Are You Using the Right Sales Channel?
⏱ Reading Time: 7 minutes
Choosing the right sales channel is essential for your company’s success. Customers already have preferences on where they like to buy their products or services and so you need to meet your customers where they are. Where your customer buys will depend on a number of factors so let’s review them together!
What Are the Possibilities When It Comes to Sales Channels?
It used to be that you just had a physical presence like a shop and then a website but now the possibilities for sales channels are almost endless. At a high level there are two types of selling – direct and indirect.
Direct selling channels allow the customer to buy goods or services directly from the manufacturer. Direct selling may take the form of face-to-face selling at a showroom. It is usually used for products that are either expensive and luxurious or that are complex and need some level of explanation. Examples: selling cars, houses and holidays. Direct selling can be an expensive sales channel as you usually pay a salary plus commission on any sales made. Telesales is another example of a direct sales channel and this can be more cost-effective. However, this also requires a lot of product knowledge and staff training.
An indirect sales channel moves the product through other distribution channels to get to the customer.
The number of people who shop online is 2.14 billion worldwide. It may be a good idea to investigate if your product or service can be sold online. A website saves the cost of having a physical space but other costs, like hosting and development, are still there. A lot of products and industries are suited to online selling!
Picture 1. Sell your product online
With the decline in high street shoppers over the past few years, already struggling retailers were dealt a cruel blow by Covid-19. Subsequent lockdowns left shops with no choice but to close their doors to customers. However, there is still a place for bricks and mortar retail stores! Shops with homeware, furniture and home improvements are all thriving as people spend more time in their homes. Also, there has been a big trend for supporting independent businesses and “shopping local” in the last year.
Fun fact: only half of Britons expecting to buy their food from supermarkets in the future. This means that the high street could see a big revival in 2021 and 2022!
Wholesalers are companies who will buy your products in bulk before selling them on, making their own profits. These can vary in size from small shops to large multi-channel retailers.
The larger the amount of stock you sell to a wholesaler, the cheaper it is expected to be. This way of doing business saves you the costs of sales and marketing (when you have to sell the products yourself).
Picture 2. The larger stock, cheaper it is
Third-party websites are those which sell your products. You will usually pay a commission for each product sold and you may also have a monthly fee to pay as well.
Those websites are likely to have a different, usually larger, audience than your own. This allows you to introduce new people to your brand. Examples of third-party websites include Booking.com and Airbnb for accommodation providers. Also, for product best known is Etsy and Not On The High Street.
One of the marketplace retailers is, of course, Amazon. However, selling on Amazon requires a lot of work with both pricing strategy and advertising to ensure that you win business over other sellers. For pricing, you should consider using a competitive intelligence and Amazon repricing tool to help keep your store listed in the Buy Box.
You should always consider creating a balancing strategy when using third-party websites. You should use them to introduce new customers to your brand and then try to convert them to buy direct through your website next time.
You can do this by sending out physical marketing collateral, like leaflets, promoting your own channel. If you have access to the customer’s email address adding them to a nursery email program – GDPR compliant of course!
Things You Need to Consider With Your MIX of Sales Channels
When was the last time you took a step back and thought about whether your sales channels are the right ones for your products? You don’t need to have every sales channel at your disposal – after all, you don’t want to be a jack of all trades and master of none. However, you do need to ensure that your brand, service and products are on the right one to maximize your business’s potential.
Your sales channel choice should be based on how cost-effective they are, as well as how well they perform and how appropriate they are. Remember you should test different sales channels and continue to do so, as markets change.
Here are some things you should consider when you are deciding which sales channels to focus on:
Type of Product
You know your product better than anyone else and you’ll probably know where it sells best. If your product needs hands-on guidance to close the deal then it’s foolish to try to save money to automate the process as you may end up losing out on sales. You may wish to start with some market research either amongst your own customers or potential customers. Find out how they prefer to buy your product and what would turn them off.
Are you selling products directly to consumers or are you selling B2B? Consider where these customers are more likely to shop and then the most efficient ways of selling to them.
Picture 3. Identify your consumers to form a sales strategy
Are Your Channels Competing With Each Other?
You don’t want any of your sales channels to compete with each other, instead, you need them to work together towards a common goal – just like your employees! For example, a network marketing brand relies on personal relationships between its representatives and its customers. If they were to set up an eCommerce site, customers may start ordering directly online, undermining these personal relationships and their entire business model.
Make sure your website isn’t suffering from selling your products elsewhere online. Other sites may compete with you on advertising, pushing the costs up, or they may rank higher than you on Google. You need to ensure that any sales channels that you don’t own aren’t cannibalizing any of your sales or pushing up your cost of sale.
What Are Your Competitors Using?
Although you shouldn’t be on a specific channel just because your competitors are using it, it may give you an insight into how that channel performs if a competitor is successful on it.
On the other hand, if there is a channel that your competitors have overlooked, it may give you an advantage. For example, if your competitors only sell through third-party websites, you may have an advantage in having your own eCommerce site. With this, you’ll be able to give a more personalized service to your customers and you’ll be able to ensure that your site works in exactly the way you want it to.
Picture 4. Keep an eye on your competitors
Costs and Benefits
Define what the costs and benefits will be of each sales channel before you decide on anything. Be aware of any contracts that might tie you into a channel and be sure to take advantage of any trial periods before you fully commit. Costs associated with different sales channels might include support systems like staffing costs and software costs as well as any initial set up costs and commissions.
Planning for Growth
Ensure that you have a plan outlined for growth over the next few years. This might include expanding to new channels once you have the capital to do so, or as you launch new products and services. Make sure you follow market trends and keep an eye on what your competitors are doing so that you are well informed when it comes to reviewing your strategies.
Monitoring Performance of Your Sales Channels
You should keep your sales channel strategy as fluid as possible, giving you the ability to make data-driven decisions, tweaking the channels as and when you need to depend on market changes and the development of your business. To do this you’ll need to report on the sales revenue, support costs and management cost of each channel.
When you’re defining your sales channel strategy, it’s of the utmost importance that you carefully consider all of the options available to you. Don’t choose your channels just because they are standard in your industry or because they’re the most convenient.
Question the reasons behind your decisions from the outset and you’ll be sure to discover advantages or disadvantages that you might otherwise have overlooked.
It’s that age-old adage – the customer always comes first – but it couldn’t be truer in this case. Make sure you meet your customer where they like to buy and your success will almost be guaranteed!
Molly Erickson is a Freelance Digital Marketer with over nine years of experience in the industry. She specializes in travel, working with a number of household names. Outside of work, Molly loves traveling to new places and walking with her King Charles Spaniel near her home in the Peak District.
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