In the case of a consumer product, the channel will most often consist of: Retail stores or outlets, wholesalers, dealers, and brokers.

Any given product may have several channels of distribution to reach a certain target audience.  If a product is directed at several different consumer groups, or target audiences, there may be several different channels of distribution for each group. For instance the same product may be sold to one targeted group through retail outlets while being sold to a different group through mail-order catalogs, and a still different group through military commissaries.

In order to maximize profit, the following steps are suggested for determining the proper distribution channels for your product.

1. Identify each group of targeted consumers who will purchase the product.
2. Choose the most profitable channel to reach each group of end users you have defined.  Each group may have a different channel, so long as they do not conflict legally with each other.  Your choices of types of distribution are:

 

* INTENSIVE DISTRIBUTION  where many middlemen carry the product.

* SELECTIVE DISTRIBUTION  where only a few carefully chosen distributors or middlemen will carry the product.

* EXCLUSIVE DISTRIBUTION  where only one VERY carefully chosen distributor or middleman will carry the product in a specific area or “territory”.  NOTE:  Be very wary of “exclusive” agreements with “reps” or distributors.  Many times the individuals or firms demanding that you give them an “exclusive” agreement to sell your product are unable to service all of the territory included in the agreement.  If it becomes absolutely necessary that you must sign an exclusive agreement, be sure to:

• Limit the exclusivity to territories that can be well serviced.
• Limit exclusivity by including dates for “performance reviews” in the agreement.

When deciding which type of distribution channel you will use to reach each selected group of targeted users, you should take into consideration the degree of difficulty in monitoring and controlling the channel, how well each channel fits with your other channels and your marketing strategy.  The channel you eventually choose should provide a balance between the best possible service for the customer, and the most possible profit for you.

If your product will require you to setup a network of manufacturer’s representatives to sell your product to chain stores and “mom & pop” stores, you must choose them very wisely.  Finding good “reps” is not easy.  A lot of the very best reps are not even listed in “rep directories”.  I had a funny thing happen to me years ago that changed the way I find my reps, and I will pass it along to you.  I was trying to get one of my products into Bloomingdales, one of the most prestigious department stores in the nation.  I called the store, found out the name of the buyer who handled products similar to mine, and I sent her a sample of the product.  I called a few days later to see if she liked the product, and she said “yes, I like the product but we buy products only through reps.  Could you have your rep call on us and we will place an order”.   I said “yes maam, I will have him contact you early next week”.

Then the search began.  I got a copy of the rep directory for that area and began calling them one-by-one until I found one, whom we shall call “Smidlap”, who agreed to take on the product and present it to Bloomingdales.  I Federal Expressed a case of samples to Smidlap, and then eagerly called the buyer at Bloomingdales to tell her “our rep, Mr. Smidlap, will be in to see you next Tuesday”.   The buyer hesitated for a moment and said “Smidlap, we don’t let that snake in our store.  You will have to make other arrangements, give me a call back when you are ready”.  I hung up the phone, dumbfounded.  I couldn’t believe it.   I thought about the incident all night, until it dawned on me that through this incident, I had discovered the answer to finding the best reps, and I have used this method ever since.

The store buyers have to deal with reps every day.  They know who the ones are that give them the best service and they know who the “bums” are.  If you think about it, it makes perfect sense that when we want to sell a product to a particular buyer, we should use a representative that the buyer trusts. I called back the buyer at Bloomingdales and asked her for the names of the reps who give her the best service.  Without hesitation, she gave me several names to check with.  I called several of the other stores in the area, found out the name of the buyer who would be in charge of purchasing items like mine, and asked those buyers the same question.  Again, without hesitation, they gave me the names of several reps whom they considered reputable (please forgive the pun).  I was able to select one out of the group that was acceptable to every one of the buyers.  I called him up, begged him to take my product, and he sold thousands of dollars worth of my product to Bloomingdales in the following week.

Over the years, I have proven this system over and over again.  It is the one sure fire method of obtaining the best possible reps.  Try it, I know it will work for you.  Yes it is time consuming to set it up the first time, but it is much more time consuming and costly to have to go out and pick up the pieces after a poor rep has ruined your image in a given area.

An excellent way to get right to the store buyers, whether you want to sell through reps or sell direct, is to obtain a copy of THE SALESMAN’S GUIDE for the category of products you will be selling.  The Salesman’s Guide has over 20 different categories of store buyers books and CDs, such as “gift, housewares, and stationary buyers guide”, “hardware buyers guide”, “premium, incentive, and travel buyers guide”, “women’s and childrens’ clothing buyers guide”, etc.  Each book is a goldmine of store buyers who handle the products you are interested in.  They are broken down by state, and list the store’s name, the buyer’ s name, the address, the phone numbers, and in some cases, the sales volume in dollars.  I highly recommend the Salesman’s Guide books, they are not cheap but they are worth every penny.  They will also develop customized lists for your individual highly targeted needs.  You can obtain a free catalog of all of their directories and services by contacting them at:

The Salesman’s Guide Inc.

Directories and CD roms

2807 North Parham Road, ste 200

Richmond , VA 23294

Toll free  (800) 223-1797

Or visit their website, http://www.douglaspublications.com

Their toll free number for customized lists is (800)-793-4568

Another method of obtaining a list of retail outlets AND distributors who may be interested in purchasing your product for resale is to attend the trade shows where products similar to yours will be sold.  You can register as a “buyer”, and then visit the booths of companies which are selling products similar to yours.  Ask them if they have a list of their distribution locations, throughout the U.S. and internationally, to enable you to call them for references on the company’s products.  Many large companies have complete lists of distribution and sales locations which are available to buyers simply for the asking.  Once you have the list, it is then easy for you to call them and see if they are interested in carrying your products.

When you begin distributing your product, you will want to hit the areas which contain the highest concentrations of your target audience first.  Get a copy of “14 Million Businesses” compiled from the yellow pages.  Look up the type of businesses that will most likely distribute your products.  Look at where they are located.  Cities and states with the highest concentrations of locations will indicate areas where you are likely to have to ship the most product.  These will be the areas where you will need the very best reps.  Once you determine those areas, look up the store buyers in those areas using your Salesman’s Guide, and contact the store buyers to find out who the best reps are in that area.  To obtain a copy of “14 Million Businesses”,  contact:

Info USA

5711 South 86^th Circle

P.O. Box 27347

Omaha, NE  68127

Phone  Toll free (800) 555-5335

Or (402) 596-7649

Fax them at (402) 331-1505

Email them at: lists@infoUSA.com

Or visit their website at: http://www.infoUSA.com

Ask for your FREE copy of “Sales Leads, Mailing Lists and Databases Directory”

Note:    Trying to set up distribution, for a brand new product, through large wholesale distribution houses can be a “catch-22”.  Many times, companies are forced to avoid initially selling their products through major wholesale distributors until their sales volume is great enough to warrant large production runs.  This is necessary to bring the cost-of-goods-sold down low enough to allow the profit margins to be big enough to allow a large enough profit margin for the large distributors to become involved.  Sometimes it takes years of sales before a company is able to reach this Point!

Be sure you do not get caught in this common “catch-22”.   Before you plan on distributing your product through wholesale distributors you had better be damn sure your pricing structure will allow you to sell through them and still be profitable

There are several forms of wholesale distribution.  They are:

1. Full line distributors….These companies purchase many different products, from many different companies , and provide retail stores with a complete package.  Most often, they have large warehouses which allows them to purchase in huge volume, then break down the cases or masterpacks and sell individual product, in small quantities to the retail stores at a substantial mark-up.(usually 30% to 40%).
2. General line distributors….These companies usually carry most of the products which would be carried in a particular type of retail outlet.  A good example is the auto parts wholesale warehouse, which sells all types of auto parts to individual auto parts retail stores.  The wholesaler generally buys large volumes of fuel pumps, and then sells the pumps to the individual stores, one or two at a time, at a markup of around 10% to 20%.
3. Specialty distributors…..These distributors usually specialize in only one type of product, and sell to individual stores and specialty departments in chain stores.  A good example is the company which sells only fishing lures to sporting goods stores and sports departments of Payless type stores.
4. Jobbers….These companies usually specialize in food and sundry items, and part of their service is setting up displays and racks for “rack sales” in convenience stores, drug stores, grocery stores etc.  These distributors usually carry only well known brands, and sometimes act as brokers or reps as well as maintaining a warehouse.

Which type of distribution you choose for your product will depend on the channels of distribution you plan to service, the room for markup in your pricing structure, and the types of stores which are available to sell your product in a given area.  The ideal product will be one which can be sold through ANY AND ALL of the different types of wholesale distributors listed above.

When it comes time to think about international distribution, there is a great service provided by the U.S. Department of Commerce, which I have used to find distributors and agents in foreign countries.  The service is called  “AGENT/DISTRIBUTOR SERVICE” or (ADS) offered by the U.S. Commercial service dept of the U.S. Commerce dept..  In return for a fee, for each region or country you wish to address, the commerce department will publish in each country, information on your company, your product, and whether you are looking for agents or distributors for your product, and the qualifications that prospective agents or distributors should be ready to meet.  The prospective agents and distributors then contact you directly, and I have been personally FLOODED with inquiries when I have used this service. They now offer a “golden Key” service that actually sets up business appointments with potential overseas partners.  That is a great service.  For information on Commerce Department services, contact:

The U.S. Department Of Commerce

International Trade Administration

14th Street & Constitution Ave  N.W.

Washington, D.C.  20230

Telephone (800) 872-8723

Or visit their website at http://www.export.gov and go to “commercial service”