Common Distribution Strategy Mistakes to Avoid

Posted by rima chauhan on March 26th, 2020

In order to have a successful growth strategy, it is crucial to select the right place to sell your products. However, the real trick lies in selecting the right mix of product, channel and market. Working with FMCG (fast moving consumer goods) organizations around the world, you would realize that those responsible for understanding channel trends and setting product distribution strategies go through the same challenges, leading to common mistakes. Here’s highlighting the major pitfalls that businesses suffer from:

  • Assuming that e-commerce is the way forward across the board: e-commerce is undeniably a growing channel in many countries, across several industries. But slow growth in drivers like smartphone adoption or roadway infrastructure development can stunt growth in certain markets. Even in the case of high Internet retailing growth, you should consider some questions carefully, such as whether e-commerce is growing at the expense of other channels important to your sales, what growth drivers can impact the channel and what you can do to leverage them against changes, etc.
  • Assuming that what has happened in the past will happen in the future: when it comes to companies looking to forecast channels for its businesses, they make wrong assumptions based on past trends. This is risky, since you are assuming the cause-and-effect between variables will remain unchanged and the current conditions will remain static. A forecast model involved multiple variables, their relationships hardly ever being static.
  • Assuming that your sources and partners give you the full retailing and macro-economic picture: clients usually forecast channel performance using a combination of internal sales figures, what local teams/wholesale distributors are telling them, and syndicated panel data. While these may provide some directional insight, it is important to confirm whether you are looking at the entire competitive and distribution landscape, how you can account for differences in definition/coverage/methodology across syndicated sources, etc.
  • Forgetting to use channel trends to inform other areas of the business, such as product development: if your channel forecast model suggests that convenience stores are the right choice for growth, this should be used to help inform the product and packaging development to increase your chances of success. Likewise, if m-commerce is the best path for your growth, you might consider developing an app to directly interact with consumers, so that the path to purchase is shortened. This also holds good for wholesale food distributors.
  • Approaching your board with an overly simple or complex strategy: with two simple an approach, your senor directors may not get the confidence to move forward. On the other hand, if you present an excessively complex dataset combining market size, channel and economic driver forecasts, it might be a bad idea. The ideal option is to have a clear strategy developed using an evidence-based approach, this should be done with visual tools taking into account sophisticated model outputs.

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rima chauhan

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rima chauhan
Joined: March 15th, 2018
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