My overused statement that this is the distribution century still dramatizes the point that in a world of excess (short-term supply chain disruption aside), only those who have powerful and/or unique distribution strategies will succeed. I first began to describe the distribution century in 2015. In the early 20th century the U.S. cycled through a production driven economy when a rapidly growing population needed lots of stuff. Mid-century, a slower growing population spawned a marketing-driven economy with “Mad Men” creating compelling reasons for consumers to select one product or brand over another. Now we are in a distribution-driven economy. Stores and stuff across most consumer-facing industries are competing to steal consumers from their competitors. Read: There is simply more supply than there is demand. Ironically, while the current supply chain mess is slowing supply availability, it adds another spotlight on the necessity for profoundly new, more efficient and effective distribution strategies.
Preemptive Distribution
Another irony of the supply and demand disequilibrium is that technology is enabling the increase of even more, often better and newer goods and services created by the legions of entrepreneurs supported by their investors who keep them afloat. Paradoxically, technology is enabling the creation of more and better distribution models that continue to reduce excess and create greater and more efficient productivity. These modern models ensure distributing the right product to the right consumer at the right time, with the right price, where and when they want it, and how they want to receive it. And it’s a war out there with all competitors fighting to steal the same consumer’s purchase. This endless loop is called preemptive distribution, a term I coined in my co-authored book, The New Rules of Retail. But enough on academics, although necessary for context.
[callout]In the distribution century, leaders have to change their mindset about the distribution of their goods and services from a linear, old-world, store-to- consumer mindset to identifying all the possible platforms where they can serve their customers.[/callout]
From Endless Aisles to Endless Distribution Platforms
Legacy retailers’ initial fear of Amazon as a wrecking ball was replaced by the realization that they, too, could compete online. In fact, it didn’t take long for them to understand that the synergy of stores and ecommerce resulted in more places for consumers to choose from. And online consumers responded by purchasing three to five times more than using a single channel. Jeff “the amazing” Bezos, ahead of everyone’s curve, gets the distribution thing. Now he is launching a flurry of brick-and-mortar models, some in test mode, others rolling on out. Maybe I need to correct myself. Bezos likely launched the distribution century.
Think of the explosion of delivery systems (aka distribution) in numbers, size and speed, created by Bezos’s tenacious effort to completely transform the “last mile.” Amazon itself is a distribution channel for millions of third-party brands, products and services. And order fulfilment (aka distribution) can now be done in a variety of ways as part of a grand distribution strategy.
Amazon has been a massive disruptor, but legacy retailers and brands have an advantage by innovating physical distribution concepts that Amazon’s model is not yet fully able to match.
Co-Distributing on Steroids
Every retailer and brand are distribution platforms for every other retailer and brand focused on the same target market. We have written and talked ad nauseum about the death of the traditional “wholesale-retail” model. Most successful brands and retailers are distributing directly to consumers through branded stores (aka distribution platforms) and online. And they are co-distributing both online and off, in some cases on competitors’ platforms. Savvy retailers offer their online distribution platforms to third parties to greatly expand offerings without having to add more physical space. And third-party, shop-in-shops and concessions are a winning strategy to showcase other brands in store to make it more convenient for customers and keep them from leaving.
Rather than trying to list the multitude of rapidly growing examples, the point is that in the distribution century leaders have to change their mindset about the distribution of their goods and services from a linear, old-world, store-to- consumer mindset, to identifying all the possible platforms where they can serve their customers. By the way, this could not happen without technology … primarily AI.
A New Form of Co-Branding
Another concept heightening the synergy of co-distributed brands is design of co-branded apparel and footwear, such as Timberland and Tommy Hilfiger. Two cool next-gen brands, Vans and BAPE, have a co-designed footwear line. Eddie Bauer and Baja East is yet another example.
And why not? The sum of the parts is larger than the whole. It’s called synergy. And by the way, this could not happen without technology … primarily AI.
The New Mad Men: AI
Another mind-blowing offshoot of the distribution century is the ability to laser in to identify and aggregate customers down to a personalized level (possible only through AI). The distribution platform also serves as a communications and advertising platform, replacing the Mad Men advertising model with machine learning.
Lowe’s, Ulta and Macy’s are just three brands who have created their own media networks (aka ad agencies) that can precisely personalize their offerings, ads, and communications. Bye-bye to spending gazillions of dollars with media agencies to reach gazillions of eyeballs and never knowing what percentage of them even give a damn about your brand. And by the way, this could not happen without technology … primarily AI.
So, here’s the message to the leaders of all consumer-facing industries: In your next strategic meeting, think not just how you distribute to customers directly. Identify the hundreds, maybe thousands of other distribution platforms that also connect with your consumers. Then reach out to them and enjoy the incredible value you have just unlocked. Distribution always overrules!
