DISTRIBUTION DECISION| MARKETING MANAGMENT| L-12|

Distribution Decisions

Did you know that most companies don’t sell products on their own or use intermediaries? These are the merchants who buy and resell the company’s products to the end consumers. Intermediaries are also an important link in a company’s distribution channel. To learn more about the role of intermediaries and how companies distribute their products, 

Distribution Decisions Definition

There are two main processes in supply chain management: downstream and upstream. The upstream process sources materials for production, while the downstream process focuses on bringing the product to consumers. Distribution decisions belong to the downstream process.

Distribution decisions refer to all decisions that ensure the efficient delivery of goods and services to the end user.

We often think of distribution as delivering physical products such as clothes, vegetables, and bakeries, but distribution also impacts services (e.g. consulting, dry cleaning) and digital content (e.g. streaming music, TV programs). While online distribution brings companies the opportunity to reach more people, it faces many same issues as offline distribution—for example, choosing the right product for sales or converting prospects into buyers.

One major distribution decision is choosing distribution channels.

Distribution channels are paths that a product goes through, from the manufacturer to the end-user.

Main distribution channels include wholesalers, retailers, brokers, and delivery companies. The purpose of distribution channels is to ensure the timely arrival of goods and prevent delayed sales. Distribution channel decisions refer to selecting distribution types, levels, and strategies.

Distribution is also one of the four marketing mix elements. As a result, it can significantly impact a product’s positioning, pricing, and promotion:

Impact on positioning: Products distributed in a few outlets enjoy a more luxurious image compared to those sold in multiple outlets.

Impact on pricing: Commission paid to middlemen can affect the price of the goods. Also, local goods may be less expensive than foreign goods as they have a shorter distribution channel.

Impact on promotion: Without wholesalers and distributors, businesses must market and deliver the products themselves, which could consume a lot of resources. On the other hand, outsourcing tasks to a third-party distributor allows the firm to reach a wider market with less effort.

International distribution decisions

International distribution decisions are one of the strategic decisions made by global companies. The decisions include choices of products to sell overseas, the difficulty in delivery, and the degree of control the company wants to have over the selling process.

There are three ways to distribute your products in the foreign market:

Set up international departments: The company directly enters a market and takes full control over distribution. For example, Amazon set up fulfillment centers all over the world to pick, pack, and ship products to customers.

Partner with distributors: This strategy involves getting export companies to sell your products overseas so that you don’t have to worry about shipping and complex procedures. This is the easiest and fastest way to extend your product reach. For example, motorsport startup Formula E uses Deutsche Post DHL to transport race cars, batteries, charging units, and media equipment to urban areas around the world.

Sell your products online: This strategy involves using the internet to sell your product over the world. However, you may still need to partner with local distributors for shipping. For example, eCommerce stores sell clothes, technology, and most consumer goods.