Models that Work - Or Not
The traditional distribution model has three levels: the producer, the wholesaler, and the retailer. Experts recommend that new small business owners strongly consider this model before they entertain alternate choices.
While other systems can indeed be cheaper, if you decide at a later date that you need a wholesaler or retailer – also called intermediaries – they may not be available.
The most popular two-level approach is direct distribution. Companies such as Mary Kay, Avon, and Silpada, for instance, manufacture, sell and deliver their products to individual customers via their own salespersons and from their own warehouses.
Another alternative is for a manufacturer to sell directly to brick-and-mortar stores or online retail establishments and cut out the wholesalers. Or, if you’re a retailer, you may decide to buy directly from the producers.
These strategies actually cut two entire levels from the traditional model, although some experts view this as a trade-off. Costs may run less, but manufacturers may find their products are not expanding into the markets as they had hoped.
The Traditional Model
The primary reason to go with the traditional model from the outset is because changing distribution and sales decisions are not as simple as altering marketing tactics, such as pricing and packaging.
As a small business owner, the traditional distribution channels you may deal with include:
- Your sales force
- Direct mail marketing
- Online marketing
- Television and cable offers
- Wholesaler or distributor
- Agent, who sells directly on behalf of the producer
- Jobber, who buys from manufacturers or distributor and resells to retail stores
Keep in mind, regardless of the model you employ, the ways you distribute your product to consumers will dictate your overall marketing plan.