What are gaps and distribution chains

Hunt for gaps

The footwear market is of course dominated by imports and the high-street shops, but one Somerset firm called Cosyfeet has become market leader in the niche sector of supplying to the elderly housebound. The proprietor saw that these people could never get to a high-street shop, and also suffered from bunions and other ailments, with the result that they could never find shoes or slippers wide or deep enough to fit. Cosyfeet's business is done almost entirely by mail-order catalogue following enquiries generated by page advertising. Nursing homes and hospitals provide some trade and volume business, as the company's main problem is that names need to be constantly updated and new customers found to replace those who die.

The distribution chain

Unlike the service provider, the product manufacturer often has to go through various intermediaries to reach the eventual user. Wholesalers, distributors, maybe an agent and the retailer are in business just like you, and need paying for the service that they provide.

A wholesaler will invariably be a specialist supplier in a narrow field, probably regionally based. Take the hardware/housewares/DIY market. Twenty-five years ago every town had its corner hardware store selling screws, paint, brushes, curtain track and pots and pans. Today we all know what has happened. Out-of-town 'sheds' as the trade calls them - Focus, B&Q, Homebase - have decimated the small family business and everything is pre-packaged, with advice from assistants nominal. Convenience and accessibility have overridden everything. To the small manufacturer with a new product, the way into this market is fraught with peril. Most of these giants will not touch a lone product from a small firm. They want Dulux, Black & Decker, Crown, etc, to merchandise 50 feet of shelf space and not be bothered with opening a new account for a small line.

The small firm is left with the shrinking field of independents, served by specialist wholesalers, who will carry paints, timber, electricals or whatever, but who are probably already listing between 5 and 20,000 lines. Very difficult. The internet comes into its own for specialisms, as in this field availability not price should be the reason for purchase. It's a grand place to search for obscure lines, but websites still need to be promoted. The trick is to make it interesting and up to date so that buyers keep on coming back.

This story can be repeated in many sectors - food especially, where the market is again dominated by a handful of giants. Swift distribution in the food industry is crucial to the success of the venture. Stricter hygiene regulations now mean carriage by temperature-controlled vehicles for many lines, but in rural areas, and those remote from major markets, these specialist carriers are scarce. Small drops are uneconomic.

In one way the food industry is fortunate: we all have to eat. But food is a mass market where, with a few luxury exceptions, volume is the only way to get the price to an acceptable level. Mass advertising, brand support, discounts and dealer incentives are all expected from today's grocer, making it difficult for small firms to supply anything other than a local market.

Take bottled water. Twenty years ago it would have been laughable to suggest that the British would copy the French habit of drinking water that we bought in a supermarket and lugged home, when it is there in the tap. Working in Somerset, as I do, there was hardly a week went by when a struggling farmer did not contact me, insisting that his water was purer than anyone else's. They all missed the point. It was the access to market and distribution channels that counted. Transporting bulky, low-value items is difficult to compete against. Give or take a bubble or two, all bottled British water is the same. When you are up against Schweppes with access to every store in the country, then you have your work cut out.

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