Branded consumer product producers can only get so big before they “hit the wall” – the
distribution
wall, that is. Your brand’s success is dependent upon its availability. It’s got to be there to sell.
Many producers think they will avoid going through conventional distribution channels and “just sell it online.” But then they find out that online sales have some severe limitations that can hold them back:
- They have to sell direct to each individual customer. They can’t get one big check for one big order from one big buyer who is putting it into a big chain of bricks and mortar stores.
- They also find out that, unlike the bricks and mortar stores that already have a large “following” of regular customers, they have to build their own following using funnel techniques that are cumbersome, complicated, and costly. They usually require a staff of folks to write emails, run CRM programs like Infusionsoft, and all the rest of the myriad of details necessary to run an online business.
- They soon discover that if their product is heavy or inexpensive, the consumer won’t pay for delivery, and that cost must be covered by the producer, no matter how “free” you may claim the delivery is.
- In fact, stores don’t have enough shelf space to accommodate all the brands vying for their customers’ attention, requiring that many consumer product brands must be sold online because the stores simply can’t take them. So in many cases, selling online is more of a fallback position than a choice.
Many brand builders would love to get their brands into bricks and mortar stores. That is, if they could ever get past the distribution wall. The “wall” is what you hit when you discover you must service what you sell. The “wall” is what you hit when you discover you did not leave enough “room” in your pricing for the middlemen in the distribution channel. Let’s take a closer look at what this means:
Service. Expanding beyond a small area you can service yourself requires careful planning and a bunch of money. You will need a staff of representatives who will guarantee reorders, build displays, and demonstrate your products to buyers, salespeople, clerks and the public. You have to prepare for this by hiring and training, as well as researching the market. And you have to invest before you see a return. So unless you have a ton of money, you have to save up for it, or pay as you go. Without this “service,” your brand won’t be visible on the shelf, and will be blamed for every hiccup along the distribution channel, finally getting the “unreliable” reputation. Once you realize the true cost of sales, you may be discouraged altogether from further expansion. You may just go back to online sales and grind along with limited growth.
“Room.” Pricing is a critical part of your brand building strategy. Too many brand builders don’t leave enough “room” in their initial pricing to allow for the distributers’ cut, the retailers’ cut, the cost of sales, and discounting programs. Don’t think that because you are selling direct, either online or in a limited territory, that you will never need a distributor. If your online sales and limited-territory sales become substantial enough to attract a bricks and mortar buyer, the first thing they will do is check your prices online. They will not take your product unless they can give their customers the same price.
So, even if you haven’t thought about bricks and mortar, build in the cost of breaking through the distribution wall so you can continue to build your brand!
Who Are We.
Having built and sold a bestselling national brand, we appreciate the value of brands and everything it takes to make them successful. Companies are valued by their brand equity. Achieving and maximizing brand equity requires tremendous respect for all your customers, from your wholesaler to your end user.
Starting in our laundry room with no money and no knowledge of the industry, we built the famous Barefoot Wine brand. We learned a lot they don’t teach in school and much of it the hard way. Although our success was in consumer products, our real world experience will be helpful to anyone looking for information and advice about brands.
We have written the New York Times Bestselling Business Book, The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand, which chronicles the history of the famous brand from its inception through its acquisition. Our book is now required reading in schools of entrepreneurship across the country. We hope this book will provide inspiration and encouragement for all those contemplating starting a brand or wanting to improve their existing brand.
Michael Houlihan and Bonnie Harvey
-Barefoot Wine Founders
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