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.
Nonetheless, some entrepreneurs aim for a two-level approach, as opposed to the three-level, in an effort to reduce costs. An alternative could be to sell directly to retailers and cut out the wholesalers, for instance. Or, a retailer may decide to buy directly from the manufacturer.
While these 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.
Experts likewise suggest the traditional model initially because it is not as easy to change distribution and sales decisions as it is to change marketing tactics, such as pricing and packaging. The ways you distribute your product to consumers will dictate your overall marketing plan.
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 (also called distributor)
- Agent (who sells direct on behalf of the producer)
- Jobber (buys from manufacturers or distributor and resells to retail stores)
On the manufacturing side, some factory owners opt for direct distribution of their goods, which actually cuts two entire levels from the traditional model - a trade-off as viewed by industry experts. Although going direct costs less, producers may find that their products are not expanding into the markets as they had hoped.