Getting your goods to market is important for all firms. It can also be a big barrier to entry – if existing companies already have their products in distribution channels, and you have a hard time getting them made available, then you may risk having a very hard time growing. This article explores how access to distribution channels can act as a barrier to entry and ways over overcoming it.
How access to sales channels impacts barriers to entry
Having your goods stocked by key retailers can be a substantial barrier to entry for new firms. It can be difficult to convince retailers to stock your goods – and if you are unable to get your goods in front of your potential customers, you are going to have a very hard time making sales.
Some of the key reasons why retailers may be reluctant to stock the products of a new firm include:
Lack of track record
As a new firm, retailers may be reluctant to stock your goods because your products don’t have the track record, nor may your firm have the history of providing product support
Existing products stocked on the shelves
Retailers will also likely have other companies’ products stocked available on the shelves – without a strong reason to change, they may be reluctant to take a new company’s products.
The retailers' customers may demand the existing products that they stock
Another key consideration for retailers is their customer demands. If their customers are expecting the products of a more established company (potentially with brand recognition) to be stocked, then you may have a hard time convincing them to switch over to your products.
Difficulty actually meeting the production volumes required by large stores
A final challenge that you may have getting your products onto retailer’s shelves is actually meeting the production volumes that they may demand. It can be difficult to scale production – there may be cash flow issues for example associated with sudden increases in order volumes (which you may not receive payment for many months).
Getting your products on the retailer's shelves
When trying to get your products on the shelves of retailers, it is important to systematically consider the reasons that they are reluctant to stock your goods, and for each reason, look for ways of addressing their concerns.
For example, if retailers are concerned that they already stock a similar product offering (and potentially one that their customers expect), you may increase the likelihood of getting your goods on the shelves by highlighting the unique features of the products that set your offerings apart from others. Similarly, if your products would attract a different set of customers than existing products (and maybe especially if they are customers that the store is specifically looking to attract), focusing on this may be a good way of gaining access to the distribution channel.
Ways of working around this barrier to entry
Of course, if you are launching a firm not only is important to be aware of entry barriers, but it is also important to consider whether there are ways of removing those barriers.
If your business is blocked out of traditional distribution channels, it is worth exploring whether there are opportunities for getting your product to market in alternative ways. One possibility is to utilize social media as a sales channel. This levels the playing field – potentially allowing you to gain sales traction on a medium that existing incumbent firms may not be strong on.
Related Articles
