The best method for getting your product to consumers can change over time.
If you’re ready to move your products into more markets, your distribution strategy will be essential. The first step is understanding the key differences between direct and indirect distribution. Distribution is the process of getting your product into your target markets. If you’re just launching your business now, you might handle the distribution process directly, whether digitally or in person, delivering your goods into the hands of consumers. But as your business grows, it may be more efficient to enlist a distributor to get your product to retailers who sell on your behalf.
The breakdowns below may help you decide what’s best for you at any given point in time.
Pros and cons of direct distribution
Whether it’s done by a small business or a multinational company, direct distribution allows products to be sold directly to customers. On a micro scale, a jewelry maker selling small collections may choose to set up a website and sell directly to the public. On a larger scale, Apple the designer of an internationally used phone app may sell directly to consumers through their Apple online store. Keep in mind that while direct distribution may offer advantages, there are also pitfalls when not using middlemen.
- Pros: You have total control over how the product is marketed and sold, and there is no fighting with competitors for shelf space at retailers.
- Cons: It may be more time-consuming and expensive for some business owners, and you may have more limited market coverage when going it alone.
Pros and cons of indirect distribution
For a manufacturer, indirect distribution means selling wholesale to agents or retailers so that they can distribute the product for you. They store it, display it, and employ the sales force to put it into the hands of customers. As with direct distribution, though, there are pros and cons.
- Pros: Distribution agents specialize in getting products into as many markets as possible, and retailers know their local markets and how best to sell your product there.
- Cons: Distribution agents and retailers will share in your profits, and retailers may sell your competitors’ products alongside you own.
Choosing a distribution strategy
Determining the best method for getting your product to the consumer depends on what you’re selling and how much you’re willing to invest in distribution. New small businesses generally don’t have the capital to pursue multiple distribution avenues at the outset, so they need to choose one that fits, and stick with it while the business grows.
Generally, if your product is perishable or if you’re selling B2B, you’ll want fewer distribution channels between your point of manufacturing and your customer. In such cases, direct distribution may be best. If, however, you’re aiming for a wider market with hopes of getting your products in front of as many consumers as possible, you may need to sell to distributors and let them do the legwork while you focus on making the product better.
If you do partner with distributors, do some vetting to ensure that they are capable of selling your products and finding the right market opportunities for them. Prioritize developing a long-lasting relationship. You’re the product expert, but you’re leveraging their sales expertise. Ultimately, the decision may not be whether to go direct or indirect, but when to favor one over the other to find your optimal mix.