Thread: Leveraging distribution systems, building brands, etc. thaughts

In the MFL it talks about leveraging distribution systems, building brands, and being the manufacturer instead of retail. I was wondering how others feel about these topics.

Leveraging distribution systems: Would engaging in the private labeling of another companies product and marketing it a different way be considered fast lane (fit the criteria). It seems to me that it would be a way to build a brand and utilize existing distribution systems. The only problem I see is that you would not have control you could get into a similar situation as affiliate marketing. I do know of several companies that have done well with private labeling and licensing agreements. Even a few licencor that have outperformed the company they are licensing.

Manufacturer advantage: I somewhat disagree with this. Even though you seem to have the most control over your product if you cannot sell it then you make no money. I think in today's society the retailers have gained in power in comparison to the manufactures in the aspect of flexibility. If consumers all want blue hats and you are the blue hat guy then you will make money but one day the consumer could say we want red hats only. The retailer will shift to purchasing only red hats. This would force you to adapt or die. I am not say that this is always the case by any means just throwing out an opposing viewpoint. I am interested what other have to say.

I agree with you. For example with my sock and underwear business for men I can pretty much stay in business no matter what happens as long as men continue to have feet and rear ends. However, if I was a manufacturer of socks and underwear Labor differences and outsourcing would have put me out of business months ago.

I think that the power in business has really shifted from the supply side to the buy side with the customers having much greater control in the market then in years past. With the diversity of products out there the consumer can get very picky and no longer has to settle for what the store has on its shelves.

77Startup-I noticed you are in Chicago.. as am I. Is your business B&M or internet based.

Really? cool you will get to "enjoy" the awesome winter with me. My company is 100% internet based. As for the marketing side it's about 50/50.

For me, the distributor/manufacturer advantage question boils down to how many manufacturing options the distributor has and how many distribution options the manufacturer has.

For example Walmart has a gigantic advantage as a distributor/retailer over manufacturers, since that are such a huge distribution point for a manufacturer's product. They can demand steep terms from their manufacturers because the manufacturers know that no other company can distribute the volume of their product at the levels of Walmart. The Apple App Store is the same way. If you are manufacturing iPhone apps and want access to the vast majority of the market, you have no choice but to bend to the wishes and regulations of the Apple App Store.

Conversely, if you are a manufacturer of a product that is in demand, and there exist some barrier to entry for others to manufacture the same product, then you may have power over your distributors if there are a ton of potential distributors out there.

For example, I used to do affiliate marketing and made decent money from it. However, I made the cardinal mistake of focusing on the product of one manufacturer. There were other companies producing the same product, but this company had the best quality product, best promotional materials, AND the highest profit margins.

The downside for me came when they changed their terms and destroyed my revenue. I tried switching over to the other companies, but my entire marketing system was built around the first company's extensive promotional tools.

The worst part was that I was suspicious of something like that happening from the very beginning, but greed and wishful thinking led me to hitching my wagon with the first company. Had I instead set up my company so that I only used marketing strategies and resources that were interchangeable between manufacturers, and I could automatically switch my marketing from one affiliate program to another, I would have made 30-40% less money per month. However I would have been almost completely immune to the changes and whims of any one particular affiliate program/manufacturer.

Whoever has the most options has the most power.

77Startup: They said the winter is supposed to be bad again this year. All I have to say is where was this snow when I was a kid and wanted to go sledding.

Do others think that private labeling would be taking too much control away from your business. I have a great idea but it is going to be too costly to reverse engineer and manufacture others products.