North American Distribution Model for Startups – Is it Broken?

I’ve talked to hundreds of CEOs and CMOs of consumer product startups (as well as mid-sized manufacturers) who are looking for ways to either break into the North American market for the first time or increase existing market presence. The initial reaction is always to look at distributors, perhaps for obvious reasons.

Why partner with distributors?

  • Distributors are already set up as a vendor of record with retailers which leads to faster integration into retail channels.
  • Distributors act as a fulfillment option to store and ship product to your end-customers and retail partners.
  • Distributors act as an extension of your sales team with a varying range of market relationships.

First of all, the retail distribution environment might not be appropriate for you based on your costs (see “Will Your Hardware Startup Make Money?“) – in which case it might be too early to even consider establishing a distributor partnership. Selling through your website or Amazon for your first production run might (and typically is) the better way to start.

What should I be aware of?

  • Not all distributors are created equal. Size, location, product lines, market relationships, add-on services, fees/costs, and many other factors go into choosing the right fit.
  • Distributors have limited or no time to help market your startup’s product. You NEED to commit resources in-house to ensure success. Distributors are meant to open more opportunities rather than serve as an autonomous extension of your brand.
  • Keep searching for more business development opportunities within the market while working with a distributor (perhaps even national distributors). There’s no time to rest on your laurels.

If you’re a consumer product startup located outside North America, you’ll likely find this article on international distribution from the Harvard Business Review interesting. There are so many moving pieces to succeed in the retail distribution space from logistics to POP designers to online promotions to in-store associate training.

Why do people say that the retail distribution model is broken?

In my opinion, brands who think this way most often had expectations for their retailers or distributors that were originally misguided.

Retailers and distributors are still useful tools in today’s market environment although new sales channel models (i.e. pop-up stores) are coming out all the time. These models aren’t broken. Instead we need to understand them better. The key is understanding the role that competition plays in changing the game.

In a ever-rising sea of new products and technology, what separates you from others? Why should your resellers or consumers take notice? Have you demonstrated the reputation and demand to justify going after distributors/retailers?

Putting a product online or on a shelf is essentially like walking up to the starting line of a race, walking onto the pitch, opening up to the first page… you get the idea. No reseller will do the work without you investing resources yourself.

Creating demand, driving channel sales, and establishing brand awareness takes creativity. Anyone can use a distributor, hire a sales agency, or hire more people (being facetious of course), but creatively marketing your products to end-consumers will ultimately determine your success within sales channels.

What am I supposed to draw from this article?

  • Have clear, realistic expectations from potential distributor partners.
  • North American retailers or distributors are not responsible for marketing your products, someone on your team needs to handle this.
  • Always expect more work, time, and financial investment on your part than what a retail or distribution partner might suggest.

So if you’re like many consumer brands who are talking with retailers or distributors – especially early in the year – hopefully this helps kickstart some ideas.

Benjamin is the Director of Business Development at Retailbound – a retail management firm acting as an affordable execution partner for up-and-coming consumer brands to accelerate sales throughout North American retail distribution channels. Contact Benjamin at bertl@retailbound.com for more information on how Retailbound can help you grow with US retailers.