In this post, I will talk about the importance of sales channels and their different types. I will share the key factors to decide which sales channel to use and why a particular company chooses one sales channel over another. In the end, I will also help you decide or determine which are the best sales channel for your business.
What is a Sales Channel?
The sales Channel is the medium or route through which a company’s products and services reach its customers, meaning it is the place (physical store or online website or a mobile app) from where the customers buy the products or services. If you have recently bought a product from any E-commerce website, you have used the online sales channel of the company. If you walked into a car showroom or a in a shopping mall to buy clothes, then you have visited the retail store channel of the company. Alternatively, a sales channel can also be considered a source of revenue for a manufacturer through which products or services are sold. For example, farmers who grow fruits, vegetables, and commodities, take their produce to the city markets to sell. For them, the sales channel is the marketplace where they sell their produce.
Now the definition of sales channel is out of the way, let’s understand the Importance of Sales Channels
A sales Channel also called a distribution channel is a very important part of the 4P Strategy. Place in the 4P strategy denotes the Sales Channel. Howsoever, great the product is, unless the product is available at the convenience of customers, sales of the products would be poor. Because of the high importance of this element in the 4P Strategy, companies spend millions of dollars in ramping up their distribution networks so that the product is available even in the farthest and remote places in a vast country like India.
Take FMCG products like soaps, biscuits, and shampoos for example which are available in all the towns and even in villages. Another example is numerous finance companies rolling out gold loans, vehicle & property loans have opened their branches or sales channels in rural areas closer to the customer to ensure higher penetration of financial products in the country.
So, what are these different types of Sales Channels
Sales channels can be divided into two types – Direct and Indirect.
The direct Sales Channel is where the company is interacting with the customer directly through company-owned stores, showrooms or through the official website which is the company’s online brand store. It is also through a dedicated sales team or account team in the case of Business-to-Business sales, that interacts directly with clients or customers. In the case of direct sales channel, whether it is the physical store, online store, or an interaction with a customer through the sales team, the company always has the opportunity to showcase its capabilities & strengths & it also gives a window to give the best experience to the customer.
Moving on to the Indirect Sales Channel which is the Resellers
Resellers are the ones who sell products and services on the company’s behalf by adding value. For example, the distributors, stockiest and the retailers in the case of FMCG products are the resellers. They add value by keeping the inventory and offering different varieties of products which the customer may need. Online Market places like Amazon & Flipkart, and large retail chains like Dmart, Croma etc are also examples of Resellers who offer availability, variety and delivery of products.
Companies use different combinations of these sales channels depending upon the type of product and the type of business it is into. For example, a computer manufacturing company like Lenovo, HP or Dell will have a deep distributor network & also an online presence on E-commerce websites for its business to consumer products where it caters to home users who need a computer and would require the product to be available easily. At the same time, for its B2B business, it would have a direct relationship with the customers and clients. Hence if it is B2C the strength of the channel matters & in B2B direct connection is important.
This brings us to know How to decide the Go-To-Market for your business
Your Go-To-Market strategy really depends on the customer segment you are targeting. Obviously, this strategy can be different for different markets & companies even for the same product. The bottom line is products or services should be made available conveniently.
Let me give some examples, let’s say an FMCG company like HUL or Britannia wants to launch a new soap or a biscuit and wants to increase its presence. Since these companies already have strong distribution or sales channels, they can simply place that new product at all their retailers and enables customers to have a trial of it. This way companies make products available and create awareness.
On the other hand, there are smartphone companies like SAMSUNG, Motorola, and Xiaomi who may want to launch their new smartphone on an E-commerce website first (like Flipkart or Amazon) because that’s where most of the customers are buying the electronics from.
Few companies are also trying to offer the best of both worlds (traditional and digital) like lens kart, CaratLane, and Tanishq where you can choose online which sunglasses or jewellery you would like to buy, and they can come to your home to offer you trials. This is called Omnichannel where you can select which laptop or smartphone you want to buy and that will get delivered from a nearby brand store to your house. The best part about Omnichannel is, that you can also contact the same store for any software or service-related concerns.
If you are a new-age entrepreneur having your own business – you could also start ‘Direct 2 Consumer’ by offering the product through online channels & once your brand establishes, you could add more traditional channels like retail stores. Take Direct to Consumer FMCG products companies like mama earth, the man company, and WoW Skin Science, who are selling cosmetics through E-commerce platforms like Amazon and Flipkart and have built strong businesses and brands. A similar example from the financial products space is the neo banks, and fintech companies like digit insurance, and ditto insurance who are offering insurance products directly to consumers without the need for traditional agents’ channels.
So, what we learned here your go-to-market really depends on the customer segments you want to target and the selling focus required in selling that product or service. If it is a fast-moving mass-market product B2C routes to market like traditional channels and online channels are used. However, if it is a solution or a niche product or service it needs a dedicated salesperson’s involvement as it was in the case of a B2B sales.
The important thing to note is, that the higher the focused selling skills or value involved, the higher will the be the cost of the sales channel for the company. The cost of an account sales team would be higher than having a consumer website catering to all customer
Summary
A company can have multiple sales channels to sell the products like resellers, eCommerce, partners, kiosks, and branches. You need to be present where the customer is going to search for products. Not only this is true for traditional businesses but also true for new-age businesses.
Hence choosing the right sales channel needs studying the target customer segment deeply. If you are an established brand, then your wide presence becomes important, which means the brand should be visible everywhere. If you are a new business recently started, selling products to consumers directly online can be beneficial in the beginning then you can expand to traditional channels later.
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