Distribution

The distribution systems covering individual markets ensure the delivery of manufactured goods to their final consumers or users.

The task of the distribution system organized around our products is to ensure that the goods reach their consumers or users, regardless of the continent. Meanwhile, not only the product moves in its physical reality: the ownership of the goods changes, the value of the goods changes, the information about the goods and delivery changes. 

Accordingly, distribution relies on two pillars: sales channels and for logistics. Their relationship is clear: the task of the sales channel (a marketing mix as one of its elements), so that our product finds its final owner, and logistics takes care of moving the physical product. 

In the sales route, the ownership of the goods passes from the manufacturer to the consumer/user (and the value of the goods in the opposite direction). This process is mostly done by resellers. (The exception to the latter is project sales, where the manufacturer contracts directly with the subsequent user of the project.) 

And logistics manages the physical movement of goods: it optimizes stock, compiles shipments, decides on transport routes and means of transport, ensures transportable packaging, and performs the organizational and administrative tasks required for physical relocation.  

Distribution costs can also be shared marketing and logistics expenses. The difficult-to-quantify cost implications of our decisions regarding sales routes mainly affect the level of our sales prices, but they can also increase our production and logistics costs. (This may be the case if, for example, we sell directly to retailers instead of wholesalers, in addition to our production costs for smaller quantities, more demanding product adjustments or other reasons, our transport and transport organization costs may also increase). 

Logistics costs can be quantified more easily, so an optimal logistics mix can result in significant cost savings. (In international trade, this is mainly achieved if we also rely on a competent freight forwarder.)

Our sales channel policy decisions determine our market success in the long term (especially in vertical markets, where buyers and their buyers are mostly resellers). The market embeddedness and customer base of our direct customers determine the range of consumers available with our products. It also affects our market share, our competitive position, and last but not least, our availability profit too. 

It is easy to see the consequences if we only know our first reseller customer on a sales trip, and we do not know in which market segment of which countries he works, what his customer base is like and their customer base. If this is the case, we cannot even know where (in which foreign markets) the final consumers/users of our products are and what their specific needs are in relation to the given product/product development. 

In addition, the motivations of a wholesaler or a retailer regarding the purchase of our product are not necessarily the same as the needs of the final consumer/user. We primarily sell the intermediate trader the hope of making a profit with our products, they are only of secondary interest in their use value and properties. 

The seller (exporter) distribution decisions require multifaceted information about the participants of the given vertical market, in addition to resellers, above all about the final consumer. 

In theory, we can make a number of decisions about the length of the sales routes, or about their shortening and width. We may consider working on parallel sales channels. We can model whether to organize a vertical marketing system around our products with long-term contractual relationships, in which our dominance is ensured. Can we analyze whether to build proprietary sales channels? We can review how the distribution activity is connected to the whole into the supply chain? Whatever we do in these areas, all these decisions will naturally have logistical consequences.