Choosing a business’ proper sales channel is one of the most important decisions business owners will make. Indirect sales refers to the distribution of goods and services by third-party channels, such as affiliates or distributors. Making the right choice can affect not only your marketing strategies, but also your business’ potential revenue. You may choose to sell your goods exclusively through direct or indirect channels, or opt for some sort of combination.
Here are seven of the most popular indirect sales channels, including tips for determining the best one(s) for your product.
1. Online Marketplaces
Online marketplaces, which include platforms like eBay, Amazon and others, are popular indirect sales channels utilized by businesses of all sizes. As a small business owner, you likely only have access to customers in your immediate vicinity. By selling through an online marketplace, you can reach a wider net of potential clients who might otherwise not know you exist. As an added bonus, using this channel can help cut down on your marketing costs.
Of course, using an online marketplace comes with some disadvantages as well. Amazon and other marketplaces can charge hefty fees to suppliers. Additionally, marketplaces often limit the branding you can do online, so consider whether or not brand development is important for your business.
Distributors are mainly wholesale businesses that specialize in selling to retailers, not directly to consumers. Because they have an incentive to sell your products for you, distributors save you money on hiring and training a sales force to market your products to their customers. Additionally, having a distributor may mean you don’t need to maintain a retail location, which is capital that can be reinvested into your business.
There are limitations that you should keep in mind. Because distributors mark up goods to make a profit, they may not be ideal for companies selling lower-value products. You will have to make sure that your product is priced sufficiently below its suggested retail price so that a distributor—and their retail partners—will be willing to carry it. Further, distributors may choose not to work with you if your target market is too small.
3. Foreign Distributors
While domestic distributors sell goods within the U.S., foreign distributors specialize in sales overseas. There are various benefits of using a foreign distributor, including the opportunity to gain access to new customer bases around the world. Additionally, foreign distributors handle customs formalities and paperwork, leaving you more time to focus on operations.
Despite these benefits, using a foreign distributor is not without its drawbacks. Typically, businesses have to agree to sell to the distributor at a deep discount. As a result, this sales channel may not be ideal for low-price products or those with a limited audience.
4. Affiliate Sales
Affiliates are individuals or companies that sell goods on other businesses’ behalf. In exchange for their services, affiliates receive commissions on sales. While affiliates help businesses reach larger and more varied customer bases, they tend to charge high commissions for their services.
Moreover, some affiliates have been known to participate in fraudulent practices like false advertising. Evaluate any potential affiliate before choosing them to sell your product. The last thing you want is for customers to hold you responsible for the deceitful actions of an affiliate marketer.
5. Outsourced Sales
It’s no secret that many small business owners are strapped for time. With that in mind, a number of companies opt to outsource their sales needs to other businesses rather than handle them in-house.
One of the benefits of this sales channel is its flexibility. Companies can choose to outsource a particular aspect of the sales process, such as lead nurturing or supporting a specific event or product launch. Still, businesses should keep the drawbacks in mind before going this route. Not only is outsourcing expensive, but businesses tend to lack control when it comes to executing their sales strategies.
6. Value-Added Resellers (VARs)
Most common in the tech industry, value-added resellers (VARs) purchase a company’s products, then alter or otherwise enhance them before reselling them to customers. A good example is a computer manufacturer, such as Apple or Dell, who each purchase processors from Intel in order to manufacture its respective computer.
Because VARs often perform technical tasks that would be beyond a customer’s capability, they can open up new audience bases for your products. Some VARs, however, often deny companies access to their customers’ info. Additionally, companies may find themselves dealing with channel conflict issues if they work with multiple resellers.
Considered old-fashioned by some business owners, catalogs are still an effective way to target certain markets for physical products. Not only do catalogs offer an attractive, tactile alternative for customers to view products, but they also let you entice more traditionally minded buyers as well as those who can’t or won’t visit your storefront in person.
Still, going the catalog sales route is not without some pitfalls. For one, many catalogs require that you sell them product at a heavily discounted rate. Further, it’s not uncommon for catalogs to charge additional fees for advertising or product photography. Before pursuing a catalog listing, businesses should make sure the final cost of being featured is cost-effective.
When choosing a sales channel, there are multiple factors to keep in mind. Not only do you have to assess how your competitors are selling their products, but you should also consider the costs of these various methods in addition to customer preferences. Once you determine the ideal sales channel(s) for your business’ needs, then you can add any complementary marketing efforts and watch your products fly off the shelves.
If you’re looking for more ways to increase your revenue, then check out our article on seven ways to increase your business’ sales.