Blog # 6 Selecting a perfect distribution network: reaching end consumer

When it comes to business systems and organization, the internal structure of the organization is not the only one important. Of critical importance is the systems and organization of the arm that reaches out to its customers - The Distribution Network. There are many ways an organization distributes its products or services. So how do we choose which one channel or a combination of channels suit an organization better?

http://www.yourarticlelibrary.com/production/5-important-factors-affecting-the-choice-of-channels-of-distribution-by-the-manufacturer/1100/

The article above lists 5 important considerations when we decide to choose distribution channels for our products, namely -

1. Product Considerations - Weight, Nature, Perish-ability etc.

2. Market Considerations - Buyers, Type of Buyers etc.

3. Government Considerations - License holders etc.

4. Manufacturer Considerations - Financial strength, reach etc.

5. Others - Cost, availability etc.

But I believe that the most important point is - Consumer Behavior.

My product, “Firefly”, is a wearable tracking device designed for the teen and the young urban woman. So ideally I should research the best way to reach out to this group. In actuality, no.

While the “Firefly” maybe “consumed” by teenagers, it will mostly be bought by their parents or well-wishers or close relatives, who will be much older. So the target audience for our distribution network is now people above the age of 40 or so.

So the question now arises, how to reach out to people above 40 years, who will mostly be at work during the week? Here are our candidate distribution channels.

E-Commerce Websites: While we could argue that in today’s age an online presence is an absolute must, the reality is simpler. Our research suggests that it is far easier and cheaper to sell our product through an established e-commerce site like E Bay or Amazon or Flip-kart. The positives are enormous - no brick and mortar store overheads, less reliance on manpower to sell, quick feedback from user communities etc. But will it reach the 40 somethings in India, where many are still not trustful of an online purchase, may not own a credit card and possibly have limited or intermittent access to the internet?

Retail Store Chains: This is one of the more traditional approaches. Organized Indian retail, though a relatively new phenomenon is slowly establishing itself across cities and towns. In my opinion, my product will have a wider reach with stores than with an online presence only. But this comes at a cost - Shelf space wars, higher rent, etc.

Direct Marketing Agents: India has a long tradition of agents or salesmen selling their wares, especially those that are focused on home makers. In fact some of India’s leading home product brands were built on dedicated and professional sales force. But of late there has been a gradual erosion of trust on salespeople. Coupled with the fact that staffing and training a sales force of required critical mass is a significant effort both in terms of money and time, this method may not be an ideal one for a small start-up.

Of course, there are many other ways to build a distribution channel. A product like the “firefly” can reach out to its target customers through Schools, NGOs, government programs etc. But what is the channel that will be most cost effective and scalable for the “firefly”? Suggestions are most welcome.