So, you have your brilliant new products ready to sell, but you don’t have a distribution strategy yet…
When deciding upon an appropriate distribution strategy there are several options to consider. Many small brands decide to launch online first either by developing their own website linking to a platform like Shopify or by selling into an e-tailer like Amazon or Beautybay.com. If you choose this route, it is really important to ensure you have a sufficient marketing plan to drive customers to the site as unlike stores there’s no walk by impulse or browsing customers.
Alternatively if you are trying to launch in stores, you could approach retailers directly. If you’ve not done this before it can be quite daunting and retailers have many expectations on the information they require in a presentation regarding trends, price and brand positioning, sales forecasts, margin negotiation etc.
You can of course contract these services in 3 main ways:
Use a Sales Agent
Agents are really campaigners of your brand and the products, and are quite familiar with the market. Sales Agents have links into retailers (but you should ask for evidence), and they have to know you and your needs well. Sales Agents are only responsible for selling your products. They do not buy the products directly from you. Agents are not involved in the delivery or after sales services. An agent is responsible for finding the target people and negotiating with them to buy the product. Though the agent will find you opportunities, they do not have the final word regarding sales; the last word is yours. Sales Agents have a fixed commission for their work.
These companies have a direct connection with you. Unlike Sales Agents, Distributors buy the product directly from you, find customers and distribute it in the market. Moreover, Distributors also provide after sales services. Distributors typically are selling your product at an agreed price into the market and therefore do less, if any negotiation on price with the customer.
A Wholesaler only fulfills orders from retailers and assumes no role other than satisfying retailer demands and doesn’t actively look out for orders from various sources in the market or market your brand, so not a great option for a start-up business.
Remember, a Wholesaler’s main source of income is the discount charged on products. They will buy products in bulk at a lower price from you and sell them direct to retailers in small units that attract relatively higher prices so your profits will be low. In contrast, Distributors charge service fees. Distributors and Sales Agents will also demand a percentage of the net sales for using their services, which can mean if they fail in their duties then you are not out of pocket. Clearly the service fee for a Distributor is higher than that of a Sales Agent given the broader range of duties they perform.
Each of these options has several more layers to understand, and a commercial consideration before making a final decision on the distribution strategy that suits you best.