Ever felt like a competitor is beating you simply because they appear everywhere? From wholesalers to big-name department stores, those brands have nailed their retail distribution network.

It might seem like replicating their strategy would work for your business, too. Instead of overextending yourself and delivering a subpar experience to more shoppers, however, you should refine your own distribution strategy. 

This guide explains how retail distribution works, and suggests several channels and strategies to consider, along with how to decide which is best for your store. 

What is retail distribution?

Retail distribution is the strategy a business uses to source products from a manufacturer and sell them to the end customer. A business can have multiple distribution channels, including wholesale and direct to consumer. 

Understanding your distribution options

Distribution channels: From direct to distributors

Direct to consumer (DTC)

Retailers can sell directly to the end consumer and cut out the intermediaries. Also known as direct distribution, DTC brands sell their products directly to the end user, either through an owned online channel (such as an ecommerce website) or a brick-and-mortar store.

This retail distribution strategy is popular because it gives brands greater control over the entire supply chain, which impacts customer experience and brand image.

Retailers

Lean on other retail stores as a way to sell your product. If you sell coffee beans through your own store, for example, increase your brand footprint and sell to other coffee shops in your area.

The key is to build strong relationships with stores that sell your product. Think of them as an extension of your team. Customers visiting those stores want the same world-class experience they’d have if they bought directly from you.

Wholesalers

Wholesalers bulk-purchase products from retailers at a low cost, and sell them to other retailers at a markup. 

Costco is one of the largest wholesalers in the US, with over 136 million cardholders. The company buys products from businesses at a lower-than-wholesale price per unit. Those cost savings are passed onto Costco’s own customers, who pay less than the recommended retail price (RRP) for items they can sell via their own business.

Independent distributors

An independent distributor is authorized to sell your business’s products to another wholesaler or retailer. Think of them as an added layer in the supply chain process. Instead of selling directly to the wholesaler yourself, an independent distributor manages the process for you. 

Online marketplaces

Online marketplaces like Amazon and Etsy host many sellers on one platform. A marketplace just provides the space for brands and customers to find each other. 

It acts as an intermediary to help sales happen. In return for this service, the marketplace takes a small fee or a cut from the seller’s profit on each sale. The biggest benefit for a business is that they can reach the huge number of customers who already shop on these popular sites.

Retail distribution strategies

Intensive distribution

The intensive distribution strategy is when a store uses all available retail channels to flood the market. Instead of selling exclusively through a handful of carefully selected channels, the aim is to get the product everywhere a customer wants to buy. 

It’s a type of distribution strategy worth considering if your product appeals to a wide range of people. Consumers sensing your product “is everywhere” conclude it must be popular, creating fear of missing out f(FOMO). If it’s a niche product that only a specific type of customer would buy, however, it’s not the best option.

Pros: 

• It’s great for building brand awareness. 
• Increased market penetration; products appear everywhere a potential customer wants to buy.
• Potential customers will see your brand as more credible if you’re associated with a distributor they already know, like, and trust. 

Cons: 

• You have less control over how your product is sold and marketed.
• Several retail distribution channels can be hard to manage.
• It’s expensive to sell products to distributors that don’t have a close overlap with your target market. 

Selective distribution

A selective distribution strategy is what it sounds like. Instead of pushing your product into any channel you can find, you only make it available through a small assortment of distributors.

This distribution model works well if you’re targeting a certain demographic. If you’re selling skincare products, for example, you could be selective and distribute via service-based stores such as hairdressers, barbers, or acne clinics in your local area. 

Pros: 

• It works for brands whose customers are happy to shop around.
• It maintains a strong brand image by associating your products with distributors that reflect your brand values and reach your target market (versus being everywhere).
• It’s easier to expand across different markets if you work with a few select partners in each region.

Cons: 

• Your products aren’t available everywhere a potential customer shops. 
• To choose selective distribution channels, you need intimate knowledge of who your customers are and how they buy your product.
• It can take a lot of trial and error to identify the best type of distributor.

Exclusive distribution

The exclusive distribution strategy is when retailers have a very specific approach to choosing the channels they want to sell through. It’s also known as the “inch wide, mile deep” strategy. 

Most often, the aim is to maintain a sense of exclusivity—people can only get your products via a small selection of distribution channels. Brands in the luxury sector are a prime example. You’ll only see luxury brands like Chanel stocked at exclusive, high-end department stores or boutiques.

Pros: 

• It’s easier to manage fewer distribution channels.
• You can build strong relationships with your distribution partners since you’re actively driving your shoppers toward their store.
• You build brand credibility by leveraging a distributor’s already well-established audience.

Cons: 

• You need to trust that your distribution partner won’t sell inventory to another distributor.
• It’s hard for unestablished brands to convince consumers to buy their products via an exclusive distributor, as opposed to readily available competitors.
• You can turn potential customers away if you’re not present in the places they’re already shopping. 

How to build your retail distribution strategy in seven steps 

US retail and food services hit $732 billion in August 2025, up 5.0% year over year. Despite economic headwinds, consumers are still spending money with retailers. 

In response, retailers are facing major operational challenges. Ecommerce accounted for 15.5% of total Q2 2025 sales, but retailers are running lean with inventory-to-sales ratios hovering around 1.31. And carrier performance varies wildly during peak season. For example, UPS hit 96.5% on-time in December 2024, while FedEx was 91.8%.

An effective retail distribution strategy balances these forces. 

1. Analyze your products, market, and competitors 

First, look at what you’re actually selling. Get the hard numbers for each SKU:

• Product economics: Know your profit margin, cube/weight, shelf life, and return rate.
• Channel fit: Shows where a SKU belongs, in physical stores, on marketplaces, on your DTC site, or sold as B2B.

The type of product you’re selling plays a major role in which distribution channels work best for your store. 

Certain items—fresh fruit smoothies, for example—don’t lend themselves to wholesale distribution. The product needs to be with the end consumer as fast as possible before the expiration date passes. The longer it sits in storage, the more likely it is to become dead stock.

At the other end of the spectrum, while you want preassembled products like furniture to sell quickly, there’s no risk of them becoming unsellable. Those types of products lend themselves to long distribution channels, such as wholesalers or independent distributors.

From a profit margin perspective, you could break it down into high and low margin products. 

• High-margin product (like a $200 face serum): You have a lot of profit to spend. The product can easily absorb high DTC costs, like marketing and shipping for a single item.
• Low-margin product (like a $5 candy bar): You have almost no profit to spare. You can’t afford to ship one at a time. The fit is B2B/wholesale, where you sell a whole case or pallet to one retailer.

If you sell vitamins, for example, you’d look at the data and see that people buy them often and they have high ecommerce penetration. In this case, having a strong DTC presence for subscriptions and Marketplace for quick rebuys presence is important.

✨ Shopify Power-Up: Use Shopify’s ABC inventory analysis report to surface the SKUs that drive your revenue and deserve prime distribution focus. Combine this with inventory reports like sell-through rate and month-end snapshots to identify which products are winners and which are not.

2. Evaluate your business capacity and costs 

Next, calculate your total landed and fulfillment costs, which includes pick/pack, materials, storage, and last-mile delivery. Some costs to consider include:

• Seasonal costs: Plan for seasonal cost increase. A key example are the USPS peak season surcharges, usually from early October through the middle of January the following year.
• Carrier risk: Factor in carrier performance risk. That UPS vs. FedEx on-time gap during peak is a real cost, as every late package is a new expense for your business, including customer service labor, shipping refunds, and replacing lost orders.
• Import costs: If you import, watch ocean spot trends like the Drewry World Container Index to time your replenishment. The price was $1,687 per container as of Oct. 16, 2025.

Calculate your profit margins for each product and evaluate how much flexibility you have for distribution partners. If you only make 30% profit when selling directly to the customer, wholesalers—who make bulk orders at a unit price lower than RRP—might not be the most sensible option.

💡 TIP: Shopify POS comes with tools to help you control and manage your inventory across multiple store locations, your online store, and warehouse. Forecast demand, set low-stock alerts, create purchase orders, know which items are selling or sitting on shelves, count inventory, and more.

3. Review your competitors strategy

Looking at your competitor’s distribution strategy can shine a light on the channels your potential customers are using to buy. 

Let’s put that into practice and say you have three main competitors that sell through the following distribution channels:

• Competitor A: DTC (online and in-store), wholesale, and retailers
• Competitor B: DTC (online only) and retailers
• Competitor C: DTC only (online and in-store)

All three competitors make direct sales, and two have a retail store they use to sell products in person. It definitely makes sense to include DTC product distribution as part of your own strategy, as customers are known to buy directly from the brand. A retail store may be a good move as well, if you have the budget for it.

However, just one competitor sells to wholesalers. This brand is much more established than you and sells lower-quality products at a cheaper price. While tight profit margins might not make you want to sell wholesale right now, it can be a good long-term goal to work toward. 

4. Select your distribution channels 

Now, decide where to sell. A DTC channel generally offers higher margins but comes with higher customer acquisition costs (CAC). Wholesale or B2B channels mean lower margins but provide stability through larger, less frequent purchase orders.

The best brands take advantage of each model. Take Tella & Stella, for example. The pet accessory brand started with DTC but added a wholesale channel to expand. Running both DTC and B2B on Shopify, they avoided bottlenecks from manual wholesale orders and increased sales by 23% across all channels.

A unified commerce platform is key here. Shopify POS unifies your online and physical store inventory, pricing, and promotions. For wholesale, Shopify B2B provides a separate, password-protected storefront with custom price lists, net payment terms, and unique buyer accounts, all managed from the same admin as your DTC site.

5. Set the rules of engagement 

Next, create guardrails to prevent channel conflict. You don’t want your ecommerce store to compete with its retail partners for the same customer. Rules can make sure your channels coexist peacefully and target the right customers. 

1. Set a minimum advertised price (MAP) policy. For example, you set a MAP of $299 for new headphones. A big-box retailer can advertise them for $249 in a weekly ad, which would undercut smaller stores and your own website. 
2. Create different assortments for different channels like online-only SKUs. A fashion brand might sell its core collection through all its retail partners, but offer an online-exclusive collection of limited-edition colors or premium-fabric items only on its own website.
3. Decide on clear inventory allocation rules. You can set a rule to always allocate the first 50% of a new product’s inventory to your DTC site. The remaining 50% is divided amongst your wholesale partners based on their size and sales history. 
4. Define your on-time, in-full (OTIF) targets for each channel. Place a 98% OTIF target for major retail partners like Walmart, who impose penalties for late or incomplete shipments. For your own website, you could set a 95% OTIF target because you have more flexibility to handle delays. 

6. Manage logistics and inventory across channels 

End customers are conditioned to take home the products they buy in-store immediately. That applies to resellers, too, who want their products to arrive as quickly as possible. It helps their cash flow if they can quickly turn a profit on stock they’ve bought.

Optimizing your last-mile delivery process helps achieve this with any distribution partner. By localizing your stock, unsold inventory is stored near your biggest customers. You’ll reduce the ground each parcel has to cover, meeting customer expectations while also reducing delivery costs and carbon emissions.

A third-party logistics (3PL) partnercan take this pressure off your shoulders. It’s their responsibility to pick, pack, and ship orders to your customers—be that a wholesaler, end consumer, or third-party reseller. 

Outsourcing order fulfillment means you can:

• Expand into new markets without the stress
• Rely on a 3PL’s expertise to make smarter distribution decisions
• Reduce operational costs, including storage rent and gas for post office trips

💡 TIP: Set up in-store or curbside pickup in Shopify to start offering physical pickup as a delivery option at checkout. Pay less on last-mile delivery, speed up fulfillment times on local orders, and drive more foot traffic to your stores.

It’s important to analyze your target audience and figure out where they like to shop, how they like to shop, and what’s important to them when shopping.

7. Regularly audit your distribution strategy

You’ve expanded your distribution network to increase market penetration. How do you know if your new strategy is working?

Regularly audit your distribution strategy and pay close attention to:

• Channels that regularly run out of stock: If resellers are constantly asking to restock your products, consider rebalancing your distribution strategy to free up more inventory for third-party resellers. 
• Channels that form the bulk of your sales: Over-reliance on one particular distribution channel can wreak havoc if your relationship goes bad, they choose to no longer stock certain products, or they stop buying altogether.
• Channels with a low sell-through rate: If just 3% of sales happen via wholesale and the majority happen via your brick-and-mortar store, evaluate whether it’s worth investing time and money in wholesale distribution—or whether you should lean into what’s already working.

Take OLIPOP. The CPG beverage company sells directly to the end consumer through its online store. Their senior ecommerce and digital product manager, Melanie Edwards, says “We’re a DTC company that values the control we have over our brand, image, and product.”

However, the brand has also “partnered with Shopify, Amazon, and brick-and-mortar retailers such as Target, Wegmans, and Whole Foods, etc. to deliver our products directly to consumers.”

These extended distribution channels happened as a result of consumers’ omnichannel shopping habits: “We realized after a few years that we needed to push into the ecommerce space,” Melanie says. “Many customers do their shopping online now, so an omnichannel approach made sense to us as a brand.

It’s important to analyze your target audience and figure out where they like to shop, how they like to shop, and what’s important to them when shopping. Answers to these questions will allow you to choose the correct retail distribution channel for your business.”

Key trends in retail distribution for 2026

As you build out your strategy, it’s helpful to know the trends shaping distribution. Here are the top ones to understand and implement:

1. Brands are getting more strict with returns: The National Retail Federation expects returns will reach $849.9 billion in 2025, with 19.3% of online sales being returned. To protect margins, brands are shifting to paid returns and stricter policies, as well as improving fraud controls.
2. The race to same-day fulfillment: The bar for “fast” delivery gets higher every year, with same-day and even sub-hour delivery becoming regular options. The strategy is to promise speed where it matters most, using stores as local fulfillment hubs and implementing convenience fees to keep the unit economics positive.
3. Continued investment in automation: Despite economic uncertainty, brands are still investing heavily in automation. A 2025 report from MHI/Deloitte highlights rising tech spend, with many leaders planning eight-figure investments to build end-to-end orchestration. Tightly integrated systems help unify data and automate its exchange, which de-risks the process of using data to scale up.

Forecasts for overall retail growth are modest. The National Retail Federation projects US retail will grow between 2.7% and 3.7% in 2025. With top-line growth slowing, distribution wins will come from improving inventory turns, perfecting returns, and mastering first-attempt delivery.

It’s time to find the right retail distribution strategy for your store

You know that customers want your products—and you want to turn a profit while supplying them. Ironing out the details, including which distributors you want to partner with and how you collaborate with them, is the hard part.

Use these techniques to determine which retail distribution strategy is best for your store. Whether you’re selling to wholesalers or directly to the end consumer, prioritize building strong relationships with your customers while keeping a close eye on profit margins. The last thing you want to do is sell all of your inventory for a tiny profit.

This article originally appeared on Shopify and is available here for further discovery.