What it means to create a new distribution model to enter new markets.

Going into a new market through distributors makes sense depending on how much risk you want to take in the new market, but what is distribution?

Basically, distribution means how you are going to spread your product in the target market so people can buy it. There are so many ways you can transport your product from your local market to the market you want to enter, and there are a number of considerations in selecting how you intend to do this, both in the short term and in the long term. The whole idea is how fast—and efficiently—you can spread your product widely. This means that your product needs to arrive at the new marketplace at a competitive price and with reasonable margins.

Here are some common distribution methods:

  Drop shipping – Drop shipping is when you handle the shipping process from a third party or location; you receive an overseas order from your distributor, sales agent, or online store, and then you handle the shipping directly to the end consumer. This is a great way to have control of the operations and avoid additional shipping costs, but your competitors might have a speedier or cheaper distribution channel, or one that is located directly in the target market.

  Distributor – Signing an agreement with a distribution company who sells a line of products in your field would be a good solution if you  are going into a market with different rules and regulations than your home market. A distributor would be knowledgeable about local regulations, and you can develop a relationship with the distributor. On the other hand, it requires you to find the right distributor for you, constant communication, and trust by both parties.

  3PL – These are companies that do Picking, Packing, and Shipping. The company does not sell for you—you are in direct control of sales, but you are using the 3PL company to store, pack, and ship the goods to the customer. If you have a sales and/or marketing team that is capable of approaching the new market, you will only need to use this service for the logistics of transporting the goods. However, you would not necessarily have anyone in the target market with product knowledge, technical support, customer service, or any other customer-facing roles.

There are several other methods, such as opening your own warehouse in the target market, but that’s a post for another day. The decision to select the distribution channel and the new market will rely most of the time on instinct, but Growidely can help you calculate risks and rewards of each option with a clear mind.