The Distribution Trap

Thomas and Wilkinson argue that pursuing the widest possible distribution damages innovative products, and that companies should be selective about where their products are sold.

The reference has not verified the book's detailed contents. The argument as stated in the title and as the authors have presented it elsewhere runs as follows. Manufacturers treat access to large retailers as an unambiguous good, since it delivers volume. But large retailers demand price concessions, slotting fees, promotional support and packaging changes; they position products against private label alternatives; they use the manufacturer's sales data to develop competing products; and they set the terms on which the product is presented to the customer. A manufacturer that becomes dependent on a small number of large accounts loses pricing power, loses the customer relationship and loses the ability to sustain the margin that funds product development.

The authors argue that innovative products in particular suffer, because innovation requires margin and because mass retailers optimise for volume in established categories rather than for building new ones.

The prescription is to select distribution channels deliberately, to preserve direct channels, and to accept lower volume in exchange for control of price, presentation and customer data.

The argument has been substantially borne out by the subsequent decade of direct-to-consumer brand building and by the experience of brands dependent on platform marketplaces, though the book predates most of it. Readers should verify the specific cases and evidence the authors present.