When you’ve got a product you want to share with the world, you also have to navigate the potentially overwhelming world of sales and distribution. There’s no shortage of options, methods, and approaches to getting your product into your customers’ hands, but knowing how to select or which is best for your business can be a bit daunting.
The good news is that it doesn’t have to be as complicated as you might think! While there are certainly a ton of options to wade through, you can take a similar approach to evaluating each and every one of them.
Before we dig into evaluating which sales methods and distribution channels are right for you and your business, let’s take a closer look at some of the most popular options.
Before we get too far into specific options, it’s important to understand exactly what we mean by “sales methods” and “distribution channels.” You’ll likely hear this industry jargon more frequently as you get deeper into this process, so let’s set some clear definitions.
A “sales method” is a big picture approach to how the actual transaction takes place - how you exchange your products for revenue. Whether it’s direct-to-consumer, multi level marketing, wholesale to other businesses, in person at a fair or farmer’s market, or any other way you can connect with buyers, your chosen sales method (or combination of methods) is the broad view.
Inside of your sales method, you’ll have “distribution channels,” which are the specific “accounts” you use to get products in the hands of customers. These channels can include your own website, retail stores, online marketplaces, etc.
In short, the “method” is the style of sales you make, and “channel” is the kind of place where those sales happen.
You can think of it like concentric circles… The largest is your sales method. Inside the sales method circle is a distribution channel. Inside your distribution channel circle is your specific account. For example: your sales method could be direct-to-consumer, your distribution channel could be a website, and your specific account is the website itself.
Let’s take a closer look at what goes on with some of the most common options.
This is not an all-encompassing list, but rather some of the more common ways product-driven businesses connect with customers. Even if a particular option isn’t on this list, you can still use the evaluation tips (further down in this article) to see if it’s the right fit for you.
Essentially taking sales into your own hands, the direct-to-consumer approach means marketing, transactions, fulfillment, and everything else is under your control. It’s a great way to connect with customers and build relationships, but can also come with increased customer acquisition costs (that is, the average amount of money you spend to win a customer’s purchase - including marketing, staffing, advertising, affiliate payouts, and so on) and smaller reach.
Getting your products on the shelves of retail stores, especially big chains, certainly increases visibility, trust and credibility. This can lead to boosted sales and more revenue. When you sell wholesale, however, your profit margins will likely be lower and you may lack negotiating power.
Selling your products wholesale to distributors has similar benefits to working directly with retailers, but allows your product to cast an even wider net as it becomes a part of the distributor’s network of retailers. Not only does this increase visibility and credibility, it’s also a chance to get paid up front when a distributor buys your product in bulk. These relationships can be difficult to build for smaller businesses or fledgling products though, as most distributors are looking for proven popularity and 10-25% profit margins (and sometimes even larger). There are, however, ways you can present your product to overcome this challenge.
One of the most common ways to sell products today, online platforms (also referred to as marketplaces) give manufacturers and brands an opportunity to get in front of large audiences, capitalize on robust platforms, product suggestion algorithms, and search functions while retaining quite a bit of control over pricing, messaging, and customer interactions.
As you likely know, though, these platforms take a cut of each sale - and because they’re so popular, that means there’s a lot of competition as well.
Now that we’ve covered some of the more common ways to get products into the hands of your customers, it’s important to know how to choose which option (or combination of options) is going to be right for you.
A good first place to start is with potential team requirements. How many people will it take to implement your chosen way of making sales or working with distributors?
If you’re a large company, this may be less of a concern, but for people with limited staff or creating products by themselves, it might be quick to rule out large distributors, certain retailers, or other methods simply because they don’t have the manpower to meet demand.
If you’re considering direct-to-consumer sales, this is also an important first step. Do you have the necessary people to handle marketing, fulfillment, content generation, and so on?
Fortunately, teams can be expanded more easily and cost-effectively than many people realize, and it doesn’t all have to happen at once. Implementation can be broken down into more manageable steps, and we’re here to help! Solving these team-related concerns is a big part of what we do at Products to Profits, including making plans for implementation that bring the right people onboard at the right time.
For most businesses, considering costs is the backbone of many decisions. Where selling through Amazon might have low upfront costs and lower margins, marketing your own DTC model has much higher potential margins but more associated costs. You should also take production costs, inventory management, packaging, and anything else you can think of into account.
The reality is that approximately 90% of the costing and pricing we see from our clients is either incomplete or full of gaps…
Calculating costs is going to take some research, legwork, and plenty of math - but if you can get a clear picture of what various methods will cost, coupled with projected revenue generated through those methods, you’ll have a much better idea of which options are the most viable for your unique business.
That may sound a little daunting, but we can help! You can schedule a no-cost, no-obligation discovery appointment with Products to Profits and identify exactly what might be missing from your cost and pricing calculations.
Some sales methods and distribution channels yield faster results than others. Evaluating the timeline for expected results, then, will give you a good idea of whether or not a particular channel is viable for the current state of your business. Working with a distribution company will likely yield faster revenue in bulk, wholesale sales, where selling on Etsy may take a while to build a reputation and generate consistent sales.
It might be difficult to get an exact timeline because there are so many factors involved - many of which are unique to your specific business and product - but even a ballpark estimate will let you know whether an option is worth exploring further.
This last evaluation tip may matter less to some businesses, but it’s still worth noting. With direct-to-consumer (DTC) selling, and even with platforms like Amazon and Etsy, you have a lot of say in pricing, marketing language, how your products are presented in images, and so on… This is typically not the case with distributors or major retailers.
If it’s important for you to have some creative control, or be able to adjust various aspects of the sales and marketing process, this is a critical element to consider.
Using the areas of concern listed above, as well as your own operational philosophy, you can start to compile a vivid picture of which sales methods and distribution channels are right for your product.
So many of the companies we work with (90% or more) have gaps in understanding when it comes to overall pricing, costs, profit margins, and a big picture financial perspective. Using these evaluation techniques will help you see the potential in each opportunity, and a meticulous review of costs, profit margins, and expected returns will show you where you stand to make the most money.
When you’re considering costs, explore every step of the process from design to sale, including Amazon fees, the required profit margins of retailers and distributors, marketing, IT, infrastructure, and so on. The stronger your financial understanding, the better you’ll be able to make informed decisions.
Revenue isn’t the only thing to think about, however. Remember that while some options provide slimmer profit margins or longer timelines, they also result in higher visibility, brand awareness, overall credibility, and potentially long-term sales.
To learn more about putting all of this into practice, making a plan for expanding your sales, and taking your product business to the next level, book a free Discovery appointment today!
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