Select a Distribution Strategy that Works (Part II)

Last week, Marka and the FEI tribe discussed how direct sales is a highly effective distribution strategy for some FEI products. This week, they discuss the advantages of the retail and wholesale distribution methods. Remember, fire = print.

Numo, Marka, Org and Lucy finally convinced Zoot to throw off his sandwich board and stroll with them toward FEI headquarters. On their way, they passed Olympus Mart, which was just opening for the day.

Flintstone and Pyro products were stacked in pyramids near the store windows. This made Org observe out loud, “Why doesn’t FEI sell through retail channels?”

“We should,” Lucy agreed. “Selling through retail has one huge advantage over direct sales—reach! By distributing goods through retailers, especially retail chains, we can reach consumers and small businesses that would be impossible to cost-effectively reach through direct sales.”

“Wouldn’t retailers take a large portion of the revenue from each FEI product they sell?” asked Zoot.

“Of course,” Numo jumped in.

“Then wouldn’t our margins decrease?” Org asked.

“It depends,” Numo replied. “A direct sales force is very expensive. So is giving up 50 percent or more to retailers and wholesalers. We need to judge costs on a case-by-case basis.”

“Retail represents a different market for our products,” Lucy added. “That’s why it’s so attractive.”

“That’s right,” Numo agreed. “I’m for a retail selling approach. The result can be higher revenues and, if we execute properly, higher total profits.”

“Let’s address the reality of fragmentation among Olympian retailers,” Marka said. “Zeus & Athena’s Shoppe is no longer the only store in town—dozens of retail stores now cater to the Olympian public’s fire-buying needs.”

“That’s why distributing through a wholesaler network should also be part of our strategy,” Lucy asserted. “Wholesalers sell products directly to retail stores. Selling through wholesalers will help us efficiently reach those smaller stores.”