Finding a Distribution Channel for Your Product

To get your products to the right customers you have to find distribution channels to deliver them to convenience stores, grocery stores and dealer channels. Manufacturers of novelty products have been finding it hard to get their products into market places as distributors of these commodities are rack jobbers who own nearly 40 percent of this type of merchandise in retail stores. If you are a manufacturer of products which can have a national level demand then the best option is to work with a national level distribution network which has a varied mix of distributors like wagon jobbers, wholesale distributors, retail merchandisers and full service merchandising distributors.

Inventors and manufacturers in general are not conversant with distribution channels and are unable to distinguish between features of each. This makes it difficult for them to identify a perfect channel which will be suitable to their product line. They sometimes employ their own sales teams like agents and brokers to interact with c-store chains, grocery store chains and stand alone convenience stores. When manufacturers employ specialty distributors and rank jobbers to distribute their products then it usually takes a different distribution channel to find its way to a customer’s table.

To test the marketplace for your product you need to find the right distributors and wholesalers which can help distribute it to convenience stores and grocers. If you do not want to use the above mentioned distributors and want to directly get them displayed in stores then the best option would be to use convenience store distributors. Take a detailed c-store distributors directory which will have contact information about top officials with whom you can discuss about your product and sales terms. Here are some essentials to keep in discussing terms of sale and distribution with distributors and wholesalers:

Estimate the price which you would charge the distributor for your product. This will depend on factors like:

Discounts on large volumes

Shipping rates

Price per unit in store

Compensation to brokers

Inventory Management – You need to understand how many times each day/ week you have to replenish orders and lead time required for each and every order.

Product specifications – Present a breakdown of unit size so the distributor / store owner will have a fair idea about how much space the display unit will take in the store.

Presentation documents in the right order starting from your designation and what your company produces to how the product can create a sensation in the market.

Choice of distribution channels available to inventors

Direct sales – Sales in this channel are managed by sales staff employed by manufacturer and they meet all store owners to present their products. In this system the distribution and supply of products are also managed by the manufacturer and it completely eliminates the middlemen. Products sold using this channel is generally limited to a small geographical area and gives higher margins to both manufacturer and retailer.

Manufacturers’ sales agents – Though the name denotes that these are sales agents employed by one company, in general they take the responsibility of selling more than one company’s products which are vastly different from each other. Their only responsibility is to act as local representatives of particular manufacturers and distribute their products when local buyers give an order. These agents take the distribution of an industry they are familiar with and do not become synonymous with the brand. Manufacturers appoint agents in locations where the sales volumes are too small and give agents a commission of 5 – 20 percent on each unit sold.

Brokers – Though brokers’ work style is very similar to agents they are not detached from the whole procedure like the latter and are partial towards buyers which can be c store chains, grocers or even dealers. While a sales agent never holds competing products in his portfolio, most brokers will have competing products and will attempt to sell the best to their clients suited to their needs instead of pushing them to buy only one product.

While this may be profitable for the broker as he will manage to make a sale and establish his reputation as a caring person before the client, it can be detrimental to a manufacturer’s reputation as the client will consider their products inferior and may pass on this message to his friends and family.

Private label – Under this distribution cycle the manufacturer sells his product to a larger brand so it can be sold under their brand. These inventors work as contract manufacturers instead of private operators as they have not created the product. This arrangement is suitable for small operators who have manufacturing facilities and expertise but lack the creativity to make a winning product or the financial strength to market it to end customers. Large brands like Playschool, Toys R Us, Fisher Price, Disney and others outsource few of their product lines to manufacturers who can replicate their existing products and sell them under their own labels.

Specialty distributors – These distributors serve small specialty stores and distribute their products as their personal label while marketing it to retailers. These distributors represent one manufacturer at a time and at most times are the single point of distribution for that manufacturer. They tend to raise the price level given by manufacturer by 30-40 percent while selling it to retailers.

Trade distributors – These distributors work in partnership with tradesmen instead of directly working with manufacturers for example wood product distributors like doors and windows who work with building contractors and auto parts distributors working with car mechanics.

Wholesalers – They are an essential component of the product distribution channel and work between c-store owners and store large quantities of distributor’s products. They work more closely with stores and distribute a variety of products across a geographical area depending on demand and add their profit margin to the product.

Rack jobbers – Typical to their name these distributors work with specific categories of products which are in high demand due to their usage. Instead of following the typical distributor routine of picking products from manufacturers or dealers and selling it to retailer, rack jobbers rent certain sections of a convenience or drug store. They own the products stored here and receive money only when products on display in its rack are sold.