The changing face of retail
In the 1980s I was a sales representative for an international sportswear brand, and sold sporting goods to retailers. The retailers would then sell our products, as well as those of other brands, to the ultimate consumers. In other words, the retailers were the intermediaries between the brand and the consumer.
As wholesalers, selling directly to consumers was a no-go zone. This was our retail partners’ domain, and we didn’t dare bite into their sales. Doing so would unquestionably result in our retail customers dropping us like a hot potato, and we couldn’t afford to lose their loyalty.
With time, however, comes change. The abolishment of import tariffs, around 20 years ago, facilitated increased direct competition. A flood of imports gave retailers greater choice. And, some of the larger retailers embarked on their own importation programs. Manufacturers and wholesalers had to fight hard for sales in an increasingly competitive market place.
Not long afterwards, the advent of e-commerce demolished geographic boundaries. Any business, regardless of size, was now able to have a global presence. This placed even more downward pressure on already difficult trading conditions for the industry I was working in.
The rise of direct distribution
In retrospect, it was only a matter of time before manufacturers and importers dipped their toes into the previously unchartered waters of selling direct to consumers.
Today, visit the corporate websites of sporting brands like adidas and Nike, and even computer powerhouses such as Apple, and you’ll see for yourself. Direct distribution strategies are clearly utilised and embedded within their logistical framework. And they don’t just compete with their retail partners online; in some cases they establish bricks and mortar storefronts devoted exclusively to their brands too.
Of course, it’s not only big business that’s tapping in to the direct-to-consumer business trend. Many small-scale producers – including many solopreneurs – have a business model that’s exclusively based on direct distribution, bypassing retail partners and resellers altogether.
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What’s right for your business?
Regardless of whether you’re in start-up mode or have been selling your products for a while, it’s vital that you look at your distribution model strategically.
Selling directly to consumers online is a popular starting point for small-scale producers, especially as there are few obstacles to overcome before getting your products on the market. On the flipside though, the web has become a highly competitive world. Getting visitors to your website can be an uphill battle, especially if there are many others selling similar products to your own.
Gain retail distribution of your product, and you could start turning over greater volumes – but your profit margin will be lower too, and you might find yourself under pressure from buyers to discount your prices.
It’s worth considering whether there’s a way your business could operate in both the business-to-consumer and business-to-business environments, without cannibalising sales from either channel.
How do you distribute your products? Is your current distribution strategy working for you, or are you looking to expand into new channels?