Importance of International Distribution
International distribution is one of the most important aspects of operating a global company. Every global company must decide how they will physically get their product in the hands of the consumer. Considerations in this decision include how much control the company wants to have in the selling process, the difficulty of getting the product to the consumer, and the type of product the company sells.
Types of Channels
- Direct Sales – Direct sales are ideal for a company that wants full control over the selling and distribution process. Direct selling allows the company to deal more closely with its customers and ensure every part of the customer experience is decided by the company. An example of this is Tesla, which owns its own stores for consumers as well as an online store for customers to purchase their Tesla vehicle and have it delivered to their home. Tesla does this because founder Elon Musk did not want customers to have to deal with pesky car salesman like most other car brands require for purchase at dealerships. Direct selling becomes more difficult however for companies with customers all over the globe. It makes sense for higher ticket items such as those offered by Tesla, however is more difficult for cheaper goods.
- Agent Intermediaries – Agent intermediaries are intermediaries who take care of the selling/distribution process for the company in return for a commission from the sale. The agent never takes ownership of the product, it simply facilitates the transaction. This is a popular distribution channel for insurance companies. The products are sold and distributed to new customers by the agent for commission, and the insurance company gains a new premium-paying customer without having to worry about making each individual sale. This can be very beneficial for distributing internationally because the agent often has the necessary contacts and skills to sell to customers in the specific market they specialize in.
- Merchant Intermediaries – Merchant intermediaries purchase the goods from the company, and then resell the goods to customers for a profit. This allows the company to sell in wholesale to the merchant intermediary, allowing for larger sales and avoiding the issues involved with dealing with customers. An example of this is Coca Cola. You will never see a Coca Cola store, however almost anywhere you go you can find a Coke. Coca Cola utilizes merchant intermediaries such as retail stores all over the globe to sell their product to wholesale, then the retailers are responsible for selling Coca Cola products to consumers in that market.