The 10 Dis’s of Distribution
DISTRIBUTION — a milestone event (noun) — “the ritual celebration that takes place when a startup actually receives payment from a distributor/retailer for its virgin production run”
Distribution = the (verbal) ‘tribute’ paid by investors to a startup which successfully overcomes The 10 Depressions of Makership.
1. Dis appointment — knowing it takes longer than you can imagine to contact a buyer in any worthwhile distribution or retail organization — online/offline/ elsewhere in the universe.
REMEDY — Start befriending these people NOW
2. Dis order — An order occurs not when you get a verbal “sure it looks great, I’d say we’d take 50”. A real order for a product comes on a PO (purchase order) document, with lots official information, terms and conditions.
REMEDY — Do nothing until you have an official PO document.
3. Dis location — Stock in wrong place — you have 500 widgets you already paid to ship to warehouse in USA, and you have an order for 100 from a French retailer. Cost to ship on to France wipes out your already shrinking margin plus delays in customs incurring more costs and all round frustration aka Dispepsia — only Pepsi & Coke have achieved true global distribution (inc Everest base camp etc) and it took them over 50 years.
REMEDY — Start in one geographic market, sync’d with direct online fulfillment.
4. Dis proportion — production run too big for early demand — you have demand for 5000, but economic production run is 50,000 aka Dis interest, when your 1st distributor has been over enthusiastic, but its all your fault of course. Guess who pays the price?
REMEDY — Start small — max out your pre-order strategy — max out on DIY fulfillment — secure one physical distribution partner, able to store/ship/sell product, who you trust and can work with.
5. Dis jointed — adult version of Dis located, now with multiple distributors in multiple markets, incurring multiple costs with diverse rates of sale, currencies, and service expectations. Broken legs are less painful.
REMEDY — Know your key markets, earn your distributors trust, grow into them, with easiest rather than biggest first.
6. Dis advantage — create a UDP (unique distribution proposition). Just like a USP for a product, a UDP can be just as profitable. Direct sales worked for Avon, Tupperware & Ann Summers. Unilever funds single women distributors in Africa. A lightweight robust product can be posted (even ‘assembled’) from a tax haven location at much less cost — e.g. teeth whitening kits). ‘Back hauling’ on otherwise empty trucks on a regular route. Ship 500 units on a pallet rather than 250, micro manufacture at point of sale, etc.
REMEDY — forensically examine every inch of the shipping process; product weight, shape, size, routes, timing, shelf life, need for batteries/peripherals, packaging, etc becomes Dis armament when u execute on your UDP v your competition & reap the rewards a unique distribution advantage can bring — geo — physio or financial.
7. Dis neyland — go there and model your customer service offering on the experience. You need CS to support your distribution/sales effort. It costs money you didn’t budget for.
REMEDY — Assign trade accounts to individual founders, even if they’re not “the sales guy”. It’s good to have everyone feeling the pain !
8. Dis traction — your customer and CFO need tracking updates; metrics inc days or value of stock in warehouse / stock turn pa.
REMEDY — Establish 4 simple measures of the efficiency of your distribution strategy. Distribution metrics — a) stock turnover — number of times per annum b) units in stock c) value of stock d) unit shipping cost.
9. Dis play — the fun of getting product in a prominent place on or off line so your customer sees it — the ‘Place’ from the 4 Ps of marketing.
REMEDY — Only pay for something you are sure will bring extra profit. Almost certainly not needed in the early days. Be creative — offer something your distributor/retailer values that costs you less (remember giving product — at cost to you — is MUCH cheaper for you than crude discounts) — partner with a complementary product etc. Get used to standing naked in public with your product.
10. Dis ernment — just when you think you’ve delivered and earned payment you still ain’t getting paid for days, weeks, months more like. “Issues” emerge now like extra costs for badly labelled packaging, extra storage time / space, bank / exchange fees, cheque-signing staff on holidays, payment still made by cheque drawn on mid US bank which takes 21 days to ‘clear’ funds. You’ve been Dis trict (DIST- RICKED !).
REMEDY — Reboot at 1
Originally published at sosv.com on July 21, 2014.
