Differentiated Distribution Strategy

In general, a differentiated strategy in business means that you offer distinct product or service attributes to your customers relative to what competitors provide. You can differentiate in a broad marketplace or in a niche local market. Differentiated distribution means that your distinct benefits extend to your methods of getting goods to customers.

To understand differentiated distribution strategies, it helps to understand the scope of distribution as a business function. In general, distribution refers to the way in which you acquire merchandise, sell it and then deliver it to customers. In a standard resale distribution process, a business buys goods from a manufacturer or wholesaler, stores them in a warehouse and delivers them to stores or consumers after purchases.

Distribution efficiency is really a key to success for many online retailers. Amazon.com's success largely stems from its massive, efficient distribution system. The company maintains distribution centers spread strategically throughout the United States and the globe. The company also has an elaborate picking and shipping system that allows for faster order fulfillment. In a December 2013 interview, CEO Jeff Bezos introduced a very eccentric plan to have robot delivery copters take packages to customers located close to distribution centers.

Kiosk-based distribution is a primary differentiation factor for several successful companies. The premise is to distribute goods through self-service kiosks that provide customers a convenient, efficient experience. Redbox became a dominant movie rental player with its pioneering approach to distributing movie rentals through kiosks. Apple has also used kiosks to distribute goods in airports and other locations. Coffee and snack providers have also routinely distributed through kiosk locations.

Vertical integration is another distribution strategy companies employ to differentiate. A retailer acquiring or starting its own manufacturing or distribution company is one example. Similarly, a manufacturer or wholesaler selling directly to end customers is vertical integration. This approach allows you to cut out the middle man, which can lead to reduced business costs and customer prices. Manufacturers can also directly ship to customers to avoid the need for costly transportation and logistics processes.