Sales Channels

4 Types of Sales Channels

1. Retail

Overview

When businesses sell products directly to their end customers for a profit, either in-store, online or by phone.

When selling via retail, you’ll sell products directly to your end customers for a profit, whether that be in-store, online via marketplaces like Amazon, eBay and Walmart, via a webstore that uses platforms like BigCommerce, Magento or Shopify, by phone, or even by using a combination of these methods. You may be the manufacturer of a product, or you may acquire relevant products from a distributor or a wholesaler. Some of the key benefits of selling via retail are that you’ll:

Have control over how to reach and how to sell to your customers

Gain deeper insights about your customers

Maintain a personal connection with your customers

Operate at a higher profit margin than wholesalers

Maintain control over your brand identity if you produce your own products

Retail sales are expected to grow 3.3% to $5.529 trillion in 2019. [Source: InsiderIntelligence]

Pros

• Gain control over how to reach and how to sell to your customers, and gain deeper customer insights.

• Maintain a personal connection with your customers.

• Operate at a higher profit margin than wholesalers.

• Maintain control over your brand identity if you produce your own products.

Cons

• Larger marketing budgets and innovative marketing strategies will be needed to drive footfall and web traffic.

• Retail customers often have higher expectations than wholesale clients; fail to meet these expectations and it will be damaging to your business.

2. Wholesale

Overview

When brands, manufacturers and resellers sell their products in bulk to various outlets or retailers for onward sale.

When selling via wholesale, you’ll sell your products in bulk to various outlets or retailers for onward sale. You’ll sell your products for a lower unit price as you’re selling in bulk, which reduces the handling time and costs involved. A wholesaler can also be the manufacturer or producer of the product, but they don’t have to be. You can also be both a wholesaler and a retailer at the same time; some call this being a hybrid business. Some of the key benefits of selling via wholesale are that you’ll:

Increase brand awareness for your product

Be able to take advantage of drop-shipping

Gain a platform that makes it easier for faster growth and global expansion

Wholesale distribution represents 7% of the private industry GDP in the US. [Source: Entrepreneur]

Pros

• Increase brand awareness for your product.

• Be able to take advantage of drop-shipping.

• Gain a platform that makes it easier for faster growth and global expansion.

Cons

• Difficult to maintain control over your brand identity and the brand experience.

• You’ll require lots of warehouse space and large capital outlays in order to buy and sell in bulk.

3. Direct-to-Consumer

Overview

A brand or manufacturer selling direct to consumers and the end users of their products, as opposed to selling to them solely through retailers.

Direct-to-consumer is a fairly recent addition to the sales channel mix as it stems from changes in buying behavior and new and innovative online brands that have put pressure on traditional wholesalers. A direct-to-consumer business model, or DTC for short, is where a brand or manufacturer is selling direct to consumers and the end users of their products, as opposed to selling to them solely through retailers. Some key examples of successful direct-to-consumer brands include Nike, L’Oréal and Levi’s. Some of the key benefits of selling via DTC methods are that you’ll:

• Maintain control over the entire brand experience

• Gain deeper insights about the end users of your product

• Improve your profit margins compared with selling via wholesale alone

22% of brands in the US have plans to launch DTC e-commerce in the next 12 months, in addition to the 71% that have already done so. [Source: Brightpearl]

Pros

• Maintain control over the entire brand experience.

• Gain deeper insights about the end users of your product.

• Improve your profit margins.

Cons

• Adapting to the need for faster fulfillment can be difficult to do, resulting in troubles meeting demanding consumer expectations around the entire end-to-end experience.

• There’s a risk of upsetting existing retail partners if not handled correctly.

4. B2B

Overview

Businesses that sell to other businesses who are the intended end user of the product.

Although B2B is sometimes listed within the wholesale method of selling, they do differ slightly. Where wholesalers sell to retailers (which are businesses), B2B strictly refers to businesses that sell to other businesses who are the intended end user of the product. Examples of this type of business might include selling coffee machines to offices, or selling tires to car dealerships. Some of the key benefits of selling B2B are that you’ll:

• Establish strong client relationships and a loyal customer base

• Have higher price points for your products compared with selling via retail

• Gain the opportunity to sell to a niche market and truly be seen as an expert in your field

B2B is expected to reach a value of $1.2 trillion by 2021. [Source: Forrester]

Pros

• Establish strong client relationships and a loyal customer base.

• Have higher price points for your products compared with selling via retail or wholesale.

• Gain the opportunity to sell to a niche market and truly be seen as an expert in your field.

Cons

• Limited market opportunity available.

• There’s often a long purchase lead time for B2B sales.

• The sales process is more time consuming and more involved than other methods of selling.