Distribution Channels: Where you sell your products

Which distribution channels fit to my company? It is not always easy to answer this question – especially since decisions based on it often involve deep-seated changes. Ideally, you will find new distribution channels that help you reach new customers and thus increase market coverage. In the worst case, however, the new distribution channel turns out to be inefficient. Either way, choosing the right distribution channels is a key decision for your business. After all, the majority of consumers already exhibit hybrid buying behavior.

We show you which distribution channels you can choose from as an online merchant and how to find out if they fit to your business – regardless of whether you already have an online shop or not.

How do I choose the right distribution channels?

Before you decide on a distribution channel, a number of factors should be considered. These will support you in the decision-making process and help you identify the right distribution channels for your products. The more distribution channels you integrate into your sales strategy, the greater the market coverage and added value for the end consumer. But be careful: don’t overreach yourself and always make your decision based on resources as well!

1. Products

What products do you sell? Can your products be sold through the respective distribution channels? Take a closer look at the distribution channels (e.g. eBay as an online marketplace) and search for corresponding products. A look at what your competitors are doing can also tell you whether it’s profitable to sell through certain distribution channels.

Many products can be sold across all distribution channels. Smartphone cases are a good example, because they can be found everywhere: in the kiosk next door, in online stores, in online marketplaces, etc. But it may well be that one or more of your products are not suitable for certain distribution channels. For example, software can be sold excellently via online sales. On the other hand, you will quickly reach the limits when selling via stationary stores.

2. Target Group

Which brings us to the second point that influences the choice of distribution channels: your target group. Which channels are they using? Where do you reach your target group? To stay with the software example: Here, in most cases, we are talking about either tech-savvy people or companies. Tech-savvy people in particular can be reached via online sales channels, which is why an online sales strategy is recommended.

Another example: You sell instruments, have a stationary store and are looking for more direct sales opportunities. So who is your target group? For high-value, high-cost instruments, you can assume that your target group is more education-oriented and takes time to select the instrument. A stationary store is recommended in this case. With less expensive beginner instruments, your target group will spend less time and make quick decisions. Going to a stationary store is less likely, which is why an online sales strategy (online store, online marketplaces, social media platforms) makes sense.

3. Competitors

If you already have a distribution channel in mind, the question arises whether and to what extent your competitors are represented. After all, your sales opportunities also depend on the competition. However, low competition does not mean that your sales opportunities are better. Competition tells you whether distribution channels are worthwhile for your products or industry.

If no or little competition is using a distribution channel, you should look closely because there are usually good reasons for this. On the other hand, your competitors may also be overlooking opportunities or not making the most of them, so in such cases you have prospects for great success.

4. Resources

Last but not least, the decision for or against distribution channels depends on the available resources. Do you have a stationary store and want to launch an online shop? Calculate with budget for agencies or a lot of time you have to invest. Do you have an online shop and want to open a stationary store? Here, too, budget and, in particular, staff will play an important role. Less resource-intensive is the launch into online marketplaces. Nevertheless, you need some resources for this as well, for example for convincing product descriptions and product images.

In addition, the question of linking the distribution channels arises with multiple sales channels. There are approaches to this such as the multichannel, cross-channel and omnichannel approach.

Find out what the 5 biggest challenges in multichannel distribution are.

Which distribution channels exist for retailers?

You now know how to identify the right distribution channels. But which distribution channels are there? The possible distribution channels vary depending on the business model and the targeted distribution strategy. Wholesalers and B2B companies sometimes use different distribution channels than retailers (e.g. through intermediaries and distribution partners).

In the following, we address the most important distribution channels for direct sales by online retailers to consumers (B2C) – both online and offline. Indirect distribution channels, which are more related to marketing and strictly speaking do not belong to sales, are left out (e.g., email marketing).

A. Online Shop

The online shop is often the heart of distribution. If you want to link the distribution channels you use as part of a cross-channel or omnichannel strategy, the online shop is always at the heart of the action. Whether social media platforms, online marketplaces, or pop-up stores: the online shop can be referenced across all channels. Here you have full control and are only bound by legal regulations, but not by the rules of other platforms and certainly not by a location.

Advantages:

• Supra-regional market coverage
• Maximum independence
• Large target group
• Success control through tracking

Disadvantages:

• Time required and costs for set-up
• Constant maintenance, support and optimization

B. Stationary Stores

While some retailers start their business directly with an online shop, others focus on stationary retail. Depending on the location, the products offered and the target group, this distribution channel can also make perfect sense. Stationary retail offers the best opportunities for customer loyalty through personal customer contact. Almost half of stationary retailers now additionally rely on sales on the Internet – both via their own online shop and via online marketplaces.

Advantages:

• Personal customer contact
• Advisory expertise

Disadvantages:

• Location-dependency
• Regional market
• Rental costs for the sales area

C. Online Marketplaces

A wide variety of merchants offer their products on online marketplaces. Here you can reach many buyers that you would probably not reach otherwise. The largest platforms in Germany are ebay, Amazon and Otto. They each offer their own advantages and disadvantages. Online marketplaces are extremely popular with both merchants and buyers. However, they have one significant disadvantage: retailers relinquish a great deal of control. To build a sustainable brand image and grow over the long term, you need your own online shop.

Advantages:

• Supra-regional market coverage
• Low costs
• Little time required
• Large reach

Disadvantages:

• Dependence on platform
• Little control on brand image
• Limited opportunities for customer loyalty
• Sales fees

D. Shopping Apps

The increasing popularity of mobile commerce has also led to a boom in shopping apps for mobile devices. In addition to shopping apps from online marketplaces, there is also the option of creating your own shopping app – meanwhile even with an app construction kit. As with the online shop, retailers have maximum control and independence here. Shopping apps also offer an improved user experience and ensure strong customer loyalty. However, new and small online shops should not waste time with shopping apps, as hardly anyone will use them – the focus here should be on other distribution channels.

Advantages:

• Supra-regional market coverage
• Higher conversion rates
• Strong customer loyalty
• Maximum independence
• Users are always reachable

Disadvantages:

• Costs for app development (with professional app)
• Only makes sense from a certain level of awareness
• Constant maintenance

E. Social Media Shopping

Meanwhile, social media platforms not only offer the possibility of paid and unpaid advertising, but also direct shopping opportunities. We spend most of the time we are online on social networks. So why not sell through them as well? For example, with the Facebook Shops function, your own online shop can be connected directly to Facebook and Instagram. The basis for this is, of course, a functioning own online shop.

Advantages:

• Users are online often and for a long time
• Strengthening of interaction and user experience
• Convincing product presentations

Disadvantages:

• Currently only possible with existing online shop

F. Pop-up Stores

Pop-up stores are the best example of how online and offline retail are becoming increasingly intertwined. The idea behind it: Stationary stores that are only open for a limited period of time. This strengthens your brand awareness and gives pure online players the opportunity to test their business idea offline. Pop-up stores are particularly suitable for the fashion industry, but also for the sale of food, furniture, toys and much more.

Advantages:

• Strengthening of brand awareness
• No running costs

Disadvantages:

• Not suitable for all products
• Intensive planning

Achieving business success with the right distribution channels

Finding the right distribution strategy often takes time and a few startup attempts. If you prepare appropriately and include products, target group, competition and resources in the decision-making process, there is not much to go wrong. If you want to grow, sooner or later you will have to expand your distribution strategy with additional distribution channels and know whether and how to link them.