New distribution channels cause packaging and pricing changes. As local demand grew, Alice decided to have the dressings made in an independent packing facility and sold to other stores in the area, which initially raised the cost of making the dressings. The popularity of Alice's Dressings caused Alice to consider the possibility of selling large pallet quantities to distributors in other states. The distributors needed another 25 percent discount from wholesale price, along with free shipping. Sales brokers were also recommended, at 5 percent commission on net distributor sales, since the family could no longer call on everyone.
Distribution channels are key to pricing and packaging decisions.
In this case, a separate business, new distribution channels and sales representation grew out of Alice's initial one-store restaurant. Alice finally decided to upgrade the bottle and label to a unique, tall, triangular, Italian glass bottle and cork, with gold and black labels and recipe hang-tags by a local design studio. She sold the dressings directly to upscale specialty and grocery stores. Distributors would not be used. Specialty brokers were hired to aid in selling directly, at a 10 percent commission on net sales.