What is distribution in business?
Distribution is one of the vital and foremost operations in business.
Without distribution, goods and services won’t get to the consumers, ultimately causing businesses to fail.
If you want to know more about distribution in business, this is for you.
So, ensure that you keep reading till the end.
What Is Distribution? – What Is Distribution in Business
Distribution is the process of sending goods or services from one party or location to another.
It is a process that is essential in business because it ensures that the goods produced reach the final consumers.
Distribution is a marketing tool as it aids in the process of connecting consumption and production.
Hence, businesses are expected to produce products or services that would be distributed widely to the target market.
Distributors, also referred to as distribution entrepreneurs, serve as intermediaries between consumers and producers.
Types of Distribution – What Is Distribution in Business
Distribution in business is of different types, and they are:
Direct Distribution
This is a strategy in that manufacturers or producers deliver their products to their consumers directly.
Direct distribution cuts out wholesalers and distributors because companies process and sell their products.
This distribution type can serve as a way for manufacturing companies to increase their revenue while saving money for external marketing services.
Companies that use direct distribution promote their products on in-store flyers and their website.
Since direct distribution focuses on the straight-to-consumer method, it often requires that manufacturing companies have their logistics and transportation facilities.
Also, it implies that they will be responsible for managing the different distribution channels such as manufacturer, shipping, retail, warehouse, and online.
Online distribution involves processing consumers’ orders and buys online through a manufacturing or production company’s website.
Then, the production or manufacturing company ships the product directly to the customer.
In the case of covering the duties of a retailer, companies that practice direct distribution often have stores where people can walk into, pick and pay for an item.
Any company that uses direct distribution should be ready to cover all the different distribution channels to succeed effectively.
Advantages of Direct Distribution – What Is Distribution in Business
Direct distribution comes with great advantages when deliberating on the distribution type.
Here are some of the advantages:
Get Direct Feedback
One of the great advantages of using direct distribution is receiving feedback from your customers.
The feedback can be provided in an online survey where customers rate their experiences with a company’s product and representatives.
Or you can get feedback when customers visit your walk-in-stores.
Getting feedback directly from your customers will help you to improve your customers’ experience while encouraging them to keep patronizing you.
Connect with Your Customers – What Is Distribution in Business
Apart from getting direct customer feedback, you also get the opportunity to build relationships with them.
This is because you will meet most of your customers one-on-one and have deeper conversations with them.
You can use that opportunity to get feedback and build trust and loyalty with them.
This will make them happy to refer your business to others.
Above all, connecting with your customers directly will help you to understand their displeasure and experience and work with them to improve it.
Better Quality
When you opt for direct distribution, you will focus more on improving the quality and value you offer.
This is because you will be in charge of managing different aspects of your business.
You will determine the best method to manufacture, package, market, and ship your products.
This will allow you to assess your product and change what you discover from your analysis.
Faster Delivery Speed – What Is Distribution in Business
Companies that opt for direct distribution are more in control of every distribution channel, shipping inclusive.
As a result, they often provide faster delivery.
This increases customer satisfaction and enables small businesses to compete with large companies with more resources.
Also, fast delivery speed is needed when solving the complaints of customers as it improves the company’s ability to send replacement products quickly.
Cheaper Cost for Customers
With direct distribution, third-party charges will be excluded as the manufacturing company will determine the product price.
In other words, no wholesalers and retailers will add to a product’s initial price.
You will find it easier to compete with different businesses by offering sales or discounts.
Also, you will charge less than when you have indirect distributors.
In the same way, you won’t have to worry about indirect distributors drastically increasing your product price.
With direct distribution, you make a good profit without losing your customers due to high prices.
No Competition – What Is Distribution in Business
Opting for direct distribution means you won’t compete for store or shelf space with other businesses’ brands.
Rather, you will directly sell your products from your website or retail stores where your customers only have access to your products.
Ultimately, it can increase your conversion rate as customers will only focus on your products and pricing without weighing competitors’ prices.
Ease Access to Market Data
Another striking merit of direct distribution is that it gives manufacturers more opportunities to get customer data.
The information they get can help them understand their customer’s buying habits and demographics.
When they utilize the information effectively, they should be able to improve their marketing strategies.
Easier to Expand – What Is Distribution in Business
For a manufacturing or production company to opt for direct distribution, they would need good capital investments such as warehouse, logistics, and system distribution.
With all these already in place, a business that wants to expand will find it easier.
When businesses expand, it often helps them to offer more products to new and existing customers.
Indirect Distribution – What Is Distribution in Business
Indirect distribution is the opposite of direct distribution.
In this type of distribution, the manufacturer engages intermediaries to deliver their products to consumers.
The intermediaries are usually importers, exporters, retailers, and wholesalers.
In this case, the wholesalers and retailers sell products of not one manufacturer but also other competitors.
As a result, manufacturers don’t have any control over what the wholesalers and retailers sell in their shops.
Advantages of Indirect Distribution – What Is Distribution in Business
Indirect distribution comes with advantages you should consider when seeking the best distribution strategy for your business.
Here are some of the advantages:
Cost Efficient
Indirect distribution agents or intermediaries rely on their marketing and sales network and teams to distribute products to consumers.
They usually have the tools, equipment, and procedure to deliver products efficiently to consumers.
As a result, manufacturing companies don’t need to go through a lot of stress and spend a lot on their distribution strategy.
Using the established process, logistics, and systems of the indirect distribution agents helps drastically reduce the time and cost of distribution.
However, working with indirect distribution agents can also have a downside.
Depending on the deal you have with them and their value, you might have to share the revenue and be careful of extra expenses.
So, consider this and weigh it with the cost-efficient benefit.
Check for how well partnering with indirect distributors and the potential revenues will benefit you.
In a well-structured indirect distribution system, the expenses are usually outweighed by the cost-efficiency gain.
Use of Existing Customer Bases – What Is Distribution in Business
In direct distribution, the manufacturers are the ones who work to create their customer base.
In other words, they only distribute to people in their customer base.
This limits them from reaching different customer bases.
However, with an indirect customer base, the manufacturers will be working with their customer base and that of their intermediaries.
This means your brand reaches more consumers and uses your partnership with intermediaries to improve brand recognition.
Increased Speed into Old and New Markets
With indirect distribution, you enjoy increased speed into old and new markets.
This means that if you want your brand or product to be sold and used in a new market, indirect distribution will allow you to do so.
Even if your brand’s presence is not strong in a new market, you will find it easier and quicker to enter and gain a strong presence.
And the best part of it is that it is often at a low cost and risk.
However, remember that your indirect distribution agents should agree about entering or developing new markets.
If you aren’t in agreement with them, you will most likely get the wrong conclusion, work on it, and not succeed in achieving the goal of entering new markets.
Establishes better focus For Streamlining and Scaling – What Is Distribution in Business
When you operate with indirect distribution, you will worry less about logistics and infrastructure for your distributions.
This is because your intermediaries will be in charge of all of that.
As a result, you can easily streamline and scale your business operations.
When trying to scale your business, handling your marketing, logistics, and distribution can take time and effort.
However, working with intermediaries to distribute your products to your consumers will allow you to focus on improving your services or products.
Intensive Distribution
Intensive distribution is a type of distribution where manufacturers distribute their products to several retail outlets.
In other words, manufacturing companies make their products available in several places as possible for their customers.
Companies that opt for intensive distribution have their products sold in national chains, large shops, and small local shops.
As a result, it increases customers’ chances of getting their products when they need them.
This can help to increase their sales.
Advantages of Intensive Distribution – What Is Distribution in Business
Here are some of the advantages you will gain if you opt for this distribution strategy:
Increased Brand Awareness and Loyalty
Making your products available in most places for customers to access would make them recognize your product anywhere.
That is to say; the more people see your product, the more their interest in it will increase.
Also, when your brand awareness is increased, it will aid potential customers to remember your product when they need solutions your product offers.
This can ultimately increase brand loyalty because they know and are assured that your products will be available whenever they need them.
Improve Sales – What Is Distribution in Business
Another advantage of this distribution method is that it helps improve sales.
With intensive distribution, your chances of making sales will be high.
This is because your product will be available to customers in different outlets when they need them.
As a result, your chances of selling more products will be high.
However, you should remember that intensive distribution works best for products bought daily or often.
This will increase the chances of buying them faster without staying too long in the stores and shops.
Exclusive Distribution – What Is Distribution in Business
This distribution method is where a manufacturer works with a merchant to distribute and sell their products through a specified outlet.
With this distribution strategy, manufacturers limit the outlets where consumers can find and buy their products.
One reason they do this is to preserve the product’s brand image.
Since the product cannot be seen anywhere, consumers have to make an effort before purchasing it.
This distribution strategy process reduces the competition that brews up among intermediaries such as wholesalers and retailers.
Advantages of Exclusive Distribution – What Is Distribution in Business
Here are some of the advantages you will enjoy if you opt for exclusive distribution:
No Competitor Risk
The first advantage of exclusive distribution is the elimination of competitors for the distributors.
When a company opts for exclusive distribution, it enters an exclusive partnership with its distributors.
This seals any opening for any competitor to enter the sector the company has tied up with their distributor.
As a result, no other distributor will have the right to distribute that company’s product except the distributors they made a deal with.
Better Management – What Is Distribution in Business
As a result of limiting the distribution of their products, companies who opt for exclusive distribution tend to know their distributors.
Also, they will be handling a low number of distributors compared to when they use other distribution strategies.
This will make it easier for them to manage the distribution of their products through their distributors.
They will also allow them to control how their products are marketed or priced easily.
As much as exclusive distribution has great benefits, it also has downsides.
So, consider that there will be a limited reach, no diversification into new markets or regions, and you will depend on your distributors.
Overall, by weighing the advantages and disadvantages, you can make a decision that’s best for your business.
Characteristic of Good Distribution Process – What Is Distribution in Business
The distribution process is all the activities that are carried out to ensure that products reach consumers.
The people involved in a distribution process depend on the type of distribution adopted.
For direct distribution, the people involved in the distribution process are the manufacturing company (the distribution department) and the consumers.
In the case of intensive distribution, it’s the manufacturers, wholesalers, retailers, and consumers.
So, every distribution type has its unique chain of distribution.
However, your distribution process should have the following characteristics to be considered reasonable and effective:
Continuous Production
A good distribution process will make sure that there is a connection between production and distribution.
In other words, they ensure that produced goods are not more than the demanded goods.
They ensure that goods don’t accumulate in the storehouse for long.
Having Services and Goods Delivered to Consumers – What Is Distribution in Business
The main aim of every distribution in business is to get products to the end consumers.
If this is not achieved, then the whole distribution activities will be ineffective, unproductive, and ultimately a failure.
Maintains Business Economic Systems
The producers suffer losses when available goods or services aren’t distributed but stored in their warehouses.
So, they employ different strategies to ensure that goods are distributed, and they get their profits and revenues.
A good distribution process can maintain a business’s economic systems.
In other words, it’s needed to keep the economy of a business running.
Conclusion on What Is Distribution in Business
To sum up, distribution is a vital operation in the business.
In addition, manufacturing or production businesses will only succeed if their distribution activities are good.
This is why you need to know the best strategy for distribution for your business.
