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Understanding the FMCG Distribution Channel: A Complete Guide

Table of Content

  • Definition of FMCG Distribution Channel
  • Types of FMCG products
  • The FMCG distribution channel and how it works?
  • How to select the right distribution channel?
  • How can we improve the performance of the distribution channel?
  • F&A

Definition of FMCG Distribution Channel

FMCG distribution channel is the way that FMCG products get from the people who make them to the people who buy them. They are the paths that goods, information, and money take through the system. 

Some manufacturers of fast-moving consumer goods (FMCG) like to deal directly with customers, but most use a network of stores to get their products to customers. Do you know what the requirements are for a good FMCG Distribution Channel? A good FMCG distribution channel network is set up through planning, effective thought processes, effort, and investment. 

Furthermore, from the public’s perspective, creating a distribution channel creates new job opportunities for laborers. Along with this, it also helps a wide range of people gain access to FMCG products. Especially, from a competitive standpoint, a strong distribution network gives companies that make things an edge over their rivals. So, distribution and channel management are essential parts of a company’s business strategy.

Types of FMCG products

FMCG products are your fast-moving consumer goods. The name justifies the products. This is because the products start selling as soon as they hit the shelves. There are multiple categories that fall in the FMCG category. People buy these things often, use them up quickly, and sell a lot of them because they are cheap and in high supply. In fact, a few common examples are sodas and chips. For the best FMCG products, log on to Myanmar Golden Heart. Myanmar Golden Heart brings to you the best products along with pocket friendly prices!

Fun fact: Do you know the opposite of FMCG? They are slow-moving consumer goods. These goods tend to have a longer shelf life, like furniture and appliances. 

Let’s look at the different types of FMCG products with Myanmar Golden Heart

Food and Beverages

FMCG Distribution Channel

This includes a lot of foods and drinks that people eat and drink every day, like Maggi noodles, sodas, soft drinks, and packets of chips. Even bottled water falls into this category due to its short life span and high turnover rate.

Healthcare Products

Healthcare care products are also fast-moving consumer goods because they are bought often, don’t last long, and are sold widely. These include products like plasters, bandages, syringes, etc. 

Home Care Products

FMCG Distribution Channel

Household goods are also in this group because they are usually standard, not very durable, and sold in large quantities at low unit prices. There are things like kitchen towels, toilet paper, bleach, dusters, and more.

Also read: Complete guide to FMCG Products

The FMCG distribution channel and how it works?

Before we understand the distribution channel, we must look at the elements that make up these distribution channels. Distribution channels are made up of different independent businesses that work together with the companies that make the products to get them from where they are made to the final customer. There are three elements in the FMCG distribution channel: agents, merchants, and facilitators. The following are their roles:

  1. The agent’s job is to generate sales by promoting a business’s product. However, they neither stock the goods themselves nor buy them. 
  2.  The merchants include people like retailers, wholesalers, and stockist. They buy and stock the products in bulk and supply them directly to retailers. Sometimes, they also supply the products directly to the customers. Generally, merchants are independent, but sometimes a manufacturing unit has its own wholesale or retail departments.
  3. As their name suggests, facilitators make it easier to move manufactured goods from one location to another. Facilitators include logistic services, warehouse owners, and independent distributors whose only job is to store and move the products, not to market or sell them.

How to select the right distribution channel?

First of all, you need to think about a few important things before you can choose a distribution channel. You will need to consider the type of product, the market, and the middlemen. 

How to choose a distribution channel?

1. Consider your Rivals

What methods are your rivals using? Why? Does it offer something better than other channels, or is it just how the business has always worked? Certainly, if your competitors have missed a way to sell your product, you could gain an advantage by using it. For example, if most of your competitors sell their products through big-box stores, you can stand out by selling directly to customers through the internet.

2. Consider the costs and benefits

After deciding on a distribution method, developing the support systems that go with it is time-consuming and costly. It is difficult to change your mind once your company has been oriented around a specific distribution channel. Before committing resources to any option, carefully weigh the costs and benefits.

3. Rank your options

After looking at the different options you have, put them in order of preference based on what will bring in the most money at the end of the year, minus any costs. Think about how much money you have and choose the method that will let you reach the most potential buyers.

4. Have a plan for growth

As your market expands, it will be important to stay abreast of developments in the market and in your competitors’ strategies for distribution. 

FAQ

1. What is the most important channel of distribution?

One of the most popular and effective ways to get products to people is through retailers. Supermarkets, malls, boutiques, and warehouse clubs are all examples of retailers. 

2. What are the different steps in the distribution process?

  1. Keeping your customers in mind 
  2. Determine the best ways to get your product out there.
  3. Build alliances and reach deals through middlemen.
  4. Observe data and optimize your distribution system.
  5. Expanding your distribution network

3. What is the most difficult aspect of a distribution channel?

The most challenging part is effectively managing the inventory along with the increase in competition from fellow rivals.

4. How many types of distribution channels are there?

Basically, there are three kinds of ways to sell something: directly, indirectly, and in a mix of both.

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