Why Your Your Distribution Model Matters

For most entrepreneurs, they have an idea—sometimes even a great one—and they put everything they have into creating it.

Every single penny they can gather is put into R&D, which after many rounds of sample formulas and even more versions of packaging components and package design concepts, results in the finished product. Sadly, many don’t put as much effort into crafting plans for distribution, sales, marketing or operations, which is why so many brands fail.

There's a saying that anyone can build anything, but few can sell it. 

Your distribution model is EVERYTHING! It influences product development. It drives sales and marketing strategies. It outlines operations requirements. Without a clear picture of how you plan to distribute your product, you’re at risk of ending up with a garage full of products ready to ship with no place to go.

Trust me when I tell you, it’s easier and a LOT less expensive to develop a product for a distribution channel than it is to develop a distribution channel for a product.

 

WHO IS YOUR TARGET CUSTOMER?

OK… so you’re asking yourself “Why does my target customer matter if we’re talking about distribution?”

Where your customer shops determines where you will want to sell your products and place your brand. And knowing who your actual customer is can determine where you sell your products—and also determine your distribution channel.

If you want to sell at a hair salon or spa, your actual customer is the spa director or salon owner, not the consumer who buys services at the salon / spa. The consumer is the customer of the salon or spa where you sell your product. Therefore, you’re really creating a professional product designed for at-home use by salon and spa clients. Your distribution will be through the pro channel, and even though the end product is used by customers, yours is a business-to-business brand (B2B).

If you want to sell at a specialty beauty retailer, department store or mass retailer, you are designing a consumer product. You will sell direct to consumers (DTC) through non-professional retailers. Your distribution will target luxury, prestige or mass retailers.

 

TYPES OF DISTRIBUTION

There are as many types of distribution as there are beauty products, so let’s simplify it. The main types of distribution within the beauty industry are:

·      Professional salon / spa

·      Medi-spa / doctors

·      Luxury (high-end department stores, flagship stores)

·      Specialty retail (beauty retailers such as Sephora, ULTA, Blue Mercury, spaceNK, etc.)

·      Mass (Target, Wal*Mart, etc.)

·      Discount (T.J. Maxx, Marshall’s, Ross, 99-cent stores, etc.)

·      Grocery (Whole Foods, Sprouts, Wegman’s etc.)

·      Hospitality (hotel gift shops, in-room amenities, etc.)

 

NOT ALL RETAILERS ARE CREATED EQUAL

Do some research on the highest and lowest price points for the retailers you want to sell your product to. This will help you be more specific about your distribution model, and it will also influence how your product is formulated, sold, marketed and fulfilled.

Example: If you want to be in Target, but your estimated retail pricing is $120 for an anti-aging serum, you’re not going to find it as easy to place as you might in a department store or specialty beauty retailer. You will likely need to reformulate to hit a lower retail price point.

Example: If you want to want to sell in Sephora, but your product is designed for the pre-teen market, you’re going to have a tough time selling it in. Why? It’s reported that the age of an average Sephora customer ranges from the mid-20s to early 40s. They may have pre-teen children, but the pre-teen children don’t shop at Sephora. Take the time to visit several Sephora stores in your community and see for yourself.

Example: If you want to sell to the professional salon/spa channel and to Target, it can be a challenge simply because the professional salon/spa account doesn’t want to be in competition with Target. Napoleon Perdis Cosmetics did this in a very smart way. The flagship brand’s price points were too rich for Target, so rather than reformulate the pro line, a new brand—NP Set—was designed exclusively for Target. What started as a 6-month test turned into a five-year, highly lucrative relationship.

Example: If you want to distribute through Whole Foods, you need to be aware of the 400+ ingredients banned from any product sold in their network. While the FDA only bans 11 ingredients, Whole Foods has 400+ ingredients banned from its shelves. Some cosmetic chemists might not agree with the list, but if the natural foods market is your target distribution model, then you need to know what they will accept—or reject—before you meet with the beauty / personal care buyer.

Think distribution doesn’t influence product development? Or how you will market your products? Or how you’ll approach buyers?

Think again.

 

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Ask yourself these questions, and write down how it might influence other areas of your brand:

·      What is your primary distribution model? Why do you want to focus on this channel?

·      What’s most important to this segment of the industry? How does your brand / product
     address this? Hint: this isn’t what’s most important to you. It’s what’s most important
     to THEM.

·      What hole does your brand / product fill that’s not already on the shelf?

·      What are the high and low retail price points found in that channel? What is the average
     price point? PS: You’ll need to do this for every type of product you plan on developing.

·      What are the buyers’ expectations for wholesale pricing and margin?

·      How does this influence your finished cost of goods? Hint: it impacts formulation,
     packaging, package components choices, etc.

·      How will you position the brand / product? How will you explain the profit potential to
     your buyer?

·      How are brands / products marketed within the channel? This isn’t your marketing strategy
     and plan, rather it’s developing an understanding about how products are marketed within
     the channel, since this will likely influence how you market your product / brand.

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