For many new business owners, direct distribution may seem like the most cost-effective way to reach customers. Without any need for partnerships, third-party integrations or revenue sharing, it has the lowest apparent cost. However, as businesses grow, a well-balanced mix of distribution channels becomes crucial for unlocking new growth opportunities. By strategically diversifying your distribution strategy, you can protect your brand and build a more agile and resilient business model.

Despite their higher costs, distribution partners not only ease the operational burden, but can significantly expand market reach thanks to their established networks. This is certainly the case in the hospitality sector, where distribution has always been critical. Since products cannot be moved, a hotel's entire inventory is filled with smart distribution.

Before the Internet, the massive distribution power of hotel chains gave them a huge advantage over independent hotels. But since the early 2000s, hotels have developed new ways to distribute through various online channels such as Expedia and Booking. In fact, 65% of all direct bookings now come from guests who first discover the property through an online travel agency (OTA).

Across industries, distribution partners routinely prove their worth, but they're not an all-important solution. To create an effective distribution strategy, it's important to look beyond where your competition is appearing. Let's explore how to diversify, innovate and potentially surpass them.

Related: Innovating your product distribution is just as important as innovating your marketing

Balancing direct and partner distribution

At its peak in 2011, Toys “R” Us had revenues of over $13.9 billion. Just seven years later, the brand had filed for bankruptcy and closed all of its US stores, though it has since begun a revival under new ownership. CEO David Brandon related closure for the company's “inability to offer expedited shipping options” and “the lack of a subscription-based delivery service.”

In other words, in a market dominated by online retailers like Amazon, their distribution strategy had not evolved. Similarly, megachain Blockbuster was wiped out by Netflix and RadioShack was stripped of its limited e-commerce strategy. No matter how big your brand gets, maintaining a diverse distribution mix is ​​essential.

In practice, this means monitoring the competition continuously and proactively adapting to market changes. So, regularly collect and analyze data from your distribution channels. This will help you make quick and effective changes to optimize your sales and market position.

Additionally, while brands should not rely solely on direct distribution, it is an essential component of maintaining control over brand image, customer experience and pricing. Apple is an industry leader in this regard. While the company has many retail partners, it also invests heavily in its own retail stores and direct-to-consumer online channels, allowing it to maintain its market dominance.

Finding innovative distribution channels

In a competitive market, the path of least resistance is to identify and mirror the distribution channels of the larger players. Ironically, this safety-first approach comes with risk. Instead of becoming a commodity, a better way might be to find niche markets. To do this, recognize that some channels have a stronger presence in certain markets than others. If you want to expand into a new region, for example, identify the channels that have access to demand in that particular area.

In our industry, some Asian countries have specific OTAs that are widely used, so listing on these platforms can then attract new customers. While investing in niche segments may not offer the same visibility as mainstream markets, a properly targeted niche strategy can lead to greater conversions and higher profitability. Red Bull, for example, carved one $10 billion market in the energy drink industry by targeting extreme sports enthusiasts through special events and sponsorships.

Fulfilling unmet needs means you can become the “right” solution in a small but profitable market. The caveat is that this particular approach can take months or even years to develop. While it's still important to leverage key players, don't lose yours unique value proposition in process. The “be everywhere” strategy can work well if you're not trying to be everything to everyone.

Marriott exemplifies this balanced approach. While guests can book any of its branded hotels through the company's central reservation system, Marriott uses direct channels (website, mobile apps) and indirect channels (OTAs, travel agents) to reach different market segments. This allows Marriott to cater to different traveler preferences, from business-focused brands like Courtyard by Marriott to leisure-oriented properties like Sheraton.

Related: 8 Ways to Make Sure You're Selling Solutions Through the Right Channel

Strategic expansion as things change

Markets will always fluctuate. But if you listen to what customers are saying where they're shopping, you'll learn about new trends and new places to put your products. If your distribution strategy is well-blended and you're not overly dependent on any single channel, you'll be well-positioned to drive change in your favor.

At least once a year, replace one or more channels that generate fewer sales to look for new customers. As a general rule, when market demand falls, brands must increase the number of distribution options they have to offer. Conversely, when market demand is high, be more selective and focus on audience quality, average prices, cost and ease of management. Successful brands often demonstrate this type ELIGIBILITY.

Perhaps the biggest name in graphic design, Adobe, even upended its entire revenue model when faced with the software industry moving towards cloud-based solutions. Although Adobe's shift from licensing and selling its creative suite of software to a SaaS model initially drew criticism, it has turned out to be a masterstroke—posting record revenue of 19.41 billion dollars in the financial year 2023.

Related: 4 Must-Know Strategies to Sell Effectively to Distributors

Premium brands like Apple and Marriott are able to gain increasing market share despite their higher prices by consistently increasing visibility and increasing engagement. As you prepare your distribution strategy, find ways to built in flexibility. By establishing metrics early and recognizing the need to evolve as market conditions change, you'll be well-positioned to test emerging platforms, explore new niches, and balance a strategy that's capable of driving immediate income and long term growth.