A good distribution strategy will identify the best sales channels for your firm and tell you how to exploit them. Exporting can open up new opportunities, fuel growth and dramatically boost your takings and profits. Selling your goods and service abroad can massively increase your customer base – and your profits. But successful exporting relies on understanding where good sales opportunities lie and how best to take advantage of them.
Your distribution channel requirements
Many firms find it more cost-effective to sell through other companies rather than direct to the end-user. A stapler manufacturer will probably sell through an office supplies wholesaler rather than individual stationery retailers. Even service providers use partnering strategies – a carpet-fitter working alongside a carpet retailer, for example.
Your choice of distribution channel will also be influenced by what you want it to do. You might need a channel that showcases your product, for instance, or provides installation and customer support. If you want to build relationships with end-users, you’ll need a sales channel that gives you direct control.
What is distribution?
The right distribution strategy will fuel your business growth. Working with sales agents and companies with established customers, for example, is an excellent way to expand into new markets where the cost would otherwise limit your ability to reach customers.
The degree of control you want to retain is important, too. By working with a sales agent you can control your pricing and perhaps establish a direct relationship with the customer. If branding matters to you, work closely with a small number of distributors rather than selling through too many different intermediaries. The same selective approach applies if you need to invest in your distribution channels – by giving sales agents product training, for example.
Distribution channel management
An effective distribution strategy will enable you to use your sales channels effectively and maximise profits. Focusing on a small number of sales channels lets you invest in each one and build strong relationships with key intermediaries.
A strategic approach to distribution will also identify conflicts and minimise them. For example, if you sell your product directly online and through other offline retailers, you will find yourself in competition with your own distributors. How do you decide how much support to offer distributors and how much to invest in promoting your online sales channel?
Whatever channels you use, you need to manage them properly. This means investing in in-house systems and staff, as well as building good working relationships with agents and distributors. Efficient logistics and effective communication are vital if you want to maximise your sales.
Your export marketing strategy
Exporting takes commitment. It means expanding your operation and developing relationships in overseas markets. If your resources are already stretched dealing with your UK market, you should focus on that for now. Exporting isn’t a quick fix for a shortfall in domestic turnover or a squeeze on profit margins.
Successful exporting starts with a strategy that spells out how you can use your strengths to give you an edge and how you can overcome your lack of international experience. You’ll need to decide how much time and money to invest in getting your overseas sales off the ground and set yourself measurable targets. Exporting typically kicks off with a trial in one market, so you can refine your approach before committing resources to breaking into other markets.
Export market research
With a whole world to choose from, you might find it difficult to pin down the best exporting opportunity. Smaller businesses often operate reactively, by responding to opportunities that come their way. But you can actively seek out opportunities. Your trade association, the local Chamber of Commerce and UK Trade & Investment can all help you spot promising export markets for your offer. They can also help with export market information and trade missions.
It’s vital to do proper research before taking the plunge. This needs to cover more than just understanding local customer requirements and the competitive environment. Different languages, cultures, laws and distribution systems are just some of the obstacles you will need to overcome to sell overseas successfully.
Market research will help you tailor what you offer to suit your export market. Bear in mind, however, that local competitors will have an inbuilt cost advantage; unless you can offer something special, you’ll find your margins under severe pressure.
You’ll also need to decide how to distribute your products or services. Unless your offer suits direct sales (for example, selling online) then work with a local agent or distributor – you will benefit from their local knowledge while you build your market capability. Whichever route you choose, you’ll also need to work out how to promote your products to customers and intermediaries.
Getting your goods into the export market is yet another challenge. Some distributors will handle this for you, but you may have to deal with customs clearance and local taxes yourself. You’ll also need to negotiate payment terms and protect yourself against the risk that customers fail to pay or that exchange rates move against you.