Market Entry – Distribution (Part One)

Distribution Types

Market Reach and Customer Access

• How products and services reach customers
• Products delivered to consumers if penetration is limited

Local Expertise and Insights

• Partners with deep knowledge of the market
• Partners bringing valuable insights about how best to position, price, and promote products

Cost Efficiency and Logistics

• Distribution that streamlines supply chains, reduce overheads, and avoids expensive logistical challenges
• Local channels lowering shipping costs, reducing delivery times, and improving inventory management

Building Brand Recognition and Trust

• A distribution presence builds credibility and trust
• Consumers prefer buying from familiar or trusted sources

Regulatory Compliance

• Different markets have different laws and regulations surrounding product sales, imports, and distribution
• Local distributors understand the legal landscape, product certifications, taxes, tariffs, and local safety standards

Control and Flexibility

• Distribution model giving different levels of control over how products are presented and marketed
• Direct distribution helping retain full control over branding, marketing, and customer relationships.  

Scalability and Growth

• Distribution channels helping scale operations
• Well-developed channels allowing for rapid expansion

Adaptability

• Distribution helping adapt to local consumer habits, infrastructure, or purchasing behaviours
• Consumers preferring purchasing online or shopping in physical stores

Risk Mitigation

• Networks spreading risk across various stakeholders
• Multiple channels reducing risks

Customer Service and After-Sales Support

• Provides post-sale services, customer support, warranty claims, and returns
• Better customer service being physically closer to customers and understand local expectations

Distribution Models for Market Entry

Direct Distribution

·       Full control over brand, pricing, and customer experience

·       High upfront costs, operational complexity, and slower scale

Indirect Distribution

·       Lower investment, quicker market entry, and access to local expertise

·       Less control over the customer experience, potential conflicts with partners

Franchising

·       Quick scalability with lower capital investment

·       Less direct control over operations and quality; requires strong brand and operational systems

Licensing

·       Low-risk, passive income through royalties, and rapid market penetration

·       Limited control over the use of your brand or product

E-commerce

·       Low upfront costs, ability to quickly test a new market

·       High competition, reliance on the platform’s rules, and potential logistical challenges

Joint Ventures

·       Shared risk and resources, local knowledge, and market access

·       Complex management and decision-making processes, potential for conflicts between partners

 Direct Sales

There are several direct selling methods to consider, each suited to different business models, customer preferences, and market conditions.

Retail Stores (Brick-and-Mortar)

·       Direct interaction with customers

·       Physical presence builds brand credibility and trust

·       Provides hands-on demonstrations and in-person experiences.

Direct Sales Representatives

·       Builds trust and allows for personalised, detailed selling

·       Customer feedback to refine the sales pitch and offering

·       Long-term relationships and repeat business

Direct Mail or Catalogues

·       Tangible, physical medium that customers find appealing

·       Effective for reaching specific, curated customer segments

·       Targeted use of mailing lists or demographic data

Social Media Sales

·       Targeted advertising to specific customer segments

·       Direct engagement with customers through comments, direct messages, and posts

·       Strong visual appeal for products that benefit from image-driven marketing

Cold Calling

·       Direct, real-time communication with customers

·       Personalised and tailored to individual customer needs

·       Feedback on interest levels and objections

Pop-Up Shops/Temporary Locations

·       Limited investment compared to permanent stores

·       Creates a sense of urgency or exclusivity

·       Direct customer interaction

Direct Partnerships or Affiliates

·       Access to an existing customer base or follower groups

·       Low-cost, low-risk model

·       Scalable without needing to expand infrastructure

Distributors and Wholesalers

The type of distributor or wholesaler selected depends the nature of the product, size of the market, budget, and long-term goals. 

Exclusive Distributors

·       Focus product with dedicated resources

·       Communication and stronger brand control

·       Invests more in sales and marketing

Non-Exclusive Distributors

·       Flexibility with distributors in a region, increasing reach

·       More options in case of underperformance

·       Easier to test different distribution models or market strategies

Wholesale Distributors

·       Established relationships with a wide range of retailers

·       Less risk, as the distributor assumes responsibility for inventory and logistics

·       Cost-effective way to gain market access without needing to manage multiple relationships

Retail Distributors

·       Direct access to the consumer market through the distributor’s outlets

·       High visibility if the retailer is a prominent brand

·       Control over the product’s positioning and pricing

Specialty Distributors

·       Expertise in niche markets, allowing for effective marketing and positioning

·       Customer insights and a highly focused approach to selling

·       Opens doors to high-value customers and specialised retailers

Importers/Exporters

·       Local market expertise simplifies logistics of cross-border trade

·       Regulatory requirements ensuring compliance with import laws

·       Manages the complexities of shipping and customs

Cooperative or Group Distributors

·       Lower costs through collective buying power and shared resources

·       Accessing multiple smaller distributors who work together

·       Conflicts or inefficiencies if partners have differing interests

Choosing the right distribution strategy and direct selling method can be the difference between success or failure when entering another market.