You must choose the appropriate distribution channels for your company, such as the wholesale and retail units that receive ownership of the product at some stage of the delivery chain.
It is important for industrial companies and importers, for example, to create a comprehensive dealer network.
Distribution channel options include:
sales through a wholesaler
sales directly to retailers
direct sales to end customers
a combination of several different distribution channels.
Dealership rights can be granted to
all willing dealers, if the aim is to attain as high a store coverage as possible
a few selected sellers, if the aim is to create an image of high quality, for example
a single dealer within a specific area, i.e. exclusive sale rights.
It is often the case that the manufacturer has no say in the choice of dealers: the power of decision lies with the central firm and trade chains.
If your company uses direct distribution, you do not have to take wholesaler and retailer commissions into account, but at the same time, this increases your own marketing costs.
In the selection of distribution channels, efficiency, affordability and coverage should be considered. When dealing with individual dealer candidates, you should take the same precautions as in the selection of any other contracting partner. When preparing a contract, in addition normal contractual matters, you should agree on how the retailers will focus on the sales of the product in question, the distribution commissions, product prices, sales targets etc. in order to avoid possible disputes.
Usually, dealers set efficiency rate goals for their operations. They allow the manufacturer and importer to see how large a share of the dealer’s overall sales they hold. There are also a number of other key figures for measuring distribution channel efficiency, such as the service level percentage, store coverage, volume coverage, marker share and profit margin II.
Your company must also work out issues related to distribution, i.e. how to deliver goods to the customers accurately, in the agreed schedule, in the agreed shape and at appropriate intervals.