The current market conditions for any goods or commodities have shaped up to be a global one. And for this particular reason brands are constantly trying to broaden their target markets. When it comes to increasing one’s customer base there are two primary aspects to look into, marketing and distribution.
Definition of Distribution Strategy
Distribution strategy is a comprehensive process of making products and services available to businesses and target customers for their use.
Brands have strategized their distribution channels since time immemorial. Be it through finding river routes in the Middle Ages or cheap cargo flights in the 21st century, minimizing distribution costs have been one of the prime targets of a distribution strategy. So in essence, a good distribution strategy should have the following objectives.
- Movements of Goods
- Availability of Goods
- Protection of Goods
- Cost Reduction
- Customer Satisfaction
In this article we are going to discuss the various distribution strategies that brands across the world are adopting to ensure that they can meet the rising demands of the current market. The process necessarily entails transporting the product from the manufacturer to the consumer. And while it may sound straightforward, modern distribution strategies can be quite elaborate in order to reduce costs and maximize profits.
Types of Distribution Strategies
So, here’s a professional insight into the major types of distribution strategies that are applied in the current market.
Direct Distribution Strategy
Direct distribution is exactly what it sounds like, the manufacturer directly selling to the consumer. It may include a selling platform such as an e-commerce store, but as long as the length of the distribution channel is minimal the process will be considered as a direct distribution process.
Modern retail brands are also examples of direct distribution channels. These brands prefer to have single channel manufacturers and set up their own shop to sell their products. Clothing brands, fast-food brands, etc. make use of the direct distribution strategy for quick access to their consumer base.
Indirect Distribution Strategy
When the chain of distribution channel is long and includes various steps, the process is considered to be indirect distribution. If a brand creates a product, sends it over to C&F specialists, who then send it to a distributor followed by the retailer where the customer finally buys it, the process will be termed as indirect distribution.
Brands such as Pepsi or Nestle are great examples of indirect distribution. These brands use multiple distribution channels that include various distributors and retailers to make their products available across the entire world.
Intensive Distribution Strategy
Sometimes the categorization of distribution strategies is not simply based on the size of the distribution channel, but also its goals and capabilities. One such strategy is intensive distribution. This is when a brand tries to push its products to maximum market capabilities and cover as much ground as possible.
Household goods or automobile brands use intensive distribution strategy to ensure that their products are being catered to the most number of consumers possible. Such a strategy can include a long distribution channel or a short one, depending on the needs of the target market.
Exclusive Distribution Strategy
A brand need not always push itself on its target market. There are various brands that have such high brand value that having exclusive region-based showrooms serve their purpose better. Let us take Mercedes for example. This brand does not try to have an outlet in every city, but only in certain major cities. This is an example of exclusive distribution strategy.
Such strategies are mostly used to ensure that the brand value maintains a certain standard even though the consumer base becomes smaller. Exclusive distribution strategies are used by brands like Luis Vuitton Stores with high-end products and also ones that target the upper economic classes.
Selective Distribution Strategy
There are brands that try to place themselves on every street corner, and then there are brands that have a selected number of outlets in every city. McDonalds, for example, will sport at least 8-10 outlets in any major city. Whereas a premium clothing brand like Gucci or Versace will have maybe 3-5 outlets at premium shopping centers. This process is known as selective distribution.
Once again, such a distribution strategy is not categorized based on the length of its distribution channel but rather on the basis of its marketing strategy. Premium brands realize that their products are highly unlikely to be purchased at certain locations and thus they actively place their distribution channels in select areas.
These are the 5 major distribution strategies that are used by businesses and brands to build their supply chain. Creating a secure and high-functioning supply chain is one of the most crucial factors for any brand looking to succeed, and thus selecting the right distribution strategy is of immense necessity.
Image By Hessel Visser