Choosing a distribution method

Choosing a distribution method means deciding how a product will be made available to the people the business wants to sell to. This is not just about a shop's location: the method changes the business's costs, who it can reach, the service customers receive and, in turn, its profit.

The method should suit both the product and the target market. For example, a business selling handmade wedding cakes might use a local retailer, where customers can discuss designs face to face before ordering. A business selling downloadable workout plans might choose an online route because the product and its buyers do not need a physical shop. Choose badly and the business could pay for costs it does not need, or miss customers it could have reached.

Retailers: service and cost

Physical retailers can offer immediate availability: a customer can take the product home that day. They can also give personal service, such as explaining features or helping with a choice. These benefits may attract customers and increase sales. However, shops have running costs such as rent, heating and staff wages. A business may need to charge higher prices to cover these costs, or accept lower profit on each sale.

Reaching different customers

A business may sell through both retailers and e-tailers (retailers that sell online) to reach different customers. Some customers want to see and handle a product in a shop; others are happy to order online. For example, a small furniture maker could sell through a local shop for customers who want to check the finish, and through an e-tailer for customers who cannot visit the shop. This can widen sales reach, but it also means managing two sets of costs and customer expectations.

The best method depends on the product, the customer and the business's objectives. A business aiming for high profit per sale may prefer a method with lower running costs, while one aiming to reach as many customers as possible may accept higher costs to widen distribution.