The views expressed by Entrepreneur contributors are their very own.
For many recent business owners, direct distribution may appear to be the most cost-effective way to reach customers. Without the need for partnerships, third-party integrations, or revenue sharing, it has the lowest apparent cost. However, as businesses grow, a well-balanced mixture of distribution channels becomes crucial to unlocking recent growth opportunities. By strategically diversifying your distribution strategy, you may protect your brand and build a more agile and resilient business model.
Despite the higher costs, distribution partners not only reduce the operational burden, but can significantly expand market reach through their established networks. This is actually the case in the hotel sector, where distribution has all the time been critical. Since products can’t be moved, the entire hotel inventory is replenished by intelligent distribution.
Before the Internet, the enormous distribution power of hotel chains gave them a huge advantage over independent hotels. But since the early 2000s, hotels have developed recent ways of distributing through various online channels, corresponding to Expedia and Booking. In fact, 65% of all direct bookings now come from guests who first discovered the property through an online travel agency (OTA).
Channel partners routinely prove their value across industries, but they are not a ready-made solution. To develop an effective channel strategy, it is necessary to look beyond where your competitors appear. Let’s look at how to diversify, innovate, and potentially outperform them.
Balancing Direct and Partner Distribution
At its peak in 2011, Toys “R” Us had revenues exceeding $13.9 billion. Just seven years later, the brand filed for bankruptcy and closed all of its U.S. stores, though it has since begun a comeback under recent management. CEO David Brandon related to closure to the company’s “inability to provide expedited shipping options” and “lack of a subscription-based delivery service.”
In other words, in a market dominated by online retailers like Amazon, their distribution strategy hasn’t evolved. Similarly, mega-chain Blockbuster was worn out by Netflix, and RadioShack was defeated by its limited e-commerce strategy. No matter how big your brand becomes, maintaining a diverse distribution mix is essential.
In practice, this implies continuously monitoring your competition and proactively adapting to market changes. Therefore, frequently collect and analyze data from your distribution channels. This will assist you to make quick, effective changes to optimize sales and market position.
Moreover, while brands shouldn’t rely solely on direct distribution, it is a key element in maintaining control over brand image, customer experience, and pricing. Apple is an industry leader in this regard. While the company has many retail partners, it also invests heavily in its own retail stores and online direct-to-consumer channels, which allows it to maintain its market dominance.
Finding progressive distribution channels
In a competitive market, the path of least resistance is to discover and mirror the distribution channels of larger players. Ironically, this safety-first approach comes with its own risks. Rather than becoming a commodity, finding market niches could also be a higher approach. To do this, recognize that some channels have a stronger presence in some markets than others. For example, if you would like to expand into a recent region, discover channels that have access to demand in that area.
In our industry, some Asian countries have specific OTAs that are widely used, so listing on these platforms can attract recent customers. While investing in specialized segments may not offer the same visibility as mainstream markets, a well-targeted area of interest strategy can lead to higher conversions and higher profitability. For example, Red Bull has carved out A $10 billion market in the energy drink industry, reaching extreme sports enthusiasts through special events and sponsorships.
Filling an unmet need means you may develop into the go-to solution in a small but profitable market. The caveat is that this area of interest approach can take months or even years to develop. While it’s still necessary to leverage the major players, don’t lose your unique value proposition in the process. A “be everywhere” strategy can work if you’re not trying to be every part to everyone.
Marriott is an example of this balanced approach. While guests can book all of the brand’s hotels through the company’s central reservation system, Marriott uses each direct channels (website, mobile apps) and indirect channels (OTAs, travel agents) to reach different market segments. This allows Marriott to meet a number of traveler preferences, from business-oriented brands like Courtyard by Marriott to leisure-oriented properties like Sheraton.
Strategic expansion as change
Markets will all the time fluctuate. But if you listen to what customers are saying about where they are shopping, you’ll learn about recent trends and recent places to place your products. If your distribution strategy is well-blended and you are not overly dependent on any one channel, you will probably be in a good position to use the changes to your advantage.
At least once a 12 months, change one or more of your least selling channels to find recent customers. As a rule of thumb, when market demand is down, brands should increase the variety of distribution options available. On the other hand, when market demand is high, be more selective and focus on audience quality, average prices, costs, and manageability. Successful brands often show this sort of adaptability.
Perhaps the biggest name in graphic design, Adobe even modified its entire revenue model as the software industry began to shift to cloud-based solutions. While Adobe’s initial move from licensing and upselling its creative software suite to a SaaS model was met with criticism, it turned out to be a masterpiece—recording revenues of $19.41 billion in fiscal 12 months 2023.
Premium brands like Apple and Marriott are able to capture increasing market share despite higher prices by continually increasing visibility and engagement. When developing a distribution strategy, find ways to build in agility. By establishing metrics early and recognizing the need to evolve as market conditions change, you’ll be well-positioned to test emerging platforms, explore recent niches, and balance a strategy that may drive each immediate revenue and long-term growth.