What Is Product Distribution? How To Choose a Partner (2024)

Product distribution links your business and customers, ensuring your offerings—whether it’s vases or velcro sneakers—reach the right audience. Entrepreneurs increasingly gravitate toward ecommerce businesses because they’re relatively simple to operate and provide direct access to customers. That said, the world of product distribution offers opportunities like retail partnerships, selling wholesale, and working with third-party marketplaces to expand the footprint of your business.

Consider the success of Fly By Jing, a popular Chinese condiment company founded by Jing Gao. Through its Shopify store, the brand has blended direct-to-consumer (DTC) sales with smart partnerships that have placed its spicy sauces in restaurants across the United States. It’s also landed its products on the shelves of major retailers, such as Target and Vons. This hybrid approach that combines online sales with an in-store presence is the kind of flexible product distribution strategy that helps a business flourish.

Learn about types of product distribution and how to choose a distribution partner that propels your business forward.

What is product distribution?

Product distribution is the process of making products available for purchase by moving them to brick-and-mortar retail stores or directly to consumers. It includes transferring goods from manufacturers or producers to end consumers, covering the transportation, storage, marketing, merchandising, and delivery process.

The right product distribution strategy places your product in the hands of buyers in a way that’s cost-effective, speedy, and aligned with customers’ purchasing preferences and expectations.

Types of distribution strategies

Here are three strategies to consider:

Intensive distribution

Intensive distribution (or mass distribution) makes a product broadly available and accessible through as many channels as possible. An example is a new mango-flavored natural energy drink that might be available in convenience stores, supermarkets, and vending machines across your city and state.

This approach works best for everyday low-cost items that consumers buy regularly—think snack foods, toiletries, cleaning supplies, and office staples.

Selective distribution

Selective distribution involves choosing a limited number of places to sell your product. While selective distribution limitsmarket coverage, you see more control over your brand image and the experience customers have with your product. This strategy is often used for moderately priced products with some level of differentiation.

For example, a skin care brand might opt to sell its serums and sunscreen through its own website, high-end department stores, and select beauty retailers like Sephora. This is to maintain an air of exclusivity while still reaching a sizable portion of its target market.

Exclusive distribution

Exclusive distribution means handing over the rights to sell a product to a single retailer or distributor. This approach is generally reserved for luxury or specialized items. In turn, this creates a sense of scarcity and prestige. In the realm of distribution, it allows for the highest levels of control over pricing, branding, and customer service.

For example, a high-end watch manufacturer like Patek Philippe might only allow one authorized dealer in each major city to sell its timepieces, ensuring a curated experience for discerning customers.

Direct distribution channel vs. indirect distribution channel

The choice between direct and indirect distribution channels will shape your company’s relationship with customers. Direct distribution (selling straight from manufacturer to customer) creates intimate customer connections and a tighter feedback loop. While, indirect distribution (selling via an intermediary) can create a more expansive customer base.

Ashwinn Krishnaswamy, a DTC expert, founder, and TikTok personality, advises entrepreneurs to consider these challenges when choosing the right distribution strategy for their business.

“Customer acquisition on the DTC side is hard,” Ashwinn says on an episode of the Shopify Masters podcast. “But [retail] is not going to solve your problems. It opens up a market, but you’re going to have a different set of problems that are equally challenging.”

There’s no one-size-fits-all distribution strategy; instead, there are a series of tradeoffs that come with each approach:

Direct distribution channels

Direct distribution channels are manufacturers selling products straight to consumers without anyone in between. This gives companies full control over their sales process, pricing, and customer experience. While this approach can mean higher profit margins, it also means more upfront investment in infrastructure and resources to sell directly to customers.

Here are a few examples:

• A linen and bedding brand that owns its own brick-and-mortar store.

• A stationary brand selling whimsical journals and planners through its ecommerce site.

• A local dairy farm delivering a subscription-based cheese box directly to customers’ homes.

Indirect distribution channels

Indirect distribution channels include one (or more) intermediaries between the manufacturer and the customer. This strategy can help your brand reach broader markets and take advantage of the expertise of a specialized distributor.

This approach has some drawbacks, however. For instance, you have reduced interaction with your customers and this may reduce profit margins because intermediaries take a slice of the pie. However, an indirect distribution strategy can also lower your operational costs and risks.

Here are a few examples:

• A craft beer brewery selling its IPAs through local liquor stores and supermarkets.

• A gourmet snack food brand partnering with a specialty food distributor to reach high-end grocery stores.

• A children’s book author distributing through online retailers like Barnes & Noble and Amazon.

What to look for in a distribution partner

The right distribution partners can propel your business further than you can on your own. They can work for you—using their marketing dollars, shelf space, and merchandising power to put your products front and center to the customers you’re courting. Here are some considerations when choosing a distribution partner:

Market knowledge and expertise 

The right distribution partner can unveil your blind spots and reveal opportunities you might have missed. Their experience working with other brands can help you sidestep common pitfalls that come with expanding your market reach.

For instance, if you’re a niche organic food brand looking to expand into mainstream supermarkets, seek out a distributor with a successful track record in that arena. On the flip side, if you’re a local shoe boutique aiming to go national online, find a partner experienced in scaling brands through ecommerce. If early conversations with a prospective partner yield new insights into consumer behavior, regulatory nuances, or category competition, it’s a good sign they can help you grow.

Solid industry reputation

A distributor’s poor reputation can become your brand’s problem and tarnish your image by association. Red flags might include a history of late deliveries, mishandling of products, or rocky relationships with retailers. Before jumping into a partnership, do your homework. Dig into industry forums, scour press coverage, and take a look at social media chatter to get a feel for their standing. Reach out to other brands they work with and retailers they supply to get the truth about their performance and reliability.

Scalability and expansion potential

Look for partners who have a track record of successfully scaling their clients’ businesses. Assess their infrastructure, technology, and team to ensure they can handle increased volume as your brand expands. Avoid automatically dismissing smaller distributors in favor of big-name players; sometimes, the giants won’t give your budding brand the attention it deserves. Instead, consider partnering with small or medium-sized distributors who are hungry to grow alongside you.

In the absence of impressive figures, focus on partners who show genuine enthusiasm for your product and vision. Don’t hesitate to dive into their long-term growth plans to see if they align with your own.

Non-exclusivity in partnerships

Some distributors push for exclusive partnerships, promising dedicated focus and better terms. However, as a growing company, tying yourself to a single partner can spell more risk than reward. Exclusive deals can limit your access to different markets and lucrative opportunities.

Before signing on the dotted line, scrutinize contracts for any exclusivity clauses that might be hiding in the fine print. Watch out for terms like “sole distributor,” “exclusive rights,” “non-compete,” or “geographical restrictions.” Additionally, make sure you retain the freedom to sell directly to consumers and use alternative product distribution channels.

Regional reach and penetration

Mastering distribution in a single region is challenging; replicating that success across different markets is even more complex. Differences in consumer preferences, cultural norms, and regulatory landscapes mean that what works in California might not translate to Florida, much less France. Yet, expanding into new territories is often a growth accelerant.

This is where a seasoned distribution partner can offer local expertise and established networks. Seek out partners who have successfully guided similar brands through geographic expansion while still maintaining their brand integrity across each new market.

Logistical capabilities

One of the primary advantages of partnering with a distributor is their logistical capabilities. Their established infrastructure—warehouses, transportation networks, and inventory management systems—can take you from one to 100. When evaluating partners, look for indicators of logistical excellence like sophisticated tracking systems and strategically located distribution centers.

To gauge their capabilities, consider placing an order as a customer and critically assess the entire order fulfillment process from checkout to doorstep delivery.

Compatible technology stack

Technological compatibility can make or break a relationship, so assess the compatibility of the distributor’s tech stacks with your own. Explore how your systems will interact, share data, and handle processes like inventory management and order fulfillment.

Cultural fit and shared vision

Distribution isn’t just a matter of logistics; it’s an extension of your brand that customers can see and feel. The way your product reaches the market is as much a part of your brand identity as the product itself. Look for cultural alignment between your business ethos and your distribution partner’s approach to maintain a positive brand perception.

Lindsay McCormick, the founder of the eco-friendly toothpaste tablet brand Bite, originally launched the business as a DTC brand but expanded its reach by partnering with the right specialty retailers.

“One of the reasons we went with Erewhon and Credo is because there’s so much employee education,” Lindsay says on an episode of the Shopify Masters podcast. “Their employees really love the products … that they sell and they’ll tell the customers the story of the product, which is needed when you’re selling a toothpaste tablet in a glass jar.”

Seek partners whose operational style and values mirror your own. This alignment goes beyond just moving products efficiently; it’s about finding a partner who understands and can amplify the experience you want to create for your customers.