When you deal directly with your customers, after all, you ensure that they have personal reasons to come to you above your competitors. This instantly sets you apart, as well as ensuring that your marketing budget and more brings repeat custom which, again, can save you money.
Selling products directly from your very own physical retail store could help you to achieve this loyalty to your brand. Even personalized packing and distribution from your online store can make a great deal of difference. You’ll be able to provide a more business-aligned service this way, after all, as well as guaranteeing delivery times and prompt arrival. These are small touches which could really set you apart from competitors still making use of indirect distribution processes. All while saving you pennies and making your business easier to manage.
We weren’t lying when we said that there is no one-size-fits-all for direct distribution. As such, there’s really no easy answer as to whether all businesses should use this method. Every company could enjoy the benefits discussed above, but it’s also worth noting that there are downsides to take into account. Direct distribution can sometimes cost more upfront, for example, as well as increasing internal workloads. That said, even small business can benefit from some direct distribution
Simply consider the following key factors first:
With these points in mind, you can consider how much or how little direct distribution would work for your company. Even if you start small for the time being, the benefits you enjoy should soon see you accessing even more direct capabilities. Should all business use direct distribution? Yes. Can all manage it right away? Perhaps not.
In reality, implementing a direct distribution strategy involves the same processes as any other distribution. Only, instead of thinking about wholesalers and retailers, your focus should be on your interactions with your clients one-on-one. As with any other distribution method, though, you need to consider things like your business goals and your potential revenue. It’s also vital that you take time to review your audience and their needs to make sure you’re developing distribution they can appreciate. Then, you need to start thinking about how you can implement this information to find success here.
Let’s consider your audience, for example, seeing as they’re at the center of this. Rather than relying on a customer base developed by another retail store, direct distribution means you first need to build a customer base who trust you. The best way to do this is, obviously, through social media channels such as Twitter and Instagram. Creating close and trusting relationships with customers here creates direct communications that you can use in your new distribution strategy. Think, too, about an easy-to-use website design, complete with a live chat feature and easy payment methods like Paypal. These things aren’t challenging to arrange, and yet they can take your direct distributions far by making buying from you easier than ever. It’s this ease and personal service which will ensure direct distribution works for you.
It may also pay to implement direct distribution in stages. As mentioned, cost and workload can be problematic here, so jumping straight in with a fully direct distribution process could topple a small business. Instead, perhaps integrate with existing indirect distributions. A website, for example, could work well with an outsourced courier to begin with. Equally, you may want to pair online sales with stock held in another company’s retail store to start.
The customer connections you can develop are, by far, the best part of the direct distribution process. As such, knowing how to promote your direct distribution efforts to consumers is a vital part of this process. This is what will make you stand out as a personable company, and is where you stand to see real results. We’ve already touched briefly on social media as your best option here. This is a fantastic way to build consumer relationships and create those direct links. Whether you post about non-business content or even upload pictures of your packing process, this proves to consumers that there are no intermediaries when they come to you for business. This is a fantastic way to build that unswerving loyalty, especially when you’re operating online. With a computer between you, after all, customers have no real way of understanding your ethics or processes.
While it may seem outlandish in modern business, physical sales in a retail store or business fair of some kind can also work wonders. Social media can only take you so far, after all, and a screen will always hinder direct communications. As such, there’s nothing better for promoting direct distribution than handing products to clients face-to-face. There’s no denying, of course, that physical stores have seen various struggles in recent years, but things are changing for the better in this area. By promoting a large store opening in your local area, then, you can guarantee you start reaping the rewards of your direct distributions fast. Even when you’re attending events, printing banners with your company information and really talking to customers could set you apart.
As we’ve touched on briefly in this article, distribution needn’t be a one or the other situation. In reality, many businesses find success easier to come by when implementing a mixture of both indirect and direct distribution processes. In fact, a combination of the two is often the only way to introduce direct distribution in a small business setting. Remember, after all that, despite potential cost savings, direct methods can be expensive to begin unless you mix techniques.
This dual business model can be seen working in all manner of different applications, and top ones include:
These aren’t by any means the only distribution collaborations, either. In fact, when you look closely at any business, the chances are that you’ll find a mixture of both processes behind them, at least to begin with. While many would admit that direct distribution is the goal, it’s something to work towards.
In some cases, you may even come to find that a complete direct strategy won’t serve your customers. If you accept multiple online orders which you have to pack yourself, for instance, you’re guaranteed to let at least some consumers down. By outsourcing instead, you ensure that you’re always able to meet with demand no matter how small your business itself. This can be a fantastic and invaluable way to grow your enterprise while still handling direct sales yourself. It also ensures you don’t leave yourself burning out by taking on too much at any one time.
If the idea of implementing indirect processes right now bothers you, remember that these are often temporary measures. A small business, for instance, could soon begin to grow with the extra income of outsourced packaging. This, in turn, could lead them towards a growing team and thus get them closer to embarking on entirely direct processes. Once you’re fulfilling enough orders, after all, it’ll be possible to invest in your very own in-house packing team, all without leaving yourself even slightly out of pocket or stretching your current employees.
It’s worth noting, too, that some indirect distribution methods are worth keeping alongside your direct efforts. While dealing directly with clients is preferable in most cases, there are some instances when it won’t pay to cut yourself off from indirect opportunities. The chance to sell B2B stock to retailers, for example, is well worth doing even if you have your own retail store. This way, you can reach a larger audience who may then seek you and your more direct methods out themselves. Equally, entrusting outsourced couriers to take stock overseas is always worth doing for increased reach.
We hope this article has helped you understand everything about direct distribution but, if you still have questions, there are other steps you can take. For one, looking into your business data and analytics can help you to see both what your customers want and how you can provide it. Equally, looking to competitors can be as useful here as it ever is for staying on top. By considering whether your rivals use distribution methods like those offered by R+L Global Logistics, you’ll have much better ideas about what works.
R+L Global Logistics has the consulting and logistics services you need to launch a direct distribution business and more. Rely on R+L Global Logistics’ experience in the entire supply chain process and take advantage of our insight on product distribution strategy.
Ready to take the next step? Contact us today to learn more about direct distribution and wholesale business plans.
How easy is it to get a small business loan? A small business loan can help many small businesses accelerate their growth. It's one of the most popular ways of financing a small business and could be used for a variety of purposes, from buying new equipment to marketing expenses. However, many small business owners worry about how difficult the loan application process is and whether they will be able to get a small business loan. Fortunately, there is an excellent selection of small business lenders available, making it easier for any business to find the right loan. A good understanding of the process will help small businesses ensure success with their application.
So, how easy is it to get a small business loan? Business loans are not difficult to apply for and secure for businesses that prepare themselves. Loans are regulated by the Federal Reserve System across the country, ensuring that small business loans are offered fairly. Getting a small business loan begins with exploring available lenders, as well as their requirements, to find the most appropriate lender for your business.
Qualifying for a small business loan could be easier than you think, but there are still various requirements that you need to meet. Lenders might look at both the personal credit history of the business owner and the credit history of the company if you are already in business. In fact, many lenders will require that you are in business for at least a year before applying.
Before applying for a business loan, it's worth getting a few things in order. Knowing some of the common requirements for a loan will help you to improve your business' eligibility.
All small business lenders can have different requirements, so it's essential to understand what a particular lender might be asking for before making a small business loan application. Be sure to gather important documents, such as tax returns, income statements, and financial projections.
How easy is it to get a small business loan? Getting a small business loan can sometimes be difficult, but there are various options available for every business. Going through traditional lenders such as banks can sometimes make it more difficult, and some businesses might want to consider a different type of small business loan.
There are a number of steps that small businesses can take if they want to be successful when applying for a small business loan.
Get everything in order before you start to apply for a small business loan. You especially might need to spend some time working on improving your credit score before you can borrow any money.
If your personal credit score or your business credit score are low, you might worry about whether you can secure a loan. If you have time, you can improve your score through business credit cards and boost your personal credit too. With a bad credit history, a loan from a traditional lender can be tough. However, there are alternative options.
You can consider alternative funding options such as a microloan, which often come from credit unions. Another possibility is a merchant cash advance, which you can use if you are having cash flow problems. Exploring alternative funding is worth it if you need to borrow money for your business.
A small business loan isn't necessarily very easy to get, but many small businesses are able to find the right lender. The best thing to do is to ensure you have excellent personal and business credit reports, which will give you access to the best lenders and a better choice of interest rate.
When you are looking for the right small business loan for your business, there are a few things to consider. Try to do the following when searching for the right loan:
Applying for and securing a business loan can sometimes be tricky. Finding the best loan for your circumstances will help you and there are always alternatives to consider.
Keep your finances and your cash flow in order by partnering with R+L Global Logistics for your business. Our affordable services offer a range of help with shipping and supply chain management, including warehousing and logistics.
Shipping your products both domestically and internationally can help you to grow your business. When you seek a small business loan or another form of credit, you can secure the necessary funding to invest in expansion and distribution. R+L Global Logistics is here to assist with all of your business's needs. When you want to know "how easy is it to get a small business loan?", we can help with that too.
Have more questions? Contact us and we’ll help you better understand the e-commerce fulfillment process.