Sales Channels: What are they and why you need them
One of the most important aspects of a business plan is getting your products to a potential consumer. Sales channels are links between a company and its consumer. They are used to ensure that the right product gets to the right people. By connecting those channels to your KPIs, you can effectively monitor customer demands, keep track of inventory and sales, and ultimately achieve your marketing objectives.
Sales Channels as part of the Customer Journey
Modern marketing and technology play a vital role in sales channels. In the early days of capitalism, face-to-face was the only way to sell a product. As technology started developing, other channels began to grow and facilitated the work to companies all across the globe. Before choosing a sales channel, you will need to study your product in detail. For example, if you are a designer, most of your sales channels will involve online interactions. On the other hand, if you own a pet store, your sales channels will be inclined towards personal interactions.
When choosing a sales channel, making the right choices will help you boost sales and create a consistent customer journey. According to the Corporate Finance Institute, the customer journey can be used in marketing and communication, especially in digital channels, to minimize wastage and make communication more efficient. This process is also known as conversion rate optimization. Depending on the strategy you choose, the amount of ROI (Return on Investment) will vary.
Sales Channels and Distribution Channels
Sales and distribution channels can often be mistaken for one another. This confusion happens because you can manage both at the same time. But while sales channels directly link your customers, distribution channels need a "middle man" to be effective. You can find the differences in detail below:
Direct paths between business and consumer
Physical or online stores
Retailers, wholesalers, or online marketplaces
To sum up, sales channels involve your sales team selling your products or services to your customers. Distribution channels include a purchase from a store and distribute your products across the community they serve.
Main Sales Channels
Now that you know the differences between sales and distribution channels, we can explore different options within this topic. As mentioned earlier, there are a lot of ways and channels that you can use to get your product to interested customers. However, we recommend four key sales channels for you to get started. While these channels are the most common in our modern market, it does not mean they will ensure success for your company. You will need to study each one to make a decision on which one your product fits.
Retail includes all of the transactions a business can do directly with a customer. These transactions involve shopping at a brick-and-mortar store, upgrading a subscription through the phone, or buying a company's store products.
The main advantages of retail are that you can maintain a personal connection with your customers, operate at a higher profit margin than with wholesalers, and maintain control over your brand identity. In addition, you will gain deeper customer insights.
On the other hand, you will need to consider larger budgets to distribute your product as well as create engaging marketing campaigns.
Most Americans prefer buying wholesale products. You will need to contact wholesale retailers to distribute products in bulk to various outlets or smaller retail stores for this channel. While this plan may seem advantageous, you will need to consider the pros and cons.
With wholesale distribution, you can increase brand awareness for your product, take advantage of drop-shipping plans, and gain a platform that can result in faster growth and even global expansion.
The main disadvantages cannot be taken lightly, though. You will need to have vast amounts of inventory beforehand to distribute to wholesale retailers. There is also a risk of damaging relationships with retailers that offer your product on a smaller scale.
3. Direct to Consumer
A Direct to Consumer business model is where a company sells directly to consumers and the end-users of their products. It is a combination of channels one and two. You sell your products through third-party stores and in your own physical and online stores. Apple is an excellent example of a direct-to-consumer model. They distribute their sportswear through retailers but also have their stores.
Using a DTC model can help you maintain control over the brand experience, gain insights from stores statistics and customers feedback, and improve your profit margins in comparison to selling through wholesale or retail alone.
The downside is you need to adapt to a faster fulfillment or have an enormous inventory to distribute both company retailers and wholesale stores. Like wholesale, retail partners may not like this option if not appropriately handled.
4. Business to Business (B2B)
It is vital not to confuse B2B sales with any other particular channel. In the three channels mentioned above, the company that makes the purchase is not the final consumer of your product or service, their customers are. In B2B sales, a company is the final consumer. Some examples include cleaning services, virtual assistants, office supplies, and software.
With the Business-to-Business model, you establish strong client relationships, build a loyal customer base, and have a higher price point for your products. You can also gain an opportunity to sell to specific markets, such as global and online markets.
In contrast, your markets could be so limited that you will have to create an intricate sales funnel. There is also a long purchase lead time for B2B sales, and the sales process is time-consuming and more involved than any other method.
Other Sales Channels
Sales channels include a wide variety of opportunities for your company that need to be analyzed to ensure success. We already mentioned the four most common sales channels. In the list below, you can take a look at other popular channels that you can possibly apply to your business.
Sales Outsourcing. You let another company take care of your sales entirely.
Automated Retail. A lot like retail, but with self-checkout kiosks or cashiers
eCommerce. Usage of digital channels as the whole sales strategy, such as a website, an app, or ads in social media.
Resellers. Resellers include companies that buy your product and resell it online on pages such as eBay, Amazon, or Craigslist.
White Label. With this strategy, you allow another company to rebrand your products with their own design.
Import and Export. This strategy is where you sell your products exclusively to distributors. They will take care of exporting those products to your market.
Agency. In this channel, you will hire an agency to represent you in sales transactions. Sales are primarily driven by a network of agents who work on commission.
These channels are just an example of what strategies you can use to get to your buyers. Across the web, you will find that sales channels are unlimited, and you can mix and match them in any way that will benefit your company.
The advantage of using different sales channels in your business comes down to customer experience. Great customer experience is fundamental and should not be taken lightly. Research shows that a loyal customer comes from a positive encounter with the product or service. By building the right sales channels for your business, you can build a community of loyal and happy customers.