Sales channels: your options

When deciding how to sell your products, you should consider which sales channels will help you reach your customers most effectively and how you can make your sales channels work together.

Guide

6 min read

1. Overview

You need to know how and where customers want to buy your products or services, and the best way of getting customers to hear about them.

The more sales channels you use, the more customers you can reach. But each channel adds costs. If you add a new channel only to find it attracts sales away from an existing channel without bringing in extra sales, you'll be increasing your costs for little or no benefit.

This guide looks at the main sales channels you can choose from. It explains their strengths and weaknesses, and how you can use them to your advantage.

2. Face-to-face sales

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

3. Sales through retailers, wholesalers and distributors

Selling through an intermediary may be a more cost-effective way of reaching your customers than selling to them directly.

If you are targeting business customers who prefer to deal with large suppliers, selling directly to them may not be a realistic option. Instead, you might aim to supply wholesalers who have existing relationships with those businesses.

If individual consumers buy low value quantities of your products, the best option might be to target retailers that sell similar products. Or you might choose to focus your efforts on a relatively small number of wholesalers who can in turn supply your products to many retailers.

Managing your distributors

Think about how you set your prices. Distributors will be more enthusiastic if they can make a large profit - but setting too low a price will eat into your own margins.

Effective advertising and promotions can be vital. Distributors will be keener to stock and sell products that their customers are asking for.

The key terms of the supply relationship should be covered in a written contract. Key issues 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

4. Distance selling

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.

5. Selling overseas

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.

6. Using a sales agent

Instead of having to recruit, train and finance your own employees, you can use an outside sales agency. A good sales agent should already have the necessary contacts and skills.

Use sales agents for:

  • building sales without heavy investment
  • reaching specialist and overseas markets

A clear, written agreement is essential. It should cover:

  • what 'territory' the agent is responsible for - eg a named foreign country
  • whether this is exclusive - you could be barred from selling directly, or using any other agents in that territory
  • how the agent will be paid (usually commission on sales)
  • whether you will meet any of their expenses
  • what rights you have to end the relationship
  • what compensation payments you might have to make if you end the relationship

Legal complications

An individual agent acting for you in the UK could legally be seen to be an employee. You would be required to treat the agent in the same way as other employees - eg deducting income tax under PAYE (Pay As You Earn) and paying National Insurance contributions.

Even if an individual agent is not an employee, there can still be complications:

  • Depending on the circumstances, you might be held responsible for the agent's actions.
  • You may be responsible for any shortfalls you cause in the agent's earnings - eg if you fail to supply adequate stock.
  • European and UK law can make it difficult to terminate an agency's contract without paying compensation. This could be as much as two years' expected earnings.

Before entering into any agency agreement, it's a good idea to take legal advice.

7. Sale channels management

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.

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