What exactly is FMCG distribution and how does it work?

FMCG distribution is the movement of fast-moving consumer goods and services from the producers to the end users.

Distribution is the lifeblood of any business. FMCG producers know that without it, success cannot be achieved. If you don't distribute your product or service well, then you're going to struggle to make money.

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This should settle any fears you may have about how profitable the FMCG distribution business can be. 

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So how do you go about getting your distribution business right from the onset? And how can you ensure that you avoid certain mistakes and make the most of your investment capital? 

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Understanding Distribution Models

Before we proceed, let’s run through the different distribution methods that most FMCG companies in Nigeria operate.

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Agents: Agents act as representatives of producers. They interface with distributors directly. Some companies employ this method of distribution.

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Distributors: In this model, distributors have direct access to the manufacturers. It is said to have better margins.

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Wholesalers: Wholesalers act as intermediaries between distributors and retailers.

Retailers: These are the actual stores where end-users purchase products. They can be physical or online.

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3 Ingredients of all Successful FMCG Distribution Businesses (Infographic)

Product

Location 

Wholesale & Retail Network

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Mistakes to avoid when starting an FMCG Distribution Business

Not Starting Small

Do not be tempted to commence on a large scale. It is advisable to test out everything. Test the location, products, and more. After you have gathered enough experience and recorded some success, then you can consider scaling up.

Inadequate Research

The world of FMCG products is filled with options and so it’s important to learn as much as you can. Take out time to do some research. Visit the top distributors in your area - ask questions and make observations. Notice their customer service and identify distribution gaps of FMCG companies. Which products are always available and which ones go out of stock the most? Research doesn’t even end after you have started. As the business grows, you will need to talk to your customers regularly and listen to their feedback. 

Product Fit

This is one step that research can help you solve. Every company has locations where their products serve the most. If you notice, distribution is usually location-based. If you don’t have the right product for an area, then there’s no point starting at all. In fact, if you can get products because the margins are high and end up not selling them for long periods then you risk losing capital. Decide on your products - high demand

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Undermining Marketing and Promotions

Some business people are fond of saying, “My customers will find me.” Maybe they will but it may take a while. Go all out with marketing instead. Spread the word among friends and family, places of worship, and civil societies. Print fliers and share them around the location of your warehouse. Reach out to potential heavy buyers and initiate business conversations. The main thing is that you keep increasing the number of people who know about your business. 

Relying only on non-digital channels

Don't underestimate the importance of doing business digitally. From inventory management, bookkeeping, and payment processing, to successful distribution businesses today and moving towards automated processes. It is also important to make the business more appealing to younger workers who are beginning to make up a larger proportion of the workplace.

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What do FMCG companies look out for in a distributor

As part of due diligence processes, producers of fast-moving consumer goods in Nigeria carry out their own assessment of a distributor before commencing business with them. It’s important to arm yourself with some of the factors they consider. Here are some of them:

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1. Startup capital capacity: Can you present a certain level of investment, to begin with?
2. Experience: Have you done a business in the past that puts you in a better position to succeed in this one?
3. Infrastructure: (Facility, vehicles, etc)
4. Market reputation: How much you’re known within the vicinity.
5. Market knowledge: How well do you understand the way the market you’re seeking to situate?
6. Technology: As a prospective distributor, are you conversant with the technology platforms needed to operate this business?

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As an intending FMCG distributor, these are the few things that must be kept in mind as you start out. 

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The idea of FMCG distribution is to ensure that the right product reaches the right customer at the right time. And as long as demand exists, distribution will always be needed. 

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Read More: How to Start a Successful FMCG Distribution Business in Nigeria

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