Wholesaling Distribution Channels
When it comes to wholesale distribution, there is no one ideal channel. Depending on your product, structure and target audience, what works for your business may be a failure for someone else's company. From retail to a traditional sales force, the various wholesale distribution options can be overwhelming. Different wholesales businesses have adopted one or more of the six methods listed below to successfully market their products where their peers failed before them. While some of the channels may lend themselves to your product better than others, the truth is you have to choose the best method for your own unique business needs.
Many companies prefer to focus on development and production of products and leave the sales to the final consumer up to intermediaries. The most well-known of these are retailers, a brick and mortar store or franchise who specializes in reselling products. While you may sell to individual stores or a small association, many businesses try to market to “big box” retailers like Wal-Mart, Home Depot, J.C. Penny, etc. The distribution channel gives you access to a wide range of customers who are already loyal customers of the retailer.
By directly marketing to consumers, you can generally charge higher margins and compete on price against retailers. Catalogs allow you to showcase products to your clients and they can shop from the comfort of their homes. However, this channel also necessitates fully functioning marketing and customer service departments. Examples of great companies who have successfully used direct mail as their core distribution channel include L.L. Bean and Land’s End.
Similar to direct mail, telemarketing involves selling directly to your final consumer. Unlike direct mail, this channel requires a much larger workforce specially trained to manage the unique challenges of telemarketing. This can require significant infrastructure costs, from renting a call center facility to hiring and training staff members.
An alternative to direct mail and telemarketing is e-commerce - selling directly to final consumers through your website. With the rise of internet sales sites, selling products online has never been easier. Again, this direct sales channel requires a different skill set and marketing approach. While more passive than direct mail or telemarketing, it can also allow you to effectively serve niche markets previously too small for your marketing efforts.
Another type of intermediary is a wholesaler: a company who buys in bulk from companies such as yours and then resells the products through one of the channels listed here. The advantage for you is minimal involvement and less competition, as compared to selling to retailers. The wholesale buyer may combine or even perform basic assembly of your and your competitors’ products before reselling them.
While nearly every company will have some kind of sales team, this wholesale distribution method is where you don’t use intermediaries nor direct sales channels. Your sales efforts are entirely in the hands of salaried and/or commissioned individuals whose responsibility it is to sell your inventory. Auto dealerships are a classic example of this distribution method. Again, there is no right or wrong way; only a way that best fits your company and your customers.