Sales channels: your options

Selling your products direct to the customer, face-to-face, offers several advantages:

• you can explain and even demonstrate complex products
• you can learn more about what the customer wants
• you can build a personal relationship
• you can use your selling skills to convince the customer to buy

Selling face-to-face also has some disadvantages:

• It is the most expensive sales channel as it demands higher staff and premises costs.
• Travel time and costs can be significant. A travelling salesperson might spend a whole day on the road for just one meeting. Where possible, plan trips so that several customers in the same area can be visited.

The costs of face-to-face sales may outweigh the value of an initial order. But if the customer then makes several repeat purchases, the expense will be justified.

Use face-to-face sales for:

• high-value and complex products and services
• establishing initial contact with a key target customer
• strengthening relationships

If you want to test a new product or market, manufacture large quantities of a product, or sell overseas it’s worth understanding the role of intermediaries in your market (such as wholesalers, distributors and sales agents). As intermediaries have local knowledge and trade connections, this can be a more cost effective way of reaching your customers than selling to them directly. Some intermediaries have multiple roles covering one or more of wholesale, distribution, or as a sales agent.

Often large retailers and online sellers will only deal directly with intermediaries rather than individual suppliers, so the only way to reach them will be to supply intermediaries who already have a relationship with those retailers. When managing your relationship with intermediaries such as distributors and agents, you must be aware of your responsibilities under the Bribery Act.

Wholesalers

Wholesalers buy bulk quantities of products at a lower price direct from suppliers and manufacturers, or via distributors, then sell them to other businesses such as retailers at a higher price, but often still with a bulk discount.

Some wholesalers focus on a single product or category of products and others carry a wide range. Often they will handle competing products. It is easier for large retailers to buy many products in large quantities from a few wholesalers, rather than buying directly from hundreds or even thousands of smaller businesses.

Distributors

Compared with wholesalers, distributors may have a closer relationship with producers and manufacturers and often take care of warehousing, exporting and transportation. They acquire ownership of the goods, so are motivated to promote those goods to wholesalers and retailers. As the contract with the retailer or end customer is with them, they are responsible for customer service. They may avoid stocking directly competing products.

Distributors will be more enthusiastic if there are high profit margins for them, but setting too low a price will eat into your own margins. Distributors will be keener to stock and sell products that their customers will be asking for, so ensuring your advertising is effective may be important.

Distributors (and wholesalers) also operate in markets for intangible digital products such as software and games, and many businesses will purchase their technology through IT resellers which are a type of distributor.

In some cases, the distributor is a tech platform. For example IT departments of large organisations in industries such as healthcare cannot manage the purchasing of single applications one by one or deal with individual suppliers, so they may purchase a range of apps from platforms dedicated to the needs of organisations in their sector.

The terms of the supply relationship should be covered in a written contract which might include:

• how much stock the distributor will hold

• what the distributor will do to promote your products

• how quickly you can resupply and minimum order levels

• whether the distributor has exclusive rights to your product (for example, in a particular territory)

• what happens if either you or the distributor want to end the relationship

Distance selling means selling by phone, mail order, the internet or digital television.

You can use distance selling for:

• approaching hard-to-reach customers
• repeat orders from established customers
• reaching new markets through the internet

Costs are far lower than if you visit customers, or have retail premises. But there are disadvantages, such as:

• you can't demonstrate your product
• it can be difficult to convince the customer to trust you without meeting them

Many businesses find distance selling cost-effective for standard products such as books and CDs - the customer already knows what they'll be getting.

Distance selling can also be a very useful way of getting repeat orders once you have built the initial relationship by meeting the customer.

Using the telephone means that as well as prompting the customer to reorder or buy new products, you can give customers an opportunity to ask questions.

Rules on distance selling

If you're selling to consumers, you must provide certain basic information such as your business' name, contact details and product, delivery and pricing information. The customer generally has the right to return goods within a specified period.

If your business is a limited company or limited liability partnership and you have a website, it must show details such as your full name and geographic address.

There are also restrictions on holding and using personal information, and on email marketing to individuals.

Even if you have your own shop premises - physical or online - you could increase the number of customers you reach if you sell through other retailers or marketplaces.

If you produce a limited amount of a niche product, you may want to approach small independent retailers directly. However as production increases, don’t forget about larger retailers such as department stores and supermarkets. As there is increasing customer interest in buying locally, some supermarkets have programmes for local producers meaning small businesses can benefit from being able to supply supermarkets directly, rather than going through intermediaries. The contracts and payment terms may be adapted to suit smaller producers.

Some larger retailers mainly have an online presence, e.g. in sectors like home interiors and household goods, and they may also be interested in niche products instead of just well known brands, so it’s worth checking their websites.

Otherwise, online marketplaces such as Etsy, Not on the High Street, eBay and Amazon can offer new routes to market, enabling you to benefit from the traffic already on their platforms and the infrastructure they provide, such as managing payments and returns, and insights from analytics. You will incur costs to have a storefront, list products, and commission but this may be more beneficial than setting up and driving traffic to your own website.

When selling overseas, you should consider:

• Do you have the financial and other resources to exploit the market?
• Have you done the necessary market research?
• Do you understand local regulations?
• How will you handle delivery and payment?
• How will you provide after-sales service?

Selling directly to customers overseas requires you to deal with all these challenges yourself, but can be a relatively straightforward option. For example, you might set up an e-commerce website and accept overseas orders, or use trade shows to market your business overseas.

Alternatively, you may want to work with a distributor or agent who already has the local market knowledge and contacts that you need.

The most complex - but potentially the most rewarding - option can be to establish your own local presence. For example, you might open a local office or set up a joint venture.

Using different sales channels can make your business more successful. But it can also bring a number of complications.

Most channels - other than face-to-face sales - distance you from the customer. This means communication becomes a priority. You need to make sure:

• the channel gets all the necessary information across - whether this is a sales agent or a direct mail letter
• customers trust you to deliver quality products or services

Be particularly careful if more than one channel reaches the same customer. For example, suppose you sell books at your shop and also online. How will customers react if they find you charge different prices? How will agents or distributors react if you compete with them through other channels?

Each channel you use must be managed. You should:

• regularly review how each channel is performing
• look at how you can support the channel - with advertising, service and so on
• compare the sales the channel provides against your additional costs
• consider whether sales through that channel are new sales, or sales you would have made anyway

Read our guide Selling online: the basics.