Choosing distribution channels

Knowing what the distribution channels look like means you know who you will be selling to in order to reach your customer.

Distribution channels are the steps needed for a product or service to reach the end consumer. When it comes to choosing distribution channels, you can work from two sides:

1. The end consumers and where they buy their products, to work back in the channel from there by identifying where the products are sourced.
2. Yourself as a starting point, and with what type of player in the distribution channel you would prefer to do business with, and see if there is a match with how products are sourced.

Note that a distribution channel is part of larger supply chain, which covers all steps from raw material to the end consumer. The supply chain also includes your suppliers. While in practice you are the one doing business with your buyers, you may need to pass on some requirements or needs from your buyers to your suppliers in order to meet them.

What do the distribution channels look like?

The European Union (EU) functions as a single market. Products enter the EU at entry points such as the largest European port in Rotterdam, the Netherlands, or the largest freight airport Frankfurt am Main, Germany. From these hubs the products are distributed across the EU member states, including Sweden.

For products shipped in bulk, direct imports to Sweden are more common than for lower-volume products. But also in this case, Rotterdam and Frankfurt am main, are often used as hubs. This explains why the Netherlands is Sweden’s fourth largest sourcing partner for bananas.

For smaller-volume products, such as exotics or speciality products for niche markets, it is less expensive to ship to one European hub in order to achieve enough volume to bring down shipping costs. From there, the products are further distributed by a European distributor.

Who are the players?

There are a number of players active in distribution channels, and while the shortest channel would be to go from producer to end consumer directly, in practice it is more common to have a number of intermediaries. How many varies and depends on the type of product, sector, size of players and so on.

The following players are part of distribution channels:

• A producer – can be any company working with a primary product, such as agricultural products, to a manufacturer making products from (primary) materials, for instance a garment manufacturer using organic cotton, yarn, buttons and other accessories.
• A specialised exporter – may export the goods, if the producer does not do it by his/herself. The exporter takes care of logistical arrangements and ships the products to his/her counterpart in the target market, the importer.
• The (EU) importer – receives and puts the products on the target market.
• Agents or distributors – can help put the product on the target market, if not done without intermediators. In fact, the importer may also be a retailer, in which case the importer is the final step before the end consumer. More commonly, however, the importer/distributor transfers the product to a retailer, for instance in the case of final products where no further processing is needed.
• The retailer – sells products to end consumers.
• Wholesalers – may be an extra stop between retailer and importer, as wholesalers supply several businesses.
• The processing industry – is a player if the product is used in its production, such as ingredients used in bakery products (chocolate in energy bars for instance), bulk foodstuff repacked in consumer packaging (seeds and nuts for example) or fabrics used for textile products made in the target market (Sweden).

Get further support

Feel free to contact us at Open Trade Gate Sweden. We can assist you in identifying relevant distribution channels for your products. Please include a description of your product and the segments you have identified as interesting.