Learn what retail distribution is, key best practices, and how to create an effective game plan for success
Why You Need a Retail Distribution Strategy
Expanding into retail distribution can be a pivotal growth opportunity for your business, offering increased market visibility and access to new customer bases. However, it’s essential to assess whether your operations and supply chain can handle the added complexity and demands of retail partnerships.
In this guide, we’ll break down the essentials of retail distribution, explore various distribution models, and give you a comprehensive checklist to determine whether your business is ready to scale.
What is Retail Distribution?
A retail distribution strategy is one method that a merchant or manufacturer can leverage to get their products into the hands of consumers.
Some merchants go direct to consumer (often via their own ecommerce site or through ecommerce marketplace sales), while other merchants choose the path of traditional brick and mortar retail.
Traditional retail channels tend to require more intermediaries than direct-to-consumer (D2C), including wholesalers and retail distributors, and therefore products sold through brick-and-mortar retailers are often more expensive.
However, today’s consumers discover new brands and products across multiple sales channels, and the only way to meet all of your potential customers is through a multichannel approach that includes both D2C and retail channels.
How Does Retail Distribution Work?
Retail distribution requires tight coordination across inventory management, transportation, and logistics to maintain trust and satisfaction, ultimately driving customer loyalty. And in a retail distribution relationship, there are really two customers – the end consumer and the retailer. It’s essential to ensure that retail partners stay stocked with your most popular products and receive goods according to their standards.
Successful distribution is especially vital in today’s omnichannel landscape, where seamless service is key to retaining customers. Multichannel selling strategies include ecommerce, marketplace, social, and traditional retail sales, requiring integrated supply chain technology and flexible fulfillment operations.
The retail distribution process involves several key steps:
- Product Procurement:
Retailers must forecast demand accurately and partner closely with suppliers to avoid stockouts or overstock situations that could impact cash flow and customer satisfaction. - Warehousing and Storage:
Proper storage procedures maintain product integrity while keeping inventory organized and accessible. Maintaining warehousing best practices for product storage ensures efficient pick paths for faster fulfillment times. - Order Fulfillment:
Timely order fulfillment is critical to maintaining product availability levels and meeting customer expectations. Order fulfillment for retail distribution often requires meeting the specific retail compliance requirements of each retailer. - Transportation and Logistics:
Partnering with the right partner for freight forwarding and final mile delivery can reduce lead times and costs, ensuring operational efficiency throughout the supply chain. - Retail Store Delivery:
Each retailer will have their own set of standards for product packaging, labeling, and delivery schedules. Partner with a fulfillment provider that knows the ins and outs of retail compliance and retail store delivery. - Replenishment and Returns:
Keeping shelves stocked and processing returns efficiently ensures uninterrupted service. Quick replenishment of high-demand items and a hassle-free returns process foster customer satisfaction and loyalty, helping retailers maintain their competitive edge.
What Does a Retail Distributor Do?
A retail distributor represents manufacturers and merchants looking to sell their products in retail stores. The distributor helps retailers find new products to keep their inventory fresh and helps merchants get more exposure by getting them on the shelves of stores. Retailers seldom meet directly with manufacturers or merchants, so a retail distributor can help open doors as a trusted source that retailers rely on to discover new brands.
3 Main Retail Distribution Channels
Retail distribution involves various channels that work in different ways to bring products from manufacturers or suppliers to end customers. Choosing the right retail distribution strategy depends on your business model, product type, and target audience. Below, we explore three major retail distribution channels and how each serves different business needs.
1. Wholesalers
Wholesalers purchase products in bulk from manufacturers and resell them to retailers, making it easier for brands to distribute across multiple retail outlets. This channel is particularly effective for companies aiming to scale their presence quickly across diverse retail environments.
Who Should Use the Wholesale Distribution Channel?
Large Manufacturers:
Manufacturers producing high volumes of consumer goods benefit from working with wholesalers. Wholesalers help manage the complexities of distributing across broad networks, freeing manufacturers from handling multiple retail relationships directly.
Seasonal Product Producers:
Businesses that sell seasonal items—such as holiday decorations or swimwear—can leverage wholesalers to reach specialty stores quickly. Wholesalers already have relationships with these retailers, ensuring that seasonal products hit shelves at just the right time.
Brands Seeking Rapid Market Penetration:
Wholesalers offer an effective way for new or expanding brands to establish a strong market presence. By distributing through a wholesaler’s established network, brands can quickly reach multiple regions or retail categories without having to build each relationship from scratch.
How Wholesale Distribution Works
In a wholesale distribution model, manufacturers sell large product quantities to wholesalers at a discount. The wholesaler then breaks down these bulk orders into smaller batches and distributes them to retail outlets based on demand.
For example, a company producing high-end kitchen appliances may sell large orders to a wholesaler, who then distributes the products to specialty home goods stores, large department stores, and online retailers. This ensures the brand has wide market coverage without having to manage each retail relationship individually.
Key Requirements for Direct-to-Wholesaler Distribution
- Consistent Product Quality: Wholesalers prioritize manufacturers who maintain strict quality control to meet the standards of various retail partners.
- Scalable Production Capacity: Manufacturers must be capable of producing large volumes to meet the demands of wholesale orders, especially during peak seasons.
- Reliable Logistics and Delivery: Timely delivery is essential to maintain the wholesaler’s distribution schedule and prevent stock shortages for retailers.
This approach allows brands to focus on production and product development while wholesalers manage the distribution network, providing a valuable bridge between manufacturers and retailers.
2. Retail Stores
Retail store distribution involves selling products through brick-and-mortar locations, such as convenience stores, supermarkets, department stores, or boutiques either directly or through a third-party distributor. Partnering with brick-and-mortar retailers offers significant advantages, including wider market coverage, increased brand visibility, and new customer acquisition through exposure in high-traffic areas.
Who Should Use Retail Store Distribution?
Consumer Goods Companies:
Everyday products like food, beverages, and toiletries benefit from retail distribution because they rely on high purchase frequency. Physical presence in stores ensures customers can easily access these products as part of their daily routines.
Established Brands:
Well-known brands often use retail stores to maintain their market dominance and customer loyalty. Retail partnerships also reinforce brand recognition through shelf presence, making products readily available where consumers already shop.
How Retail Store Distribution Works
In this model, brands either sell directly to retailers or work with a distributor to manage the process. For example, a beverage company may partner with a grocery chain, ensuring their drinks are prominently stocked in the beverage aisle. This allows the brand to meet demand efficiently while enhancing customer convenience.
Key Requirements for Retail Store Distribution
- Strong Retail Relationships: Building strong partnerships with retailers increases the chances of securing premium shelf space and promotional opportunities.
- Consistent Inventory Management: Ensuring stores are replenished on time prevents stockouts.
- Regulatory Compliance: Meeting product labeling and safety standards required for retail sale streamlines the inbound process and strengthens partnerships.
Partnering with an outsourced fulfillment provider like Ware2Go, a UPS company, enables you to meet these requirements without diverting attention away from your core business operations. Ware2Go’s nationwide distributed network enables faster replenishment times and end-to-end inventory visibility. Our 3PL and warehouse partners are well-trained in retail compliance SOPs around packout and labeling. Click here to learn more.
3. Independent Distributors
Independent distributors manage the distribution of products on behalf of manufacturers, handling logistics, warehousing, and retailer relationships. This is an ideal solution for businesses that want to tap into established distribution networks without the burden of directly managing supply chain operations.
Who Should Use the Independent Distributor Channel?
Small to Medium-Sized Businesses:
SMBs benefit from independent distributors as they lack the scale or resources to develop their own distribution networks. Partnering with a distributor allows them to access retailers efficiently without the complexities of handling logistics and retail partnerships.
Companies Entering New Markets:
Businesses expanding into unfamiliar regions can use independent distributors to quickly gain market entry. Distributors already have local knowledge and relationships with retailers, reducing the risks and time associated with entering new markets.
How Independent Distributor Models Work
In this model, manufacturers sell their products in bulk to independent distributors, who then manage storage, transportation, and delivery to retail partners. For example, a small organic snack company can partner with a regional distributor specializing in health food stores, ensuring their products reach the right retail shelves quickly. This helps smaller businesses focus on product development while the distributor ensures timely and efficient delivery.
Requirements for Direct-to-Independent Distributor Distribution
- Flexible Warehousing Solutions: Ware2Go’s scalable warehousing ensures businesses can store products closer to distributors to minimize delivery times and meet fluctuating demand.
- Seamless Inventory Management: Real-time inventory tracking from Ware2Go ensures businesses can coordinate with distributors effectively and avoid stockouts.
- Optimized Transportation and Logistics: Ware2Go’s nationwide fulfillment network supports fast and cost-effective delivery to independent distributors and retail partners.
How to Tell if You’re Ready For Retail Distribution
Having a clear understanding of your value proposition and place in the market are the key to growing across multiple channels and eventually securing those coveted retail partnerships.
If you think retail distribution may be the next step for your brand, ask yourself these eight five questions before taking the plunge.
1. Is Your Product Ready for Retail and Distribution?
Quality assurance is of utmost importance in retail distribution. An oversight at any phase of the production process — from procurement to packaging, can potentially damage your brand image for a long time.
Retailers and consumers can be forgiving, but there’s no need to risk finding out how far that patience extends.
How to evaluate if your product is ready for retail distribution:
- Conduct market research: Analyze their performance, pricing, and unique selling propositions of your direct competitors in the retail space to understand market demand and position your product effectively.
- Run a product quality test: Ensure your product meets retail standards and customer expectations. Testing for durability, packaging, and functionality will help identify any improvements needed before launch, increasing the chances of success in retail environments.
Ensuring your product is at the highest quality, ready for the end user and meets the need for the solution your product offers is key to long-term retail partnerships and consumer preference.
2. Is Your Packaging Ready for Retail Distribution?
Package compliance is a must. UPC, inner and outer case, FDA regulations that vary by state are all considerations that must be thoroughly investigated. Finding a trusted fulfillment partner will also ensure that your products are being packaged and handled correctly to avoid damage in transit to avoid costly returns and unsatisfied customers.
How to evaluate if your packaging is ready for retail distribution:
- Double-check industry compliance and regulations: Each industry has standards for proper labeling. Expiration dates, how to use, and a path for inquiries are all important for the end user.
- Visual appeal: When creating or designing a package, a good rule of thumb is “eye appeal is buy appeal”. Does it attract, engage, inform, and convince you to buy? How does your product package differentiate from the pack?
3. Can Your Manufacturer Meet the Demand?
Demand planning is essential. Your supply chain must be prepared for the potential influx of demand that comes with retail distribution. If your retail partners can’t trust you to keep product on the shelves, those relationships could turn sour quickly.
In forecasting and planning for increases in demand, work with your supplier to establish a goal for the volume or tonnage increase.
If you are looking at a 10x outcome, review with your production and manufacturing team to ensure your newfound demand turns into sales and shipments, not just unfulfilled invoices. This is one of the most critical steps in the process of growth.
4. Can Your Fulfillment Network Meet the Demand?
Fulfillment expectations have evolved rapidly and drastically 2-day delivery is no longer an exception — it has rapidly become the expectation.
How to evaluate if your fulfillment network is ready for retail distribution:
- Assess your inventory management capabilities: Your inventory management system should allow you to see inventory levels across your entire network and all of your selling channels through a single view. You should also have the flexibility to re-allocate inventory or re-route orders in response to shifts in demand.
- Look into your order processing efficiency: Order processing should be automated wherever possible with advanced order orchestration logic to ensure orders are routed to the best warehouse in terms of inventory availability and transit time to the final destination.
Besides fast shipping capabilities, your fulfillment network must also have the flexibility to manage LTL, pallet, and truckload capabilities to be relevant in the marketplace today. Finding a single partner that can handle multiple transport modes within one network will save you time and money as you grow and expand across multiple channels.
5. Is There Demand for Your Product in Brick and Mortar Stores?
You need to fully understand the demand for your product before engaging in distribution efforts. Having a clear understanding of your product’s place in the market will help you avoid jumping into retail partnerships before your brand is ready.
How to evaluate if there is demand for your product:
- Analyze industry market trends: Identify consumer behavior shifts, emerging categories, and potential gaps. Use industry reports, competitor analysis, and market forecasts to assess if your product aligns with current demand.
- Evaluate your historical sales data: Your own historical sales data will help you understand which products perform best. Look at trends like seasonal peaks, product types with the highest revenue, and customer preferences. Identifying patterns in your existing sales data will help predict future demand and guide inventory and distribution decisions.
Proper evaluation of the market, competition, retail pricing, shipping costs, margin harvest are all critical parts of making the decision. Engaging a third-party firm to conduct retail surveys, consumer feedback and retailer receptivity can clearly identify your next steps.
Use the checklist below as a questionnaire to assess if retail distribution aligns with your business needs at this time. Download the image and answer each question to help guide your decision-making process.
If you’ve determined that your business is ready to partner with a distributor and a major retailer, the next step is developing a retail distribution strategy. A well-planned strategy ensures smooth operations, aligns with market demand, and maximizes your product’s reach—setting you up for long-term success in the retail space.
Why Do You Need a Retail Distribution Strategy?
Whether you’re managing a brand with a legacy reputation or a high-growth startup, launching a retail distribution strategy is likely part of your long-term growth plan. Multichannel selling is the only way to compete in the market today, and even digital native brands have begun to see the importance of retail distribution as part of an omnichannel strategy.
The smart retail market is projected to grow at a compound annual growth rate (CAGR) of 29.1% from 2023 to 2030, driven by evolving customer expectations and the rise of connected shopping experiences. As retail becomes more data-driven and personalized, businesses need a solid retail distribution strategy to stay competitive. Meeting customer demands for fast delivery, product availability, and seamless omnichannel experiences requires efficient supply chain operations and strategic partnerships with distributors and retailers. Planning ahead ensures your business can adapt to market shifts and thrive in this rapidly growing landscape.
How does a retail distribution strategy help you compete in today’s market:
- Brand awareness: Each new sales channel opens you up to a new segment of shoppers. Your best customers may discover your product in store rather than online.
- Establishing trust: Often, brands in brick-and-mortar stores, especially major retailers are seen as more established and trustworthy.
- Diversified fulfillment options: A retail distribution channel enables you to offer ship from store or buy online pick up in store (BOPIS) in addition to home delivery.
- Omnichannel presence: Today’s most successful brands have an omnichannel sales strategy to keep their product top of mind for consumers wherever they may shop.
What are the 3 Different Types of Retail Distribution?
There are three of the most common retail distribution strategies are intensive distribution, selective distribution, and exclusive distribution.
1. Intensive Distribution
An intensive distribution strategy attempts to saturate the market with a product, getting into as many retail locations as possible. This is often an effective strategy for products in crowded categories at low price points where consumer loyalty is relatively low. In these categories, consumers are more likely to try a new brand if their preferred brand is out of stock or if a new brand is on promotion.
| Pro’s | Con’s |
| Maximum market coverage: Saturating the market ensures your brand reaches a wide variety of shoppers across all market segments. Higher sales volume: More exposure means more sales across a wider network of brick-and-mortar stores. Competitive advantage: Saturating the market can make your brand a household name and establish trust over lesser-known competitors. | Channel conflict: Different retailers may offer different promotions or price points, which could in turn erode margin and brand perception. Higher costs: Stocking more locations across more markets means higher inventory carry costs as well as transportation management. Brand perception: Distributing across more channels makes it difficult to manage your brand’s presentation in-store. It can also make your product seem less exclusive to luxury consumers. |
2. Selective Distribution
A selective distribution strategy is the middle ground between intensive distribution and exclusive distribution. Merchants will distribute their products to only select retailers or in select areas. This distribution strategy is best suited for higher-end brands that consumers will specifically seek out or brands looking to build strong relationships with retailers and create an association between their brand and particular retailer.
| Pro’s | Con’s |
| Target reach: Knowing your customer base and where they shop leads to higher conversion rates. Better retailer relationships: Managing fewer retail partnerships will allow you to have closer and more communicative partnerships. Enhanced brand image: Limited availability can often lend to an image of exclusivity, which is particularly important to luxury consumers. | Limited market reach: Limiting your retail partnerships will decrease your reach across geographic markets and consumer segments. Dependency on retail partners: With fewer retail partnerships, brands become reliant ontheir chosen partners. If a retailer struggles with inventory management or customer engagement, it can significantly impact sales. Potential for lost opportunities: Fewer retail partnerships could mean your brand has less exposure and could miss out on potential sales. |
3. Exclusive Distribution
An exclusive distribution strategy limits retail distribution to a single retailer. It is best suited for premium or luxury brands in niche markets. The sense of exclusivity is a perceived value add for luxury shoppers, and brand equity will drive shoppers to seek out products with exclusive retail distribution.
| Pro’s | Con’s |
| Brand prestige and control: Managing a single retail partnership allows for greater control of your brand’s presentation and exclusive negotiations. Higher profit margins: Greater control over pricing, elevated brand perception, and simplified inventory management can lead to higher margins. Long-lasting retail partnerships: Building a close relationship with an exclusive retailer creates a more stable and long-lasting partnership. | Restricted market coverage: Limiting your distribution strategy to a single retail partner gives you less visibility due to decreased market saturation. Risk of retailer dependency: If sales suffer through your exclusive retail partner, you do not have other retail channels to rely on. Exclusive agreement may involve more costs: Exclusive agreements can have higher retailer fees, increased transportation costs, and require more marketing spend. |
How to Choose The Right Retail Distribution Strategy For Your Business
Selecting the right retail distribution strategy is crucial for your business’s success. By following this step-by-step process, you can effectively determine which approach aligns best with your objectives and market conditions.
- Evaluate Your Product Type and Consider Your Product’s Lifecycle:
Start by analyzing your product type, as this will influence your distribution strategy. Consider its lifecycle stage—introduction, growth, maturity, or decline—to decide if you need an intensive, selective, or exclusive distribution strategy. - Measure Consumer Interest Against Market Size:
Conduct market research to assess consumer interest in your product category. Use surveys, focus groups, or online analytics to gauge demand and compare this with the overall market size to determine potential sales volume. - Determine Your Brand Position:
Clarify your brand’s position in the market. Are you offering premium, mid-range, or budget products? This positioning will guide your choice of retail partners and the distribution strategy you adopt. - Clarify Your Sales Goals and Ideal Profit Margins:
Define your sales goals, whether it’s maximizing volume or focusing on profitability. Understand your ideal profit margins to ensure your distribution strategy supports these financial objectives. - Identify Your Customer Preferences:
Research your target audience to understand their purchasing habits and preferences. Knowing where your customers shop—online, in-store, or both—will help determine the most effective distribution channels. - Evaluate Your Potential Geographic Reach:
Consider the geographic areas you want to target. This assessment will influence whether you choose a local, regional, or national distribution strategy based on where your customer base is concentrated. - Examine the Competitive Landscape:
Analyze your competitors’ distribution strategies. Identify their strengths and weaknesses to find opportunities for differentiation and to inform your own approach. - Calculate Distribution Costs:
Estimate the costs associated with different distribution options. Include transportation, warehousing, and retailer margins to understand how each strategy impacts your bottom line. - Assess Potential Retailer Partnership Opportunities:
Identify retailers that align with your brand values and target market. Evaluate their distribution capabilities, customer base, and reputation to ensure a good fit. - Run Pilot Programs to Test:
Before fully committing, consider running pilot programs in select markets. This will help you evaluate the effectiveness of your chosen strategy without significant risk. - Collect and Analyze Data Results:
Finally, gather and analyze data from your pilot programs. Use this information to refine your strategy, ensuring it meets your goals and resonates with your target audience.
Above all else, you are looking for a partnership — one that is based on synergy, support, and flexibility. Distribution is a very challenging machine, and it has daily hurdles to ensure fulfillment rate is acceptable, share of mind by the sales team is high, and that at the end of the day the business is growing.
Ideally you will have manufacturer sales representatives working alongside the distributor’s sales team. Depending on the size of your organization you may not be able to cover all territories or states, but often reaching out to broker groups can fill that gap.
Open, honest communication is also essential, and sometimes tough conversations need to take place. At the end of the day, If you can fill a demand at retail and provide reasonable margin, it can lead to a healthy distributor relationship.
When Is It Time to Start Looking for a New Distributor?
If you are new to a distributor network, you must have a two-year plan that targets mutual goals and drives outcomes. Often manufacturers elect to distribute through more than one distributor to ensure marketplace coverage and healthy competition.
If you are engaged with the distributor leadership, sales, and operations team and mutual goals are not being achieved, it may be time to consider alternative options.
Looking or interviewing new distributors is a consistent behavior, placing your energy with the one who “got you to the dance” is always healthy.
Start Your Retail Distribution Journey Today
Expanding your business into different retail distribution channels is a significant move that can unlock new market opportunities and growth potential. However, it’s crucial to carefully assess whether your product, supply chain, and overall operational readiness are prepared for the complexities of new distribution channels, or if further preparation is needed before making the leap.
Using advanced warehousing software can streamline this process by analyzing key data, optimizing inventory management, and providing insights to ensure your readiness for retail distribution.
Want to find out more about how Ware2Go can help you analyze your distribution readiness and optimize your supply chain? Have a chat with our team today.
