Saturday, 2 March 2013

Starting a business – distribution strategy

Your distribution strategy is the method you use to get your product or service from the original manufacturer/service provider to the final purchaser or end-user – i.e., how and where your customers buy your product or service.

In the pre-online retailing world (for those of us old enough to remember it, it was only 15-20 years ago!), most people purchased goods and services from the local shops.  Where I grew up in America, mail order was a direct to the consumer alternative, but in Australia that option was rare (and still is).  This model encouraged manufacturers, wholesalers, and retailers to build the largest facilities and produce the most generic goods possible to maximise their economies of scale.  Businesses took advantage of the lack of small number of competitors in the Australian market to charge high prices and maximise their margins. 

If you think I’m exaggerating, consider the car industry, where 99.9% of all cars would be purchased through a dealer in Australia.  If you research a globally-produced car, such as a VW Golf, you will find that in the US, there are twice as many colour and other factory options, and the car is half the price as in Australia.  For that matter, even cars produced in Australia and shipped to the US are at least 20% cheaper in the US!