How do I choose the right distribution channel for my product or service? This is one of the most frequently asked questions on the subject. So, at Sidely, we've decided to answer it. There are three types of distribution: exclusive, selective and intensive. Each has its advantages and disadvantages. The choice is based on various criteria, the most important of which is generally the marketing positioning of the products.
Follow our guide to understand all the issues involved in choosing a distribution method.
Exclusive distribution means selling only in a given territory or under a single banner.
Brands opt for this distribution method to concentrate and optimize their efforts on one channel. However, exclusive distribution can also be set up at the distributor's request. In a way, this is the cost of entry for small brands wishing to enter the retail market for the first time. Monoprix often uses this clause.
Example: Monoprix
By limiting the number of your points of sale, you establish a quality collaboration with your retailers. In return for the exclusivity of your products, you can negotiate merchandising actions and better facing positions. This type of distribution lends itself particularly well to trade marketing, as it gives you the opportunity to work together to develop marketing strategies tailored to your target clientele.
Exclusive distribution of a product generally enables the distributor to attract consumers loyal to the supplier's brand to its point of sale, potentially generating further purchases.
And often, the situation is reciprocal: if you contract with a retailer that has exclusivity clauses on a large number of products (Monoprix comes to mind), you also benefit from frequentation linked to the specific offer that your partner has built up over time.
As a manufacturer, you have the guarantee that your products are sold in a quality environment, ensuring that your brand's prestige is maintained.
Limiting the distribution of your products to a particular brand or territory can give them a special appeal, linked to their "rarity". With the help of your retailers, you could try to create a unique buying experience to further enhance this feeling of exception.
The limited number of points of sale means that customers have less access to your products, and therefore fewer opportunities to buy them. Access to mass retailing can therefore prove costly, because even if you make your entry, all the additional potential of this first deal is barred to you.
If your exclusive distributor experiences a drop in performance, your entire sales are at risk. It's also common for your products or brand not to perform well in the exclusive chain. In this case, you need to go into the store, take your presence and price readings, and discuss them with the floor managers. Identifying the reasons for the lack of performance will enable you to negotiate a better facing or position.
This is a fundamental clause of the exclusive distribution contract, which implies that you undertake not to sell your products directly in the area assigned to your exclusive distributor. This clause is designed to prevent competition with your exclusive distributor in a given area. Remember, however, that this limit is associated with a territory. As a result, you remain free to offer your products for sale directly to consumers - or via other distributors - in other regions.
Selective distribution means offering a product or service through a limited number of outlets or chains. Retailers are selected on the basis of their location and/or the expertise of their sales staff.
For example, products that require personalized information and advice, such as tools or computers, but also those that benefit from a particular brand image, such as luxury goods.
This form of distribution allows you to benefit from the skills and expertise of your distributor. The advantage of this type of distribution is that your distributors know the target customer well, can handle after-sales service, and can respond to customers' specific problems.
As a supplier, this distribution method enables you to create or preserve the brand image of your products.
Selective distributors are chosen on the basis of their location. So you'll want to select distributors positioned in areas where the customers you're targeting are located first.
By restricting the number of distributors, you also limit your geographical spread, which in turn reduces transport and inventory management costs.
In selective distribution, your distributors benefit from your brand's reputation, which can potentially increase their customer base. The quality of your products is reflected in the image of your points of sale, encouraging word-of-mouth and thus increasing your partners' traffic and sales. Use this argument to obtain the commercial benefits you're aiming for in return!
Selective distribution makes it necessary to create a set of specifications justifying this mode of distribution. Indeed, certain practices, such as a fixed selling price, may be prohibited by antitrust regulations. Your choice of distributors must therefore be based on a list of objective criteria.
Even if your distributor has its own sales force, you'll often need to support them to ensure that the information and after-sales service they offer consumers is comprehensive and effective.
By limiting the number of distributors and the areas covered, you inevitably cut yourself off from part of the market. As a result, a substantial communications budget may be needed, with targeted marketing campaigns to create need or desire among your target clientele.
Intensive distribution enables a brand to offer a product or service in as many points of sale as possible. This type of distribution is often used for fast-moving consumer goods, as it maximizes their presence in points of sale. This is the supermarket distribution model.
Examples: consumer products such as Bic, Mars, Herta etc.
By opting for intensive distribution, you make it easier for your customers to find your products, since they can be everywhere. This means your product can be seen by as many consumers as possible, maximizing purchasing opportunities. It also makes it easier to keep track of product availability.
Fast-moving consumer goods (FMCG) are generally manufactured in large quantities, which reduces their unit manufacturing costs. By the same token, transport and storage costs per unit are reduced, as the quantities to be shipped and stored are greater.
Finally, good management of deliveries and stocks - correlated with orders received - helps optimize logistics and therefore reduce costs.
With intensive distribution, consumers develop buying habits based on product availability and ease of access. What's more, they become more familiar with your product thanks to the increased visibility of your brand.
The more shoppers are exposed to your product, the more likely they are to buy it. The high visibility of your product, its systematic availability, and the intensity of your advertising campaigns all help to imprint your product on the consumer's memory, arouse their desire, encourage impulse buying and therefore... increase your sales.
Intensive distribution aims to offer your products in as many points of sale as possible, over a wide geographical area. This type of distribution is justified by the reputation and massive adoption of your brand or products by consumers with varied profiles.
Intensive distribution is commonly used for everyday consumer goods, which are subject to competition from similar products. This means you need to reduce your margins in order to remain competitive.
What's more, distributors benefit from increased bargaining power, which often enables them to obtain better prices, thanks to the large volumes of products they are able to sell.
At the same time, stock management becomes more complicated as you have to meet the massive demand for your products. Warehousing and logistics entail additional costs linked to the number and variety of partner outlets.
By multiplying the number of points of sale and distribution intermediaries, it is more complicated for the supplier to have control over the way its products are presented to end customers. As a result, the consumer's shopping experience can vary considerably from one store to another.
Controlling the actions of distributors becomes more complicated as they multiply. Geographical and cultural differences may require specific approaches.
When competition increases, distributors tend to lower their selling prices to remain competitive. And to improve the visibility of your products, you'll need to boost your promotional and merchandising activities, which will put a strain on your promotional budget. The overall profitability of your operations could also suffer...
In intensive distribution, maintaining the quality of product layout and presentation in-store is complicated. You often lose the ability to control in-store customer service.
If you offer luxury products, generally with low production volumes but high margins, you'll tend to opt for exclusive distribution.
-> Monop'Beauty allows Monoprix to offer its own products as well as brands for which the retailer has exclusive rights;
-> La Maison du Caviar has also made this choice, marketing its products in its boutiques (both physical and virtual) as well as developing partnerships with Michelin-starred restaurants.
If you supply a specific product that requires specific knowledge to bring to market, you can choose to market your products through selective distribution.
-> The LVMH group distributes its products via the Sephora brand, which is fully aligned with the prestige image of the French luxury giant;
-> Regional products are sometimes found mainly in stores located in the areas where they are consumed.
Finally, intensive distribution is particularly well-suited to the marketing of consumer goods, as these are intended to be sold to the largest possible number of people.
-> So giants like Nestlé and Coca-Cola distribute their products to as many points of sale as possible, including supermarkets, petrol stations, online stores, cinemas, vending machines and grocery stores... The strategy of these companies is to be able to offer their products wherever consumers may want them.
The distribution method must therefore be based on a number of criteria, a (non-exhaustive) list of which is given below.
Keep in mind that your brand, your products, but also your market, have their own specificities. That's why it's important to build a strategy that matches your environment.
Finally, measuring performance in the field enables you to validate your distribution choices, or to review them. Advanced reporting tools must therefore be put in place to assess the performance of your distribution channels.
The choice of distribution method is therefore crucial for brands that sell their products indirectly, as each method involves benefits and risks. To choose the right distribution method, your starting point will be the nature of your product and its positioning.
But, as we have seen in the table above, other criteria can also be taken into account, such as image management, control of product presentation or the quality of collaboration with your retailers. All these factors contribute to optimizing your distribution strategy and boosting your sales.
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