Choosing a distribution partner is one of the many decisions facing a start-up who is ready to accelerate growth. A distribution partner provides logistics, warehousing, and fulfillment services to ensure that products travel effectively from manufacturer to the retailer.
Brands often transition to a distributor after creating a unique value proposition, not only for their consumers but also for retailers, distributors and brokers. Different partners in the value chain are looking for different value propositions.
A winning value proposition that attracts a distributor includes; a product that consumers want to buy, a price they are willing to pay, availability in a minimum number of stores, and a product that contributes to the growth of the specific category by being in demand and unique.
Distribution Strategy Insights:
1. Consumer and channel:
Develop a deep understanding of the end consumer, and the channels/stores they are shopping in. Canadian distribution landscape offers a diverse distributor network with different specialties and focus on regional and/or national distribution. Great partnerships will help brands evolve into national players by first growing within the province and building brand loyalty among consumers and retailers. Distribution is not merely about servicing the retailers and consumers, but also about creating the demand so that the products move off the shelves. If a distribution strategy does not address how demand is shaped then it is not a comprehensive approach to growth.
2. Business model:
Focus on developing a business model that supports growth objectives while also offering flexibility to adapt to the changing consumer and industry landscape. A brand’s goal is to continue to serve the customers and the consumers with speed and efficiency. A good business model should address three areas for long-term success:
A scalable supply chain to ensure the capacity to support sales growth. This includes sourcing strategies all the way down to inventory replenishment.
Strong financials with a good margin and predictable cash flow. Working with a distributor is often a big milestone for start-ups and they must understand the cash flow required.
A sales and distribution team that is collaborative and execution focused. Build a partnership with a culture of collaboration, trust and in-market execution.
3. Distributor partnership structure:
Last but not the least is to ringfence the distribution partnership with a detailed agreement that addresses all aspects from margins, inventory levels, lead times, payment terms, service level adherence, to all contractual obligations on both sides. Brands owners can reach out to fellow entrepreneurs and industry networks for thoughts on how to best navigate these relationships.
Written By: The Venturepark Labs Team