How To Fuel Expansion And Growth Strategies By Acquiring Distribution Channels

Acquiring distribution channels is an effective strategy for fueling expansion. You’ll build on your go-to-market approaches to elevate the business to the next level. After establishing a strong customer base in your local markets, mergers and acquisitions (M&A) represent the next step.

A great go-to-market (GTM) strategy includes six crucial elements, such as defining the market and identifying the target audience. Other components include distribution channels, pricing structure, product messaging, and brand positioning.

Careful planning is essential when attempting to penetrate markets across state and global borders. Building partnerships with local entities reduces trial and error and speeds up the delivery of products to consumers.

You’ll connect with players that have established distribution channels and start serving customers quickly. Your post-acquisition integration initiatives should focus on shared advertising and marketing programs, delivery systems, and attractive packaging solutions.

Since you’re targeting local customers in new locations, you’ll leverage the expertise of onsite players to understand customer preferences. So, how would you fuel expansion and your GTM strategy by acquiring distribution channels? Read ahead to understand the basics.

Understanding Distribution Channels

Understanding distribution is about identifying the target audience and where they are likely to buy products and services. Distribution channels are independent agencies or transportation pathways that deliver the products to the end-user or end-customers.

These pathways encompass the network of agencies, intermediaries, and pipelines that enable the efficient movement of products. These entities, which include wholesalers, retailers, distributors, and agents, facilitate smooth movement from manufacturers or producers to customers.

Online platforms are also distribution channels since they use e-commerce to deliver products to end users. Distribution is about the product’s journey from the manufacturer to the end customer.

Efficient distribution can significantly influence sales and, consequently, your company’s revenues and bottom line. Thanks to faster turnaround times, sales can pick up by as much as 5% to 10% or even higher. The resulting higher customer satisfaction and lower costs enhance brand value.

Integrating automation and AI capabilities into your distribution network can raise sales by 10% to 15%. You’ll ensure that brand messaging and product experience are consistent across the board, regardless of the particular channel you deploy.

Do keep in mind that not all distribution channels are a good fit for your brand and target audience. This is why you’ll research available partners and identify the key players. Next, you’ll select the ones best suited before reaching out with an acquisition offer.

Acquiring Distribution Channels – Start by Researching the Market

Your go-to-market analyses should help you identify the geographical locations and target customers. The next step involves understanding the local distribution network in the target location to select the right pathways. You’ll also zero in on the optimum partners for your company.

You’ll undertake in-depth research to analyze competing brands popular with customers, their buying habits, and places where they shop. For instance, if you intend to expand your pet food brand, you’ll scout for the typical stores where customers shop.

Also, research the customer demographic to learn about their pet preferences. Do they own more dogs, cats, or other animals? Do the stores offer additional products aside from food, like toys and basic accessories? What days of the week do customers prefer to shop?

Your search will help identify the leading retailers in the space who might be interested in stocking your brand. Remember that retailers have individual business models regarding the volumes they order and carry simultaneously. They may also have frameworks in place for sourcing inventory and pricing.

For instance, large chain retailers typically meet with manufacturers at fixed intervals. That’s when they review the product range they want to carry and strategize advertising and marketing tactics. Don’t expect to connect with a retailer and have them stock your products the next day.

Similarly, you’ll identify other potential distribution partners, such as distributors, wholesalers, agents, and eCommerce platforms. However, collaborating with local players involves detailed processes that you must navigate. A great solution is to have representatives and agents on the ground.

These local agents have detailed market knowledge and can assist and guide your growth strategies. At the same time, they’ll identify potential risks and assist you in taking the proper steps to mitigate them.

Key Players of Distribution Channels

Before you start acquiring distribution channels, it’s crucial to understand the key players in the space. Here’s what you need to know:

Distributors

Distributors purchase products from producers and manufacturers and sell them to the next link in the chain. They may sell the products to wholesalers, retailers, or even directly to customers. Large brands typically offer them exclusive distribution rights in specific geographical regions.

Working with distributors allows you to leverage their established supply chains to lower lead times. Lead times are the intervals from the time the products leave the manufacturing facility to when they reach the consumer. Shorter lead times can significantly impact customer satisfaction.

You’ll maintain a competitive advantage because customers may seek alternatives when your products are unavailable. New product launches and feedback compilations will be more successful because users can access them quickly.

Efficient logistics ensure that customer-facing agencies always have the desired inventory. Factors like these help with improved cash flow management. Given the many advantages, you could consider acquiring or merging with a distributor operating within the targeted location.

You’ll have an in-house network that responds to demand and adapts quickly to changing customer needs. Getting real-time customer feedback helps you tweak product features and fulfill orders while taking advantage of evolving trends.

Wholesalers

Wholesalers purchase products in bulk from the manufacturers and distributors and then sell them to retailers. They may also sell smaller quantities to local customer-facing outlets. Partnering with a wholesaler enables you to reach a broader market without direct sales initiatives.

Since wholesalers purchase products in bulk, you’ll save on warehousing and storage costs while ensuring the smooth movement to sellers. Your partners will manage stocks more efficiently, eliminating issues like overstocking and shortages.

Like distributors, wholesalers also manage logistics and inventory to minimize lead times and deliver products on schedule. Since your company is poised for rapid growth, collaborating or acquiring distribution channels like wholesalers is a considerable advantage.

During peak season, you can rely on your partners to shorten delivery times and take advantage of high demand.

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Retailers

Retailers are essentially customer-facing units that provide last-mile delivery. They interact directly with customers through physical stores and local outlets and promote sales through one-on-one relationships. Local outlets also run marketing and promotional programs to boost sales.

Collaborating with retailers ensures higher brand visibility and maximum market reach within the particular region. Customers visiting stores can see and touch the product before purchasing it, and instant feedback is an added advantage. You’ll get first-hand information about satisfaction.

Large brands selling through retail partners can also monitor changing preferences while providing top-notch after-sales service. This factor enables serving new customer segments that you might have overlooked during initial targeted marketing strategies.

Most importantly, retail outlets enable you to gather data in real time. This data can be invaluable in understanding customer needs, shopping behavior, and their perspective of the competition. You’ll use this information to add advanced features to existing products and new products to the portfolio.

When selecting the right retailers, you’ll look for stores that are reputable within their community. A collaboration with them adds credibility to your brand while giving you the advantage of informal joint marketing campaigns. Ultimately, you’ll increase sales, revenues, and profitability.

Experimenting with Online Sales

Now that you have a fair overview of how acquiring distribution channels helps with expansion, how about starting with eCommerce? Instead of diving into an M&A transaction, you could experiment with a risk-free market penetration approach.

eCommerce allows you to explore your targeted market without investing too many resources. You’ll start with low sales volumes while using aggressive online marketing campaigns to build a strong brand presence. Once customers are familiar with the brand, you can build a local foothold.

Consider teaming with dropshipping agents to pick up orders and deliver them to the end users. When sales start to pick up, you can move on to exploring partnerships with distributors, retailers, and wholesalers. Also, consider fulfillment centers for quick delivery options.

These agents have warehouses where they can store stock and package products with messaging that appeals to customers. They’ll also dispatch goods and gather data from reviews and ratings.

Partnering with distribution networks and channels is a natural progression of your GTM approach. If you’re not quite sure how to define your go-to-market strategy, check out this video I have created.

What to Look for When Acquiring Distribution Channels

When partnering with local players through mergers or acquisitions, you’ll select channels that are a great fit for your company. Having tested the market with eCommerce, you should be ready to commit to a long-term presence. Here’s what to look for when choosing the right partners.

Do They Work With Competing Brands?

Large-scale distributors that operate on scale typically handle multiple brands within the same vertical. If the particular distributor is also working with competing brands, it may not be in your company’s best interests. Find the right partners by working with wholesalers, retailers, or agents.

Check for suppliers that offer streamlined deliveries and other benefits that will work well for your brand. Expect local distributors to approach you when information about your upcoming expansion becomes public. Weigh their pros and cons carefully before making a selection.

Can You Control the Messaging and Branding?

It is crucial to maintain consistent brand messaging across all platforms and locations. Customers should be able to recognize your brand as distinct from the competition, regardless of where they shop. To make that happen, you’ll need control over the marketing and advertising strategies.

You’ll partner with distributors and sellers who understand the importance of market positioning. Local sellers may want to adapt the messaging to resonate with their customers. However, it should also align with your overall marketing strategy.

An excellent workaround is creating a balance between both approaches. For example, Ikea. This Swedish company is now an international conglomerate offering USPs like affordability, high quality, sustainability, and functionality.

Anywhere across the globe, its stores maintain its branding and appeal but the products offered are adapted to local requirements. Ikea stores in Japan stock tatami mats, a traditional Japanese room essential.

On the other hand, Indian Ikea stores are smaller, compact, and neighborhood-centric. As for products, the stores stock more of closed storage cabinets to adapt to Indian dusty climates.

Can They Develop Markets and Demand?

When acquiring distribution channels, you may find that potential partners lack experience in the local market. Or, they may lack experience with your prodict range. Further, customers in your targeted area may not be a ready market because they are unfamiliar with such products and their value.

This factor need not be a deterrent. Because demand can be created. Accordingly, you’ll partner with distributors and sellers interested in stimulating awareness and demand. Ensure that they share values and growth objectives similar to your company’s and are enthusiastic about expansion.

You’ll likely invest resources into aggressive marketing and advertising. But having local sellers and agents on the ground can help strategize messaging that appeals to the audience.

Your initial goal is to penetrate the market and create demand. But, building a lasting partnership should also be high on your list of priorities. Focus on long-term and consistently growing sales rather than short-term collaboration.

The Takeaway!

Acquiring distribution channels to fuel expansion and your GTM strategy works well when you partner with the right players. Make sure you choose the right agents and partners who are familiar with the customer demographic and their needs. They should also have expertise in buying preferences.

You’ll leverage this know-how to penetrate the market and reach your target customers quickly with aggressive brand messaging and advertising. At the same time, you’ll ensure a consistent supply of products to keep pace with the competition.

Don’t hesitate to enter into mergers and acquisitions to create new demand in unexplored markets. This strategy can be an effective expansion tool across state and global borders.

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