8 of the Best Distribution Channels for Products
Have you thought about the best distribution channels to get your products into customers’ hands?
You might think the answer is obvious: people will buy your product directly from your website.
With a physical product, you’ll ship it straight to your customer.
With a digital product, your sales software will send it to your customer automatically.
But there are plenty of other ways you might distribute your products too. And using a mix of different distribution channels in your business can save you time, increase your profits, and help your business grow faster.
We’re going to take a look at a range of distribution channels. Traditionally, these are geared around physical products, but we’re also taking digital products into consideration.
Before we dig into the specifics of different channels though, let’s take a broader look at what distribution marketing means.
What is Distribution Marketing?
Distribution marketing, sometimes just called “distribution,” is an important part of the marketing process.
Distribution marketing means making your product (or service) available to your customer. It involves using one or more distribution channels to get products into your customer’s hands.
It’s something that business owners sometimes overlook when setting up their business, but it’s vitally important. If people can’t easily buy your product, then you aren’t going to make many sales.
Three different approaches to distribution marketing are:
With intensive distribution, brands sell their products through as many different channels as possible. You’ll usually see this type of distribution used with inexpensive commodities, like soft drinks and snack products. These could be distributed through big supermarkets, discount stores, restaurants, vending machines, food vans, and more.
Exclusive distribution is commonly used for luxury items where a brand wants to maintain a lot of control over distribution. Products like iPhones are a good example. With exclusive distribution, a product might only be available from the brand directly and from one third-party distribution channel. For instance, Apple’s products are available through Apple Stores and Apple Authorized Resellers.
With selective distribution, brands find a middle ground between intensive and exclusive distribution. They might make their products available in higher-end stores, for instance, but avoid letting them hit discount stores. Online, they could offer their products through well-known online stores, avoiding smaller or less reputable online outlets.
Types of Distribution Channels
The online world has brought new ways of selling products, and you might feel a bit bewildered by the range of potential marketing channels of distribution. Ultimately though, distribution channels can be grouped into broad types or categories.
The four basic types of distribution channels are:
- Direct-to-consumer: This is when you sell your product straight to customers. With a digital product, that will almost always be through your website; with a physical product, it might be through a retail store you own, or through having customers make a click-and-collect order from your business premises.
- Wholesale: With wholesale distribution, you sell your product in bulk to someone else who then resells it — normally to retailers, but potentially directly to customers.
- Broker: A product broker can help get your product into stores — at a cost. They will receive commission, often as high as 5-10%, on the sales they make.
- Retail: Retail distribution means your product is sold through (online or offline) stores that aren’t owned by you. Those store owners might buy the product from you, or they might purchase from a wholesaler or broker.
With the huge rise of online retail over the past couple of decades, distribution channels are becoming increasingly sophisticated. Some channels are also available specifically for digital products.
8 of the Best Distribution Channels (With Pros and Cons)
Let’s have a closer look at the best distribution channels for products, taking into account the pros and cons of each.
It’s important to remember that no distribution channel is necessarily “better” or “worse” than any other. What matters is choosing channels that are a good fit for your products, brand, and audience, as well as having a good mix of different channels so that you can get the key benefits of each.
Direct sales to consumers are the simplest, most obvious distribution channel for your product — especially if you sell digital products.
Your direct sales channel will likely include one or more of the following:
- Your website/email list: You’ll need eCommerce software that lets you make sales. Your software should automatically track inventory (for physical products and digital products that are sold in limited numbers). If you sell digital products, your software should make those automatically available to customers after purchase, without your involvement.
- Your social media accounts: Some brands sell directly through Facebook or Instagram. These sites let you create an online store where you can take orders. You could also use instant messaging to make sales, particularly if you sell a service. To make this process more efficient, you can use a messenger bot to handle common inquiries and even to take payment.
- Your physical retail location. If you own a retail store, restaurant, or other place that you sell from, then that’s also a direct sales channel. This may not be a permanent sales channel. For instance, perhaps you mainly sell items through your website and through Etsy, but you also have “pop-up” stalls at local craft fairs.
Pros of Direct Sales
With direct sales, you keep the maximum possible profits. There’s no middleman taking a cut of your earnings.
Direct sales make it easy to build relationships with your customers. You can capture information like their email addresses so that you can stay in touch — and hopefully make more sales to the same customers in the future.
You don’t need anyone else’s agreement to carry out direct sales. There’s no need to persuade a store to stock your product, or to get a distributor on board.
Cons of Direct Sales
With direct sales, you’re on your own. If you want to make more sales than you physically have the time for, then you’ll need to hire employees to help. That can quickly get expensive.
Direct sales limit your reach to the customers you can get in touch with. For instance, if you sell through your local store, you can only reach customers in a small geographical area.
Wholesale distribution is when you sell your products in bulk, at a lower unit price than usual, to wholesale companies. These companies will then sell your products to retailers, or may sell them directly to customers.
You might choose to work with a single wholesale distributor (which can give you a lot more control over the retail outlets in which your products appear) or you could sell to lots of different wholesalers.
Pros of Wholesale Distribution
Wholesale distribution gives you the opportunity to scale up your business fast. You don’t need to go through the work of dealing with individual retailers; instead, you can simply sell in bulk to a wholesaler, who’ll then get your products into retail stores.
Your income will come in upfront, often on a predictable schedule. This can make things much easier for your cash flow than if you’re selling directly to customers (where money might trickle in slowly, or unpredictably).
Cons of Wholesale Distribution
Your profits will always be lower than if you sold directly to customers. You’ll need to provide your products to wholesalers at a considerable discount, potentially at just 50% of the regular retail price.
With wholesale distribution, you’re often several steps removed from your customers. You might sell to a wholesaler who then sells to a retailer. Or, there might be even more steps in the chain — perhaps you hire a distributor to find wholesalers to work with. This means you won’t have any customer contact details to stay in touch with people who bought your product. You also won’t get much customer feedback.
Retailers are people who sell directly to customers through a brick-and-mortar store or an online store. While some wholesalers may also operate a retail store, you’ll usually find that wholesalers sell their products to a number of different retailers, who then sell these to customers.
In some cases, retailers will take your products on a “sale or return” basis. This means that they only pay you for the stock that they actually sell. Anything they don’t sell after a certain period of time is returned to you.
Pros of Retail Distribution
When you work directly with retailers, you don’t normally need to offer the deep discounts that you’d give to wholesalers. This means more profit for you per product sold.
If your direct sales channels are online, having your products in “real” stores can be a great confidence boost. It can also help make you look like a more reputable brand — your products will appear alongside other products that people love, in stores they’re familiar with.
Cons of Retail Distribution
Retailers may only be willing to accept products on a “sale or return” basis — and this can be difficult for your cash flow. You won’t have the predictable income that you might achieve through other channels, like working with wholesalers.
When your products are sold through a retailer, you won’t normally have access to customer information (like email addresses or even anonymized demographic details). The store can contact their customers about new products, but there’s no guarantee that they’ll promote your products over another brand’s.
Distributors act as intermediaries between you, the manufacturer, and wholesale or retail stores. They take ownership of your product, buying, storing, and delivering them to stores.
Pros of Distributors
Distributors can save you a lot of time. They handle the logistics of getting your product to stores, meaning you won’t have to invest time and resources in doing so. You just need to get your products to the distributor.
If one retail store stops selling your product, distributors will have connections with other stores. This makes it a lot easier than painstakingly building your own relationships with stores — only to find that several of them close, change hands, or no longer want your product.
Cons of Distributors
Distributors might offer several different products to stores in the same category — meaning that they’re promoting your competition, as well as you.
Just like working with a wholesaler, working with distributors means giving up a hefty cut of your profits.
Brokers (sometimes called agents) play a similar role to distributors, helping to connect you with retail stores — but they work in a slightly different way. Brokers don’t take ownership of your product; they sell the store on stocking it and get attention to your brand, but it’s up to you to physically ship your product to the store.
Pros of Brokers
Unlike distributors, brokers normally won’t work with competing brands. This means that your product (and brand) gets more attention.
Brokers can open doors for you that would otherwise have been closed. They have expert knowledge of their market and have long-established relationships with wholesalers and/or retailers.
Cons of Brokers
Brokers match up buyers and sellers, but they don’t actually buy your product from you. This means that your cash flow might still be uneven.
You may disagree with your broker on decisions about how and where your product should be sold.
Although the idea of buying from a catalog might seem rather outdated in the days of online stores, catalog sales are still going strong in some industries.
With a printed catalog, products are displayed in full color, with a price and short description. The catalog will include an order form (normally at the back) that customers can complete and mail with their payment. Alternatively, customers might need to phone to make an order. These days, almost all catalogs will also offer the option to buy online.
Even when people do prefer to buy online, having a physical catalog can give brands an edge over their competitors. Some audiences, such as retirees, may feel more comfortable with catalogs than with looking through an online store.
Pros of Catalogs
Catalogs are an alternative sales channel to online stores. They give you the opportunity to get your products in front of people who don’t use the internet to shop online, or even those who don’t use it at all. This includes retirees as well as young children, who might look through a catalog to make a Christmas list that adults will then purchase from.
Having a catalog can make your brand look larger and more reputable, especially if your catalog is well-produced.
Cons of Catalogs
Producing a printed catalog can be expensive. You’ll also need to factor in the costs and logistics of delivering your catalog. Is it going to be mailed only to existing customers, or are you planning to mass-mail your catalogs?
Online, you can easily change the price of a product or mark it as out of stock. With a printed catalog, you can’t change prices or information after going to press. You’ll typically need to wait a few months to produce a new edition.
Whether you sell physical or digital products, online marketplaces are a huge distribution channel for many brands. These marketplaces are brands in their own right, having built up loyal audiences along with very strong search engine reputation.
Often, when a customer is looking to buy, they’ll turn straight to their favorite marketplace and search there rather than searching on Google. This means that if your products are only available directly from your website, you’ll be missing out on a huge number of potential customers.
Online marketplaces include:
- Large, all-purpose marketplaces that sell a huge range of products. Often, you can use these to sell both physical and digital products. Amazon and eBay are good examples.
- More specialist marketplaces that sell a broad category of products. Etsy, for instance, sells primarily handmade and craft items. It doesn’t sell commodities.
- Highly specialist marketplaces that only sell one very specific type of product. Marketplaces for website themes, for instance, sell website themes.
Pros of Online Marketplaces
Online marketplaces can be a great way to access a ready-made audience for your product. Instead of spending a long time on your search engine optimization (SEO) and building your mailing list, you can tap into the customers that are already looking for products just like yours in the marketplace.
With many online marketplaces, you don’t have to go through a long vetting or approval process. (There may be an initial or automated approval.) You don’t need to convince the marketplace to stock your product in the way that you’d need to talk a retailer into doing so.
While some marketplaces only pay out monthly, others pay almost instantly. You’re certainly likely to get your money faster than you would from many other channels.
Cons of Online Marketplaces
In an online marketplace, your product appears alongside potentially hundreds or thousands of competing products. This means you might lose out on sales to a bigger brand, or your product might simply get lost in the noise.
Online marketplaces will take a cut of your sales, and this can be a large percentage of your profit. If you’re selling a digital product like an ebook or website template, you might find that the marketplace takes as much as 50%.
Bundles of Digital Products
If you sell digital rather than physical products, a popular sales channel is through partnering with an online “bundle” seller. These sellers bring together a number of products in the same topic area, such as “time management” or “health and wellness.”
The bundle is then sold at a very low cost in comparison to the retail price of the items within the bundle. For instance, the bundle might contain $1,997 worth of products, but be sold for just $47.
Typically, the bundle sellers keep the profits. The brands whose products are included in the bundle make their money through affiliate marketing: they get commission on the sales they drive. Because the bundle represents such great value for money, lots of people in the brand’s audience are likely to buy.
Pros of Bundles
Being part of a bundle can expose you to a much larger audience, some of whom might go on and buy directly from you in the future. While you won’t get direct information about the people who buy the bundle, you can get customers to sign up by email for your product (especially if it’s something like an online course) or for a bonus related to it.
If there are big names in your niche with products in the bundle, being associated with them can help you to look like a larger player in your niche too.
Cons of Bundles
Since you only get paid based on the sales you make, you may not get as much profit as you hoped from the bundle — especially if your own audience is small. Putting your product into a bundle shifts you from making money as a brand/manufacturer to making money as an affiliate marketer.
Bundles bring together so many similar products that yours may get ignored among everything else. Even if thousands of people buy the bundle, you may find that only a handful actually make use of your product.
How Will You Distribute Your Product?
Whether you’re still at the planning and brainstorming stage or you already have your product ready for sale, it’s worth spending some time thinking about the best distribution methods to try.
If you’re currently only distributing your product directly to customers, is there a different distribution channel that would let you access a larger audience?
It’s also important to think about how you’ll preserve your brand if your product is being sold by retailers, wholesalers, online marketplaces, or even as part of a bundle. For your audience to be clear about your brand, you need to get clear about it too.
If that’s something you’d like a bit of help with, check out our personal branding coaching. We can walk you through the whole process of creating your brand. This includes help on building your audience and turning leads into paying customers too.
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