Types of Distribution Channels In Denmark

As a foreign exporter interested in expanding to the Danish market, it's crucial to understand that having an outstanding product and a target customer base is only part of the equation.

What truly matters is the ability to effectively connect with the Danish customer and ensure the seamless delivery of your product or service. In this context, our focus is not solely on marketing strategies; it's about creating a practical pathway for customers to purchase your offerings and have them delivered.

To help you succeed in the Danish market - but also in Norway, Sweden, and Finland, here are some examples of distribution channels to include in your business model:

Direct Sales Representatives

Sell your products directly to the end customer through in-person sales during face-to-face meetings or over the phone, subject to legal limitations in relation to consumers.

This is the most resource-intensive way to sell, but in situations where trust and dialogue are important, it may be the only option. For entrepreneurs who haven't yet established trust in the market, it might be the only possibility. Some economic considerations when choosing this channel:

• What is the cost of acquiring a new customer in terms of time and expenses before securing an order?
• How much is each customer expected to spend?
• How large of a geographic market can we cover without significant expenses?
• Can we expect repeat purchases from customers, and what is the total value of a new customer over time? Having your own sales representatives is, of course, more profitable if you can acquire a new customer over the phone instead of traveling around for meetings.

Retailer or Agent

If your product requires personal sales, retailers and agents can be an option to expand the product's reach without building your own sales organization.

The prerequisite for success is that retailers and agents are as passionate about your product as you are and believe in its sales potential. It's also relevant to consider what other products the agent or retailer has in their portfolio, both to determine if your product aligns with their customer base and to see which other products compete for the retailer's attention. As a rule of thumb, retailers prefer to sell what yields the highest profit for their effort. Don't we all?

When comparing retailers to agents, the key difference is that with agents, the end customer typically receives the product directly from your company, whereas retailers typically maintain their own inventory.

Distributor

If you're willing to step further away from your end customer, selling through distributors or wholesalers is an option.

With distributors, you have the opportunity to be mass-distributed to retail chains and stores in general. This sounds promising, and it's often the dream for those who have developed a new product for the broad consumer market.

However, the challenge is that neither distributors nor retailers can be expected to have a particular affinity for your product, so you must create demand among consumers or other end customers yourself. There are plenty of items to put on the shelves, so if your product doesn't sell itself with a reasonable profit, you risk being pushed out. In other words, you usually need a significant marketing plan to stand out.

Value-Added Intermediary

Retailers and distributors are primarily involved in moving goods.

They buy your product and sell it onward, often without paying much attention to what's on the packaging. Value-added intermediaries, on the other hand, add additional value to your product. For example, if you sell software to businesses, it's valuable if the intermediary can assist with installation at the customer's site and possibly train users on the system.

This distribution channel is particularly relevant if you have a product that requires additional service and support for the end customer to benefit from it fully.

OEM Sales (Original Equipment Manufacturer)

One way to accelerate sales from 0 to 100 in 4 seconds is through OEM sales, where your product is sold as an integrated part of another product.

For instance, when you buy a new PC with pre-installed software. The risk, of course, is that your product may become somewhat invisible within the overall package. The advantage is rapid sales without the need to sell to anyone other than the OEM manufacturer.

A classic example of building a brand even when embedded in another product is Intel, which gained recognition with the "Intel Inside" label on various PCs and didn't just disappear as a component inside a case that customers might never open.

System Integrators and General Contractors

There are, of course, many products and especially services that can't be sold through OEM sales, but it might be an option to sell through companies that offer complete solutions, where your product or service could be a part of it.

This could involve elements in an IT system, kitchens for a public housing project, or entertainment sales through an event agency organizing large events.

Market Sales and Trade Shows

After considering the previous distribution channels, it's time to get "back to basics."

Some products are well-suited to being sold at markets or other temporary business locations such as trade shows and festivals, even if this channel is temporary. It can also serve as an opportunity to meet new customers whom you can later serve through other channels, including online.

Company-Owned Stores

If there are enough local customers, and you don't need to travel around to reach them at markets, opening your own store, or perhaps several might be more relevant.

By "store," I mean a local outlet where customers come to purchase your products or services. This could include restaurants, fitness centers, hair salons, and more. This is the classic way of doing business and is best suited for locally oriented companies.

Franchising

Building your own chain of stores can be capital-intensive, so if you want to operate store chains without having the capital, it might be worth considering franchising as a channel.

You have several partner stores, restaurants, or whatever it may be, committed to following your concept while investing capital in your own store. It sounds appealing, but the challenge is, of course, convincing other franchisees to believe in your concept before you've proven that it works.

Online - Own Platform

Web and mobile platforms are, of course, channels that should be seriously considered.

Many dream of bypassing intermediaries and earning full profit through direct sales from their own websites or mobile platforms.

Online - Other Platforms

In addition to building your own website, there are opportunities to sell through existing online platforms like web shops, app stores, and the like.

Conclusion

These are various distribution channels you can contemplate when developing your business model and expanding to the Danish market.

Each has its own advantages and challenges, and the choice of the right distribution channel will depend on your product, target market, and overall business strategy.

Get in touch with a trusted export advisor for the Danish market and make your final choices carefully.

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