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Multi Channel Distribution: Definitions, Strategies, and Examples

A multi channel distribution strategy could give your business a competitive edge. Join us as we explore this increasingly popular practice in logistics.
By
Joe Weaver
April 30, 2024
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Multi channel distribution gives you several options for getting products into your customers’ hands. From online shopping to browsing in a physical store, it has the potential to help you reach new markets. 

Building a strategy that takes advantage of all available distribution channels isn’t easy. However, doing so may elevate your business to lucrative new heights.

Key Takeaways

  • Multi-channel distribution combines direct and indirect channels into a single distribution network.
  • The four main channels in a multi-channel setup are distributor, retailer, wholesaler, and ecommerce. 
  • The advantages of one distribution channel can help businesses address disadvantages from others.

If you need help building a multi channel distribution strategy, we can help! Call us at (855) 863-7672.

What is Multi Channel Distribution?

This is a logistics strategy that reaches customers through several distribution channels instead of one. Businesses use a combination of both online and offline methods to sell their products. These include retail storefronts, ecommerce platforms, and wholesalers.

This practice provides customers with different ways to buy your products, catering to different shopping preferences. 

Speaking of customers, they’re the driving force behind the development of multi channel distribution. You can see evidence of this in statistics gathered in this study from beehiiv.com, some of which are listed below.

An infographic titled "How Consumers Prioritize Convenience When Making Purchasing Decisions" detailing consumer behaviors found in a study from beehiiv.com. The information is presented in bar graph form and reads as follows: 97% of customers polled backed out of a sale because it was too inconvenient to complete. 83% of customers polled prioritize convenience in purchasing more than they did five years ago. 52% of customers claim that convenience factors into over 50% of their shopping decisions.

From the customer perspective, multi channel distribution bolsters convenience by providing more options for shopping and returns.

Given the complexity of this form of distribution, it’s a good idea to review the four basic channels that comprise it, including their pros and cons.

What Are the Four Types of Distribution Channel?

Together, the following channels represent the most popular ways of moving goods from supplier to buyer. 

  1. Distributors

Pros: A distributor handles the logistics of getting products from manufacturers to various market segments. They’re skilled at reaching broad and specific audiences. Oftentimes, distributors have their own storage, shipping, and marketing resources.

Cons: If you’re a manufacturer, this channel can reduce your control over how your product is marketed and sold. You’ll also lose a larger cut of your profits than you would by selling directly to an end user.

  1. Wholesalers

Pros: Wholesalers buy products in bulk, resulting in big sales for manufacturers and distributors.  Like a distributor, they usually have warehouses or distribution centers. However, wholesalers usually focus on a specific market segment, like car parts or home furnishings.

Cons: Relying on wholesalers can create a disconnect with retailers and end users. They also expect significant discounts, so your margins can suffer.

  1. Retailers

Pros: Good old-fashioned brick and mortar. Retailers are one step away from consumers, offering manufacturers valuable insights into their behaviors and preferences. Dealing directly with a retailer usually means higher profit margins since there are no middlemen involved.

Cons: Building a direct relationship with a retailer isn’t easy. Wholesalers and distributors thrive because they often have dedicated marketing departments that vendors selling direct to customers might not have. 

  1. Internet (Ecommerce)

Pros: No one can deny the popularity of online sales. Selling directly to consumers means bypassing the rest of the distribution chain, boosting profits and offering direct insights into buying habits.

Cons: It’s not easy to stand out in a crowded online space. You’ll need to make sure your sales platform is constantly up-to-date and easy to use compared to your competition. 

With this knowledge of each channels’ appeal and challenges, let’s look into building a distribution strategy that involves some or all of them. Doing so can create a process with few weaknesses.

Multi Channel Strategy: Best Practices for Developing Your Own

When developing a distribution strategy that uses multiple channels, there are several common principles that most businesses follow. Understanding them can help you create a plan that maximizes your sales reach. 

Here’s how you can apply these principles.

  1. Evaluate Your Resources

Distribution requires a robust network of delivery vehicles, warehouses, and employees. Most businesses don’t have their own distribution setup. However, outsourcing these services to a 3PL can open up your options. This is largely a matter of how much you’re willing to invest up front.

  1. Know Your Customers And Your Product

Do you want high volume/low margin sales, smaller direct sales with higher margins, or both? The goods or commodities you intend to distribute may dictate this decision. For instance, if you deal in raw materials, you might not benefit from ecommerce as much as you would a distributor.

  1. Make Data-Driven Decisions

Numbers don’t lie. Reading consumer reports and analyzing your own historical data provides insights into customer behaviors and preferences. Doing so will help you prioritize which channels to use and in what way.

  1. Integrate Your Channels

Making your channels work together is the key to implementing multi channel distribution. For example, offering the option to purchase goods online and pick up in-store (BOPIS) can create convenience for your customers.

  1. Invest in Technology

Effective channel integration is far easier with the right tools and technology. An integrated inventory management system, for example, can help prevent excess stock while still keeping  high-demand items available.

  1. Review and Adapt as Required

Customer expectations change, and that is something that you’ll need to account for. Review each channel’s performance and be ready to adapt your strategy to stay competitive. This might mean expanding your ecommerce presence if your customers are shopping via social media.

The principles I’ve included here are guidelines. Your own strategy will need to be tailored to address factors your unique  goods and target market. 

To see how such a strategy would play out, let’s take a look at some hypothetical scenarios.

Examples for Business Owners

These examples will give you an idea of what multi channel distribution looks like in practice.

  1. Automotive Supplier Distributing Raw Materials to Manufacturers
    • An automotive supplier specializes in distributing raw materials like aluminum and specialty plastics to various car manufacturers. 
    • They use distributors for larger, established companies and a direct online ordering system for smaller, specialized manufacturers. This dual approach allows them to manage orders of various sizes.
  2. Book Publisher Using Direct Sales, Bookstores, and Online Retailers
    • A publisher distributes books through direct sales from their website, national retailers, and popular ecommerce platforms. 
    • Limited editions and autographed copies are only available via their site to attract collectors. Meanwhile, mass-market editions are widely available through third-party retailers. Using multiple channels helps them reach different market segments.
  3.  Tech Company Combining Online Sales with Retail Partnerships
    • A company specializing in smart home devices sells their products via ecommerce and trusted electronics retailers. 
    • They use an inventory management system, which helps ensure cross-channel availability. To align with their marketing strategy, the company synchronizes product launches and promotions across all channels.

From these examples, it may seem like every business could benefit from implementing this strategy. While that is often the case, there are some caveats to keep in mind before you decide to invest in building and maintaining more than one sales channel. 

Advantages and Disadvantages of Multi-Channel Distribution

With the definitions and scenarios I’ve presented, certain advantages of this strategy are clear and consistent. These include:

  • Flexibility: Businesses can adapt to changing market conditions and consumer behaviors, maximizing revenue potential.
  • Meeting Customer Expectations: Today’s consumers expect flexibility in their shopping experience. Offering multiple channels caters to these expectations, particularly when it comes to returns.
  • Increased Market Reach: Reach different segments of your market by providing them with preferred purchase channels instead of limited them to a single option. .
  • Protection From Volatile Market Conditions: Diversifying channels can keep a business solvent when one distribution method becomes less desirable. Think of how retailers started to prioritize ecommerce during the COVID pandemic.

However, you should consider the following issues while deciding if this strategy is right for your business.

  • Channel Conflict: These include pricing disputes where online prices undercut physical store prices.
  • Complex Management: Operations require high-tech systems and processes to ensure all channels work together seamlessly.
  • Cost of Initial Investment: While the potential for increased profits is high, setting up a multi channel distribution network can be costly.

Generally speaking, the advantages outweigh the disadvantages. 

If you’re ready to apply this distribution method to your business model, you might not be sure exactly how to adapt it for your specific needs. That’s where we come in.

Build Your Multi-Channel Plan With Product Distribution and Strategy

As your business grows, the need for multi channel distribution is practically inevitable. If you need help planning and executing a strategy that takes advantage of multiple distribution methods, we can help. 

Product Distribution Strategy has worked with many businesses and shippers to create logistics plans that meet their unique needs. We can do the same for you! 

In addition to distribution, our consultants can help you strategize for:

Call our expert team at (855) 863-7672 or contact us online today. We’re ready to help your business adapt to the ever-changing demands of the U.S. market.

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