Assessing your distribution options is one of the most important elements of any Route to Market strategy. Choosing the wrong distribution strategy, although often not evident in the short term, can cripple a company’s long-term growth, and ability to execute effectively. Often FMCG companies in a rush for market entry, do not assess, they merely appoint distributors or importers.
In a COVID-19 world it is even more important to understand the full suite of distribution options available to you, especially current performance, and potential future performance.
Distributor or Distribution Assessments are Step 3 of our 20 Steps to Route to Market Excellence model and can be broken into Macro (what is available in the market) and Micro (the current or potential performance of each option). Some key advice here is not to assess one without assessing the other, macro first and then micro.
To do this, we use our DIME Approach (Direct, Indirect, Mix & Everything in between).
Direct Distribution is where you distribute your own products and explicitly control each element of the distribution network. In assessing direct distribution options, you need to evaluate all the potential direct options in the marketplace, rank them based on a specific criteria, and then perform detailed assessments on the top ranked options.
Indirect Distribution is where you utilise you own customers to pass your products through the supply chain. This can take many forms but is usually FMCG company to distributor(s), potentially on to wholesalers, cash and carry’s, and then on to outlet level, including retail and Horeca. In assessing indirect distribution you need to first map out all of the potential first line distributors, including their national or regional coverage map, then rank them based on specific criteria, and finally perform detailed assessments on the top ranked options. Feel free to gain inspiration from our Distributor Assessment Guide and Distributor Assessment Tool available for download.
Mix is where we use a combination of direct and indirect distribution. For example, you may directly distribute to the top 4 cities in your market as they account for 60% of the volume and you may use distributors for the rest of the market. In assessing mixed distribution, you need to map the potential options for each mix element, rank them based on set criteria, and then perform more detailed assessments on the top options.
Everything in between is essentially a stand back, stop and pause moment. This is where so-called blue-sky, left-field, total market disruption ideas come in. It is where we try to model the new and emerging trends and distribution options to see where they will fit into the new normal and how we can capitalise and gain competitive advantage.
To get you started I have provided a list of questions you can ask under each DIME element, designed to kick start the process on how to protect your distribution options in a COVID-19 world.
This current global pandemic has brought significant commercial global and local disruption, and with-it significant challenges and potential new opportunities. We do not know when these challenges will decline or if there will be further waves of the virus. So, we must prepare, now! The above approach and questions are designed to kick start and help your thinking. I am sure there are many more questions that can be asked.
I hope you find this useful and your views and comments are welcome. If you need more specific assistance or help during these challenging times, please reach out to me directly.