eCommerce

What is a distribution strategy? Learn how to create it in 4 steps

Mariluz Sampalo

Mariluz Sampalo

Apr 27, 2022

distribution strategy for online stores 4 tips

Inside this article

  • iconWhat is a distribution strategy?
  • iconWhat are distribution channels?
  • iconDistribution strategies: Types and examples
  • iconHow to design a distribution strategy
  • iconGrow your eCommerce business with Outvio
  • iconFAQ about distribution strategy
  • What exactly is a distribution strategy? Is distribution the same as transportation? What is the correct way to distribute goods? What types of distribution strategies exist?

    Moving goods across the supply chain can mean huge expenses. This is why designing a strategy to minimize the use of resources and time is highly recommended. Use a distribution strategy to make your eCommerce logistics more efficient.

    In this article, we clear up any questions you may have about distribution strategies.

    What is a distribution strategy?

    A distribution strategy is a plan with all the necessary actions to transport a product from the manufacturing stage to the final point of sale. A distribution strategy needs to reflect the distribution channels and processes, as well as an internal map of all the stages through which goods circulate without interfering with other eCommerce logistics tasks.

    This flow is necessary to ensure that the items are available for sale at the lowest possible costs. To achieve this, there must be regular and well-executed internal communication between all the business areas and processes.

    This is the journey that a product normally goes through: manufacturer > wholesaler > distributor > retailer > consumer.

    However, each distribution strategy varies depending on the nature of the business, the product, the size of the company, the markets it operates in, and the type of audience it targets.

    For example, an eCommerce business doesn’t need to transport the goods to a physical point since items are usually shipped from the warehouse to the address of the customer.

    The distribution strategy can be used as a powerful business competitive advantage. As an example, you can commercialize your products through your own online and physical stores, and through other distributors. This is the case for many sneaker companies, like Nike or Adidas.

    Benefits of establishing a distribution strategy

    These are some of the benefits of creating a clear distribution strategy for your business:

    • Reduces logistics costs
    • Avoids bottlenecks in the supply chain
    • Ensures that deadlines are met as established
    • Improves customer experience due to shorter delivery times
    • Creates more sales channels to promote products to other markets and consumers
    containers for product distribution strategy

    What are distribution channels?

    Distribution channels are all the stages through which the product has to circulate before it reaches the consumer. Generally speaking, distribution channels are divided into:

    • Manufacturer
    • Wholesaler
    • Retailer
    • Agent
    • Internet
    • Consumer

    The number of agents involved in the process depends on the type of business. For example, your company may have a B2B strategy, while another may be stronger at sales in physical points or online selling. All these possibilities enter a different number of stages and agents before the items are finally sold. Additionally, each distribution channel can be broken down into several steps.

    Keeping track of your stock will help you with your distribution policy. Learn more about warehouse optimization and stock maintenance in our guide for warehouse design.

    Distribution strategies: Types and examples

    Distribution strategies are classified according to the number of agents involved in the production and sales process.

    Direct distribution strategy

    The direct distribution strategy is typically used by physical and online businesses with a B2C approach; in other words, retailers who are focused on selling directly to the consumer. There are usually only two parties involved: manufacturers and consumers.

    An example of a direct distribution strategy can be a clothing store that sells items produced for that particular brand.

    Indirect distribution strategy

    Businesses that sell their products across various points of sale are working through an indirect distribution plan that requires them to hire agents.

    All companies whose sales channels are outside their control sell with an indirect distribution strategy. This is the case with companies selling their products through different marketplaces and retail businesses.

    Intensive distribution strategy

    This is a large-scale distribution model that generally involves international intermediaries, a warehouse network, complex manufacturing processes, and several shipping companies. An intensive distribution strategy aims to reach all possible sales channels.

    If a company wants to sell their items in another country, they’ll typically start by commercializing them through a local physical or online store.

    Do you plan to expand to other markets? We recommend our article on international shipping.

    Selective distribution strategy

    This strategy occurs when a business is segmented towards a specific channel, like a marketplace, physical store, or online store. This strategy is characterized by its low distribution costs. On the other hand, sales options are more limited.

    Both Apple and Nespresso are two brands that use selective distribution as a strategy, marketing their products as premium and of high quality. This is why it makes sense to only distribute their products at very specific points.

    Exclusive distribution strategy

    Exclusive distribution is used for products that are aimed at a very specific audience. For instance, high-end vehicles are normally sold by authorized dealers. An establishment that sells Audi probably doesn’t sell Mercedes or Ferraris.

    Last-mile is the stage of the selling process when most issues seem to happen. We recommend optimizing every detail to avoid shipping issues for your eCommerce business.

    How to design a distribution strategy

    1. Analyze and define your distribution strategy

    As with the development of any process, before making a decision you need to consider your needs and goals.

    Some of the elements that need to be analyzed are related to your products and market. For instance, you need to consider the nature of the goods, the preferred sales channels of your customers, the main sales channels of your competitors, etc.

    2. Choose your distribution channels and agents

    Do you already know the distribution strategy you want to develop? Well, now it’s time to select your sales channels for that strategy. For that, think about how you can add value to the shopping experience, the type of product you sell, its price point, how you want to promote it, and how it will reach the sales point.

    Once the sales channel has been chosen, you’ll need to decide which agents will be participating in the distribution of the product.

    Choose only the necessary agents to achieve your goals while keeping your profits and expenses under control. After all, a strategy that reduces benefits won’t be sustainable in the long run.

    Tip: One way to reduce costs is to create partnerships with distribution channels to create an environment where both parties feed off each other. This will help balance out costs with other benefits, like a reinforced brand image.

    3. Create your distribution strategy

    The distribution strategy includes all the decisions to optimize the process of dispatching goods to your sales points. These are the steps that you need to take to create your own distribution strategy:

    • Evaluate your expenses and profits
    • Centralize product data with a PIM system
    • Synchronize communication between all agents involved in the distribution of goods
    • Establish control mechanisms for the goals
    • Train employees to achieve the best results

    4. Fix mistakes

    Once you have created your distribution strategy, the next step is to optimize is to maximize profits. Monitor the performance of your sales channels and fix any possible friction points or processes that could lead to financial loss.

    transportation and distribution throughout the supply chain

    Grow your eCommerce business with Outvio

    Is it possible to reduce logistics costs without compromising the customer shopping experience?

    With Outvio, you can integrate all your couriers in a logical and organized interface designed to make your work much easier. Automate shipping and returns on an international scale, optimize customer service, and solve shipping issues in a faster and more efficient manner.

    Create a customized tracking and return portal for your customers and brand your notification emails with marketing elements that can help you carry out cross-selling strategies.

    FAQ about distribution strategy

    What’s the difference between distribution and transport?

    Distribution is the stages that go from product production to reaching the final consumer. Transportation, however, is simply the act of moving goods. Distribution is the strategy, while transportation is the execution.

    Why is distribution strategy important for marketing?

    The distribution strategy of a business has a strategic component that needs to be coordinated with the marketing decisions of the company.