Distribution Management 101: A Beginner's Guide

Distribution management, also known as channel management, refers to the efficient coordination of products or services from manufacturers to end consumers.

As an e-commerce seller, understanding this strategy is crucial to understanding supply chain operations and optimizing the e-commerce procurement process.

Three participatory roles in channel management
Five aspects of distribution management
Difference between distribution and logistics
Five types of distribution management


Three participatory roles in channel management


Channel management involves the management and coordination of various entities or intermediaries:

Wholesalers

Wholesalers purchase products directly from manufacturers and sell them in bulk at lower prices to retailers or distributors. They primarily focus on product sourcing . For example, 80% of Alibaba suppliers are trading companies that purchase products directly from manufacturers and can be considered wholesalers.

Distributors

Distributors purchase products from manufacturers or wholesalers and sell them to retailers or end consumers. They focus more on marketing and sales, have a broader sales network, and bring products to a larger number of consumers.

For example, Walmart wholesales products from many manufacturers and brands and distributes them to its retail stores. It's a typical distributor.

Retailers

Retailers sell products directly to end consumers. They can be physical stores or online e-commerce platforms. Retailers play a crucial role in marketing, merchandising, and making products available to customers.

How does distribution management work in e-commerce?

The main objective of distribution management in e-commerce is to ensure smooth and efficient fulfillment of orders. and timely delivery. Key components typically include:

Supplier coordination

For e-commerce companies that work with multiple suppliers or drop shippers, distribution management involves coordinating with suppliers to ensure timely product availability and order fulfillment.

Inventory management

E-commerce businesses need to keep track of inventory levels to avoid running out of stock or accumulating excess inventory. A distribution management system helps monitor inventory levels in real time and automatically updates inventory as orders are placed and fulfilled.

Order processing and fulfillment

For small-scale e-commerce sellers, in order to focus more on core aspects of the business, such as product development and marketing, they often outsource their logistics services to 3PLs .

When customers place orders, sellers notify these 3PLs to process them. These companies then handle the preparation and packaging of the orders in their warehouses or distribution centers .

Shipping and Delivery

Once the order is packaged and ready, logistics providers arrange the most suitable shipping method to deliver the product to the customer's address. Customers are typically provided with real-time tracking information to monitor the shipment status.

Multi-channel integration

E-commerce companies can sell through various online channels, such as websites, online marketplaces (e.g., Amazon ), and social media platforms. A distribution management system helps integrate and manage inventory, orders, and fulfillment across these different channels.

Distribution vs. Logistics

The difference is that distribution involves the process of delivering products from manufacturers to end consumers. Its focus is on marketing, sales, and product delivery.

On the other hand, logistics has more to do with the management and coordination of transportation, storage, and distribution processes within the supply chain.


Five types of distribution management

Distribution strategies can be divided into different types. Each type of channel offers different opportunities for companies.

Selecting the most appropriate distribution management solutions depends on a thorough evaluation of several factors, including product attributes, target market, distribution costs, and competitive environments.

Direct distribution

The manufacturer or producer sells products directly to consumers without any intermediaries. This strategy is often used by small businesses and niche products .

Indirect distribution

In indirect distribution, products pass through one or more intermediaries before reaching final consumers. These intermediaries can be wholesalers, retailers, or distributors.

Small e-commerce sellers and startups tend to adopt indirect distribution solutions. Because their order quantities are often small and cannot meet the manufacturer's minimum order quantity, they will choose to purchase from wholesalers for their small orders.

Exclusive distribution

Exclusive distribution involves granting a distributor exclusive rights to sell a product in a specific geographic area or market segment. This strategy is often used for high-end products or monopolistic products. An example of exclusive distribution is Apple and Samsung, which exclusively authorize AT&T. to be the distributor for end users.

Selective distribution

Selective distribution involves selling products through a limited number of carefully selected retail outlets or distributors. This gives manufacturers greater control over their brand image and product availability. For example, PUMA and Nike collaborate with select high-end department stores to attract consumers seeking high quality and style.

Intensive distribution

Intensive distribution aims to sell products to as many retail outlets as possible to maximize market coverage. This strategy is often used for fast-moving consumer goods and products with a wide range of consumer needs, such as daily necessities, food, beverages, etc.

This is the option for most e-commerce sellers, but due to the universality of the product, you may need to consider some differentiation, such as manufacturing your products under your own brand names to improve competitiveness.

Monthly Product Report: We collect the most popular items from over 1,000 customer orders to help you find your winning product.

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