Once manufacturers create products, they will send them far and wide to be sold in stores, reach customers, and increase profits. But what is the process behind getting these products from one place to another? You will learn more about how retail distribution works below.
What is Retail Distribution?
The term distribution refers to the manufacturing, packaging, delivery, and transport of a product. For example, a retail distributor purchases products from a manufacturer and then resells them to a retailer for a profit.
These distributors are an essential part of the supply chain between manufacturers and buyers, making this a huge market. Without retail distributors, there would not always be a dependable way to get a product from a manufacturer to a consumer. Retailers rely on distributors to deliver goods on an agreed timeline to sell to customers and keep their businesses going.
Types of Retail Distribution
There are several different types of retail distributors that are important to understand.
National Retail Distributors
This usually refers to distributors that sell to retailers, think household name stores, like Walmart. Distributors work with these “national” accounts, which means that the retailer has stores across the country. National retail distributors harness the ability to rapidly increase a product’s reach and improve distribution strategy. Their relationships with major retailers leads to mass product distribution.
Regional Retail Distributors
Regional distributors don’t have as large of a reach as national retailers. They typically cover a smaller geographical area. Although this type of distributor has less brand recognition, they can act as a more engaged partner with suppliers. This type of distributor usually works with growing brands.
Local or Specialty Distributors
Dedicated to more specific retail accounts, local distributors are usually more expensive and selective about suppliers. The area served by local or specialty distributors is much smaller than the previous types discussed and they sell fewer products. However, this doesn’t mean there isn’t an opportunity for profitability here. Due to the specialized nature of their business, this type of distributor is typically in high demand.
How Retail Distribution Works: Channels and Levels
Distribution channels refer to the flow of business between a manufacturer to the hands of a consumer. This channel is known as the supply chain. There are two different types of retail distribution channels to be aware of:
- Direct Distribution – This is where the manufacturer delivers a product to the consumer with no middle man in between, making it a direct transaction.
- Indirect Distribution – An indirect distribution channel refers to a situation where there are intermediaries between a manufacturer and the customer. An “intermediary” refers to someone like a distributor.
To take this a step further, the different levels of distribution go along with these channels. You’ll notice that the first level takes the least amount of time to run through the supply chain. The last level is the most time-consuming since it has the most steps to go through before the sale.
- Level Zero – This is a direct-distribution situation where the producer or manufacturer sells their product to the consumer.
- Level One – This is an indirect distribution channel. Here, there is a middleman between the manufacturer and consumer. Here is where a third-party logistics (3PL) provider, such as Beitler Logistics Services (BLS), comes into play. BLS is responsible for transporting the product from the manufacturer to the retailer. The retailer will, in turn, sell the product to a consumer.
- Level Two – There are fittingly two intermediaries between the manufacturer and customer in this case, making this another indirect channel. For instance, a producer would sell first to a wholesaler. They would then sell the product to a retailer, who would be responsible for selling it to a consumer.
- Level Three – This level is a replica of level two, with one slight difference. The alteration here is an agent who brokers a deal between the retailer and the consumer.
Advantages of Working With a 3PL Transportation Provider
Manufacturers reap several notable benefits that come from partnering with a 3PL provider.
Reliable Customer Service
A 3PL service provider will ensure that a manufacturer always has exact shipment information. From the time items depart from the origin facility until they reach the retailer’s hands, detailed shipment information is available. Plus, 3PL providers like BLS offer 24/7 operational support, handling the issues with ease when emergencies arise.
Increased Cost Savings
Using a 3PL to move retail from the manufacturer to the sellers helps decrease costs. Manufacturers can utilize a 3PL to find the best transportation method. For instance, pool distribution shipments allow you to pool items into a single load at a competitive price. Not only does this save money, but it also cuts down on time spent coordinating shipment, which increases efficiency.
Working with a retail distributor allows manufacturers to reach a larger audience with their products. Partnering with a company like BLS means that a manufacturer’s reach can expand throughout the U.S. and Canada. Their extensive network is an excellent way for manufacturers to grow their business and increase sales.
Profitability of Retail Distribution
There’s a lot of money on the table when it comes to the distribution industry. United States Business Logistics costs reached $1.6 trillion in 2018, which accounted for eight percent of GDP that year (source). Much of this comes from the distribution of retail products.
If you’re ready to start your own lucrative retail distribution business, Beitler Logistics Services is here to provide transportation services. Contact the BLS team today to get started!