Brief business model discussion

I have spent quite some time and energy looking at different business models for the global distribution of the  Hydropal filtered sports bottle.

Our business model has been designed to eliminate the “middle man”.  This is a global trend.  You will probably already know that retailers are constantly trying to  buy direct off the manufacturer, often after they have been introduced the product by a “middle man”. 

The current economic situation means this will happen more and more as margins are squeezed well below what we have been used to in the past.  Having the additional reseller level adds not just to the price but also to the complexities of managing ‘who spoke with who and when’. 

Consequently, we have a three tier distribution model, 

1. An  Agent(importer), 
2. Distributor/s and 
3. the Retailer.  

The Hydropal is a bottle full of air so it made sense to find a agent in each territory that could supply and print the bottle section in order to save of freight costs and more importantly, production lead times.  So this becomes my entry point for each territory.  

This is typically a manufacturer with little or no experience in marketing.  This matters not because the marketing is done by the next level up and by Hydropal head office.  As long as they can hold stock, turn out good product on time and stick to the plan we are happy.

The distributor or distributors.  This is where the business model gets interesting.  Every distributor that is clearly effective is going to want an exclusive.   The challenge is to offer an exclusive in the area they are good at and leave out the market segments where others are better.  This does not apply to all products, in the case of Hydropal it clearly appeals to different consumers for different reasons and we are yet to find one company that covers them all.

Finally, the retailer.  Retail is now taken over with global retailers that are busy buying up smaller independents so making the right approach is critical because if you are not in with the big boys you can miss some serious opportunities. 

It can take years to develop a rapport with head office and buyers.  It is best to find distributors with existing relationships and accounts already loaded into their system....make sure you have allowed enough margin for the retailer and their marketing levies and hard arse payment terms.

Spend time to find a business model that works for you now and in the future when volume kicks in.  The less tiers of distribution the better.  It is less complicated, it results in a cheaper retail price and affords greater control over branding.