Distribution and Sales Policy

 Distribution Policy

Distribution policy is a strategy applied by a company for the correct shipment of its products from the production chain to its positioning in the market.

Distribution policies refer to the measures taken by a company, from manufacturing to packaging and final transport stages, to ensure the product reaches the most appropriate channels and points of sale; and does so within the planned launch and product replenishment times.

Types of distribution policies

A distribution and sales policy is classified according to the number of intermediaries involved, which makes it more (or less) complex to manage.

We can distinguish five standard categories:

• Direct policy: You sell your products directly to the customer and by means of a simple strategy, as a single sales channel (that is, your own physical or online store).
• Indirect policy: You distribute your products through several intermediaries and channels.
• Intensive policy: This is the most wide-ranging strategy, as it includes a larger number of intermediaries and channels. Its degree of complexity depends on how ambitious you are: do you want to sell internationally, for which you will need diverse distributors? Will you be betting on an all-channel strategy that integrates physical and digital channels, in which case you’ll need to direct more effort towards your warehouses and contacting a large number of sellers?
• Selective policy: You only distribute your products through a limited number of channels (such as only physical stores or only online marketplaces), or in a small geographical network (a country or a city).
• Exclusive policy: This involves you granting the distribution rights of your products exclusively to one channel or outlet. It can be your branded online store or a retailer with whom you reach an agreement. This type of distribution is common in brands with a very specific target or selling luxury products, in order to feed their image of prestige.

Agents who can participate in a distribution and sales policy:

• Representatives: These agents can speak for your business and bring your products closer to customers, companies and/or other intermediaries. As reps are the public face of the company they should be well trained in sales goals and brand philosophy as well as familiar with the product, thus enabling them to identify opportunities for new channels of distribution or sales. They can also handle logistics and special contracts.
• Wholesalers and distributors: These are the intermediaries who purchase your products in large quantities to distribute them among other sellers or channels. Study carefully what their work networks are like and whether they will position your products in the places that interest you most.
• Retailers or Sellers: Retailers purchase products from wholesalers or distributors in order to sell them in their physical stores or through digital channels (an online store, or a marketplace dealing with a variety of brands).
• Partners: These act as sales reps, although they will not sell your product directly. It is increasingly beneficial to include marketing agents in a distribution strategy, as your partner network can act as an ambassador for your product or brand to other companies or customers.

The ideal plan starts by studying what profit margin each of these possibilities offers. Then, as much as you can afford, try different options to find out what works best with your product.

Bear in mind that selling products to individuals is not the same as selling products to other businesses.

The distribution of products for retail, with the public being the end consumer, may have a more direct distribution policy; whereas the distribution of products for businesses normally requires the participation of reps and wholesalers specializing in business services.

Examples of distribution policies

Simple distribution

A brand of locally produced gluten-free biscuits in Barcelona wants to position or find a niche for, its products. They have a limited warehouse and a handcrafted production process that does not allow them to reach large volumes of shipments.

Their focus may be on distributing their cookies to local businesses, with an indirect yet simple distribution process leading from their factory to cafes, bakeries and specialized shops in Barcelona that will sell their biscuits.

They may also be interested in employing an agent to make their brand known through newly-established local businesses and thereby gradually increase profits. This will enable the company to obtain more equipment, achieve a higher production rate, and expand distribution to other cities and across more channels (such as their own website, supermarkets, and marketplaces).

Complex distribution

Consider the case of a long-established shoe manufacturer wishing to boost its international presence. To achieve this, today, it’s crucial to have a strong presence on digital channels.

This means involving more intermediaries. The manufacturer will need to have warehouses spread over a range of geographical locations to guarantee a streamlined distribution worldwide. They’ll need to build a network of wholesalers to position their products across the most suitable sales channels for footwear, as well as a network of sales personnel who are well informed about the brand and its catalog.