How to set up a distribution network for a new product

Distribution is the bridge between your product and your customer. Getting the distribution model right for a new product determines whether it reaches the market efficiently — or whether you spend years rebuilding a channel that doesn't fit your product.

Define your target customer first, then work backwards to the channel. Who buys your product? Where do they currently buy similar products? What's their purchase journey? A product for small retailers is distributed differently from a product for large corporations, which is distributed differently from a product for end consumers. The customer defines the channel, not the other way around.

Evaluate channel options: direct sales (your own sales team calls on customers), distributors (you sell to distributors who resell to retailers or end customers), agents (they sell on your behalf for a commission without holding stock), modern trade (large retail chains), and e-commerce. Most products use a mix, but start with one or two channels you can execute well.

Distributor selection is as important as distributor motivation. A distributor who covers your target geography, has relationships with your target customers, has the financial strength to hold stock and extend credit, and is not over-committed to competing products — is your ideal partner. Signing a dozen distributors quickly and then finding most are inactive is a common and expensive mistake.

Define distributor economics clearly before signing. What is the distributor margin? What are the credit terms? Who bears the cost of returns? What sales targets are required to maintain exclusivity? If these terms aren't clear upfront, conflicts will arise when the relationship is under stress.

Launch with depth, not breadth. Cover a small geography excellently before expanding nationally. Getting your first territory to strong penetration gives you learnings, references, and economic validation before you scale a model that might not work.