You’re ready to go with your brilliant new product. You’ve secured your first-round financing. You have your manufacturing locked and loaded. Now it’s time to carefully consider what many successful entrepreneurs believe is the most important harbinger of success:
Distribution Strategy and Execution.
This point is made succinctly by Jim Huffman, author of The Growth Marketer’s Playbook,“The right distribution strategy connects your solution to the people who have the problem in a friction-less way. It forces you to connect the two by finding the right path or paths to uncover the people who will love your product. By focusing on distribution, you’re starting with the end in mind. You’re setting yourself up for success.”
Distribution is at the heart of getting your products into the hands of consumers. Any startup business must overcome the basic problems of distribution and seize every possible logistical edge.
“Most businesses actually get zero distribution channels to work. Poor distribution — not product — is the number one cause of failure.”Peter Thiel
How to Get It Right
To set your distribution network up for success, you must carefully select your 3PL (3rd Party Logistics) partner. Unless you have millions to go it alone, these critical-to-success companies will make sure your products get into the hands of retail outlets, ecommerce marketplaces or drop shipped directly to customers.
The advantage of working with an established 3PL distributor is that that the best-of-the-best already have firm relationships and agreements with the important retailers. Since these relationships can take months or even years to establish, this saves your startup from wasting time and a huge investment to gain access to these retail entities.
Since your 3PL distributor holds the relationship with the retailers, you must have tremendous trust for whomever you select. So vet and choose carefully. Make sure you pick a mega-experienced distributor with a portfolio of blue chip retailers and online partners, especially Amazon.
Start with a Long-Range Distribution Strategy
Find a distribution partner that can help you with all facets of distribution strategy, beyond core excellence in warehousing, handling and shipping. Seek out a company that has experience aligning your decisions with your customers’ needs and expectations:
- Who are your best customers with the highest lifetime value?
- Where and when do they shop?
- How often and how fast do they want your product?
- Which retailers and online outlets do they expect to find your product?
- What outlets can your product intersect with consumers if they aren’t actually searching for it?
- What marketing channels can best reach them?
Know this: The best 3PL distribution partners can help you thread the needle on ALL of the above points. If you don’t have a partner that can guide you with high-level distribution strategies, keep looking.
Select Distribution Channels that Can Scale
Think of your distribution channels as “scalable networks” to your initial customers that are built for ever-growing expansion.
Here’s Peter Theil’s perspective from his best-selling book, Zero to 1: “Networks unleash powerful viral effects. But success requires starting with small networks and then scaling them. Facebook began as a network for Harvard students, then all students and eventually anyone in the world. Don’t start with technology which works only at scale, it should grow with scale. Ideally, the potential for scale should be in the original design itself, eg. Twitter.
Amazon began with only books, added similar products like CDs, and then scaled all the way. PayPal began with Palm Pilot users and eBay PowerSellers, and then kick-started a virtuous cycle by paying early customers to sign up and get referral fees.”
To be prepared to scale, find a 3PL partner that offers hybrid services – one that will help you connect the dots strategically between your product, your customers, your marketing and your distribution – always with an eye at least 5 years into the future.
If you’re seeking a frictionless solution, there’s just no reason anymore to choose one 3PL provider for large national accounts, another for smaller independents, a third for ecommerce, and a fourth for Direct-to-Consumer. Your distribution network is your road to future growth. Start by building a super highway. The more avenues through which your startup can move product, the more potential income streams that can operate simultaneously. For this reason, think Omnichannel from the start.
Your distribution partner should be structured to allow one inventory to support every channel: retail, ecommerce, direct-to-consumer, and third- party marketplaces with a dynamic Amazon relationship. This enables a seamless experience across all buying channels and optimizes inventory at all locations to meet future customer demand.
Landing the Plane
Now I’m going to take you quickly from 30,000-foot view into what some might call “the weeds.” Quite simply, these are the weeds that will set up your business for steady or lightning-fast growth.
Look for a partner that specializes in customized, scalable solutions, integrated services and new technologies that provide:
- The ability to ship by the pallet, case, and each under one roof
- Seamless service across all channels
- Faster order processing for online orders
- Streamlined inventory utilization, velocity, visibility
- Economies of scale / reduced distribution costs
- Flexibility to accommodate business fluctuations/growth
- Regional distribution for speed or delivery and lower costs
- Customized solutions for every order in every channel
- Efficient, multi-client, e-commerce fulfillment centers that can scale with you during peak seasons
- Fixed-cost leverage and ensuring that spikes don’t turn into misses
Ready, Set, Go
Now that you’ve started your company’s engine with a brilliant product, fire it up for the future with a brilliant distribution plan. – P.L.