Distribution is getting your product to the consumer. Distribution is
one of the "Ps" of marketing - "place." Once you know
your market area and have safely processed and packaged your product,
you have to place it where your customer can buy it.
There are two types of customers you need to consider when distributing:
1. the consumer (i.e., the end user, reached through direct sales)
2. an intermediary or middleman (i.e., retailer, wholesaler, broker) who
will sell to the end user.
Direct to Consumer
Direct selling includes farmers' markets, mail or Internet order, sales
outlet from your farm or processing facility, and arts and craft shows.
Direct selling to your customer allows you greater control over the prices,
feedback from customer, and control over product presentation and display.
When selling to a retailer, you are selling indirectly to the consumer,
as the retailer is the intermediary between you and the consumer. Each
retailer serves a different type of customer. You need to consider their
customer base when approaching retailers. The retail outlets you can consider
- gift stores
- specialty food stores, i.e., health food, ethnic
- general food stores, usually locally owned and operated
- chain grocery stores
There are advantages and disadvantages with each type of retailer. Smaller
independently owned outlets can usually make decisions on what they will
stock and negotiate the terms and conditions. The disadvantage is that
the volume in a small outlet will likely be low so you will have to develop
a network of outlets, which can be costly to serve.
Large retail chains will carry a large enough volume to supply their
stores. You must ensure continuous supply. You may find that it can be
expensive as many grocery chains charge fees for product listing and advertising.
Many locally owned independent restaurants try to purchase and offer locally
grown and made products to their customer. They want guaranteed supply,
consistency in quality, and a competitive price. You might have to package
your product in larger sizes for the restaurant's convenience.
Wholesalers / Distributors
Wholesalers purchase your product then sell it to retailers and even other
wholesalers. There can be high sales potential with wholesalers because
they have access to many retailers. Wholesalers take title to the products
Brokers, agents, or sales representatives work on a commission and do
not purchase the products they sell. They help bring buyers and sellers
together and can assist in expanding sales beyond the local market.
Choosing Your Distribution
It is important for you to choose the most cost-effective method to deliver
your product to your customer. Costs you need to consider include:
- selling directly (either doing it yourself or hiring a staff person)
- retailer's, wholesaler's, broker's fees or commissions
- shipping your product
When determining your distribution method you might want to determine:
- the method that best suits your product and personality
- what your competitors are doing
- the advantages, limitations, and costs for each method
Once you have identified a preferred method, you need to consider:
- portion of the market you can cover with your preferred method
- if you can produce enough product to meet the demand