What is Channel Sales?

Channel Sales

Most people are already somewhat familiar with channel sales, as they make up around 75 percent of the world’s sales and consumer market. Channel sales is simply a sales strategy in which a parent company sells products through another company. Channel sales is also referred to as indirect sales, which we will expand on in the next section. We will also explore why sales channel strategy dominates the digital market.

Direct Sales vs Channel Sales:

Direct Sales Strategy

It is the traditional method of sales – direct to consumers from your business. For the direct sales strategy to work, you need to hire a sales team that’s good at their job (selling!).

Your team needs to know your product down to the tiniest detail and be excited about selling it for you. It’s your sales team that will be directly responsible for the growth of your digital business.

Your main means of sales within the direct sales strategy are:

• Acquisitions
• Upselling
• Cross-selling

Channel Sales Strategy

Channel sales strategy refers to the process of building partnerships with third parties in order to get a wider reach for your product.

Partnering allows you to leverage the existing customer base of an established brand, so you can expand your own customer base. This lets you take your products to a wider market and increase your cash flow at low cost, without needing to scale your sales team.

There are a variety of different ways you can implement partnerships for your channel sales, including:

• Referrals
• Affiliate partners
• Distributors
• Resellers
• Managed service providers
• Consultants

Depending on the nature of your product, you may be able to include several of these partnership models in your sales tactics to increase your reach and revenue.

What are some examples of Channel Sales?

The most common types of channel sales strategies include:

Retailers

Retailers buy goods in bulk from a manufacturer at a discount, then sell individual marketing products to consumers. They make a profit by selling goods to consumers at a higher retail price.Since retailers need to pay to package and store goods once they purchase them, the final price also reflects these costs.

Product vendors

A product vendor is a company representative who sells products to another business. They work with businesses to ensure the product is advertised correctly and often troubleshoot consumer issues. Vendors usually maintain relationships with several businesses in a particular area.

Affiliate marketers

Affiliate marketers sell a company’s products to consumers. Businesses hire affiliates and offer them a commission if they make a sale. The affiliate marketer doesn’t spend money on any of the products they sell, but they are responsible for any marketing costs. The owner of the product may provide training and materials, such as banners and special discounts, but the affiliate marketer covers the costs to promote the marketing product.

Distributors

Distributors are intermediaries who purchase products from manufacturers, then sell them to retailers. Like retailers, distributors buy goods in bulk at a reduced price, then sell them to retailers at a higher price. Wholesalers usually work with distributors since they buy a higher volume of products.

Dealers

Dealers operate somewhat like retailers. They are the last link to the final consumer in the sales chain. Dealers are often more structured than retailers because they need to have an authorized partnership with the manufacturer.

Strategic partners

A strategic partnership is a mutually beneficial relationship between two businesses. A product manufacturer that aligns with an independent business consulting firm can partner together to deliver excellent service to their customers.

Agents

Agents contact product retailers or distributors to inform them about a product and convince them to begin a distributorship or retailership of a particular product. In fact, they usually work with product manufacturers and get paid on a commission basis.

Value-added partners

In fact, value-added partners are businesses that collaborate with product owners to build services or products with added value. An example of this would be a company selling computer hard drives that partners with a cloud storage business offering additional backup services.

What To Choose?

Choosing between a channel sales strategy and direct sales strategy largely depends on the type of product you’re offering, how developed it is, how much predictable revenue you need, and who your ideal customers are.

You also need to think in terms of profitability and whether you can afford to lose percentages of sales to third-party partners, or whether you want to keep all your profits to yourself.

Finding a good balance of these two strategies will help you take your offerings to a wider market while still retaining control over your sales process and maintaining enough predictable monthly revenue.