Starting a distribution business can be exciting if you know how to manage it. There is no doubt that it is one of the most productive trades on the list, and there are many entrepreneurs who are interested in starting this business.
Essentially, your role as a ‘distributor’ is to act as a middleman between manufacturer and retail shop owners. However, there are some cases where distributors sell directly to consumers as well. Initially and without any structured system in hand, You may find it difficult to keep jumping between producers and retail traders, but if you work well and hold all the threads firmly, then it is not so hard as well.
If you are thinking of entering into this industry, then this article on ‘How to start a Distribution Business’ will help to kick off your journey. Here are the things given in this list that you should consider before starting.
Factors that should be considered before starting a distribution business:
A distribution business needs proper market research, a viable implementation plan, and other key things to consider if one wishes to start a business. Here are the essential items to consider:
Making a good business plan
A good plan is half of the battle. Making a proper plan before starting a distribution business will save not only time but also money. A good business plan integrates the business strategy and vision while addressing all the issues. It is less likely to fail if the business plan identifies the challenges as early as possible, sorts them before they become a pain in the neck, and helps to create a smooth business journey minimizing the risks in the journey.
Choosing a product/Figuring out what to sell
Many products are available in the market, but you should choose the one already in demand or is expected to increase in demand in the near future. While running the business, you obviously want to make a profit; when selecting a product, you should carefully measure how much profit you can make from it. To make the business viable, following the core principle of trading business, you must buy products at a lower price and sell them at a higher price. Analyzing a competitive scenario of that relevant industry and other complementary products is also a must. So, figuring out what to sell is an extremely critical decision that you must take rightly.
After selecting a product at the initial stage, the next step is to filter the business idea through various processes in order to analyze the competition. The purpose of a competitive analysis is to find current and future competitors and identify their strengths and weaknesses (compared to your position in the market), and observe how they are approaching the market.
Upon proper analysis, you can ascertain the possibilities of effectively outranking your competitors. It may include estimating what is needed to make a significant push in the market regarding money, resources and strategies.
Looking for the right business partner/Investor
To create a successful business, you better have a trusted partner who shares the same spirit and commitment as yours. It will greatly reduce the pressure of managing a business from a single end. It will also facilitate the flow of new strategies that will come up by sharing ideas. On the other side, having one or more business partners can significantly reduce the initial investment or capital required to start and operate the business.
It is also important to keep in mind that an investing partner can only be attracted if the business model can clearly show ways of managing it profitably. So after finding a profitable product and doing an in-depth competition analysis, you can offer or share your business idea to attract people as operating or investors partners.
Overcoming Implementation challenges
After the planning stage, you need to develop a beautiful implementation plan to execute the goals outlined in the initial stage. In the implementation stage, you will fight those identified challenges and start cutting your path to success. Needless to say, many more unpredicted challenges will appear on the way. So you need to stand firm, keep your focus on growth, and keep moving forward, breaking all the obstacles.
Making a proper marketing plan
A realistic but ambitious marketing plan will surely serve as one of the crucial success factors for your business. Many businesses fail due to a lack of a proper marketing plan or failure to execute as per plan. However, it has become much easier to reach customers in today’s technological world and get them aware of your product and service.
Nowadays, online digital marketing has mostly taken over the space of old-fashioned physical marketing. That’s why it’s good to have a specifically targeted marketing plan at the beginning of the business in order to implement it by creating a beautiful blend of online and offline marketing; centered on the target audience of the product.
One of the core challenges of implementing a distribution business is managing the warehouse properly and delivering products to the proper retail shops or locations. The more delivery points a business has, the more challenging it becomes to manage the warehouse. You, as a distributor, have to keep an accurate account of the product flow that is coming from the manufacturer and is delivered to the retailers. At the same time, you have to keep track of the returned products coming back from the retailers to the warehouse.
To manage all of these channels a proper distribution management software is necessary. With the help of such software, organizations can manage inventory and deliver products without any hassle. You can use a suitable distribution management software system to manage the warehouse, which will allow you to bring all the warehouse accounts and retailers in one place and get accurate data.
Securing the Sale Price
You need to make sure that you are making the product more competitively priced so that you do not lose out to the competition. There is no general rule regarding profits since each product and industry is different; find a competitive price depending on the supply chain and industry analysis.
1) Don’t take it lightly
Do a comprehensive analysis of the market, your competitors, distribution channels, and everything that may affect your business operation in the future.
2) Keep your mind open
Be willing to accept the reality of the market you are trying to reach out to. Although you may be doing well in your current market/ industry/ business, keep in mind that you are likely to be a stranger in your new market. Embrace the local business knowledge by letting go of your ego.
3) Start small
It’s not practical to cover an entire country or region in one shot. Begin small, measure, test, and then expand slowly. Plan for a pilot test and a field validation. Make a small-scale test of your strategy.
4) Look for third parties
To start a business in a new market, what should you do? A solo trip or accompanied one? It depends. If you have the full capacity for distribution, coverage and knowledge of the market, direct penetration may be an option. If these options are not available, and in most cases, it is better to include a third party that knows the market while reducing financial risks.
5) Don’t neglect your current operations
Getting caught up in the moment makes it very easy for one to lose focus. Usually, what is new is more attractive than what we are doing currently. Keep in mind that your current operation, brands, and products are what generate cash for new projects, especially while scaling up your business.
Summarizing and wrapping up:
Starting a distribution business is a mix of challenges and opportunities. Managing the retail channel is a tricky thing when you are new in the business. In order to maximize sales, a business needs to study its distribution network and business strategy, evaluating its products, distribution capacities, and strategies.
Initially, it might be wise to conduct thorough market research and test out one or two products with minimum investment to gauge the market’s reaction. If the business goes well, you can expand wisely according to the demand.