📖Reading: What Sales Channels Should the Entrepreneur Focus Upon?

📖Reading: https://capsulecrm.com/blog/what-are-sales-channels/

Click here to learn about which factors to consider while selecting a sales channel.

Click here to see a comprehensive list of sales channels examples.

How your customers access your products or services can make a huge difference in your sales and profitability. Take, for example, a small business owner who makes stylish candles. You could sell one-to-one to neighbors and friends, through your website or social media, in local stores, or at farmer’s markets and pop-up events. Many successful entrepreneurs use multiple channels, but it’s essential to invest your time and energy in the channels that generate the most sales and profits.

A key decision is whether to sell directly—through your own store, website, or personal sales calls—or indirectly through retailers or online platforms like Amazon. Consider the entrepreneur who developed a coconut-cutting device. Initially, she planned to sell it on her website for $13 each. Later, she realized she could sell it wholesale for $7 to grocery stores, which displayed it next to coconuts. She made less per unit but sold far more units overall.

Selling through stores comes with its own challenges. Simply getting your product on the shelves doesn’t guarantee sales. One of our coffee-roasting entrepreneurs got into over fifty stores, but sales per location were low. The solution? Drive customers to the stores with marketing tactics like social media campaigns, email promotions, in-store taste tests, or point-of-purchase displays.

You should explore different local options for selling your product. Many markets and supermarkets could be great opportunities, you just need to determine which ones are the best fit for you. It’s a good idea to discuss this with your mentor and do thorough research to help you make the best choice for your business.

Action Tip: Start by listing all possible channels where your product could be sold, then rank them by potential reach, effort, and profitability. Focus your energy on the top one or two channels first, and refine your approach as you learn what works best.

📖 Reading: A Guide to Selecting Sales Channels Using an Apparel Company Example

🔍 Guide: How to Sell on Amazon, Step by Step

This step is about your sales and distribution approach. If you are selling a physical product (e.g., lip gloss, candles, clothing, cakes), you need to decide how you are making the product available to customers. You have three primary choices. The first is to sell directly to your customer, either in person, from home, your own store, or your own website. The second is to sell at a stall or stand in a public market. An example would be selling at a farmers market or at pop up locations. The third is to sell through an existing store (owned by someone else). With this latter option, the store might buy products from you at a wholesale price, mark them up, and set their own retail price. Alternatively, the store might allow you to sell on consignment, where they carry your product on their shelves, but do not buy them from you. Rather, when they sell your product, they get a percentage (e.g., 30-40%) and you get the rest.

If you are selling a service, then usually you are dealing directly with your customers without any middlemen or intermediaries, although you might partner with other organizations to facilitate your sales. An example is one of our entrepreneurs who collected and fixed up bicycles for three years, and then opened a bike rental business where she would deliver and pick up the bikes for customers. She partnered with three hotels, and these hotels would recommend the bikes to their hotel guests, and keep a few of them in inventory at the hotel.

In deciding which sales channels to rely upon, there are a few key factors to consider. A big consideration is volume versus margin. An example is an entrepreneur who made his own brand of coffee and imported the beans from Ethiopia. He initially attempted to sell at farmers markets and over his website. That meant he made bigger margins, but would sell one or two bags of coffee at a time. With the online sales, it took some effort to drive customers to the website. He eventually concentrated more on selling through grocery stores in the area. It took some time to get into his first store, but his perseverance paid off. The store initially bought small quantities, but eventually were ordering large numbers of bags each month. They then started carrying the coffee in five of their other stores. He made less per bag because the store took part of the margin, but he sold in much larger quantities.

Getting into stores can also be only half the battle—the question is whether your product will sell once it is in the store. This brings us to the issue of control. When you sell through another organization, you do not control what price they charge for your product, whether your product gets placed on an attractive, eye level shelf, or in a less attractive place, how much inventory the store will carry and how often they will place additional orders, and how much the staff working in the store will push your product, among other factors. As a result, if you sell through other stores, it is important to communicate regularly with the store owner or manager, to regularly visit the store, and to see if the manager will let you do promotions within the store. This means you need to have a strategy for how to support the sales of your product when it is in a retail store.

Let’s consider another example of an entrepreneur who has evolved to have an effective approach to sales and distribution. Sanaa Chocolates started in 2018 and produces gourmet, customized chocolates and bonbons. She sells 5-piece, 9-piece, 16-piece and 25-piece assortments. She initially started by selling at the Farmers Market. In 2019, she relocated to a commercial kitchen where she paid $500 per month in rent. It was good for production but not for customer traffic. Today, she sells through four different channels. She has her own store (where she also makes the chocolates in a back kitchen area), makes sales through her own website, sells some of her products through three other stores in town, and makes direct sales to businesses and universities who buy them for events.

Here is a graphical illustration of the distribution strategy for Sanaa. In this example, Sanaa is using four sales channels. About 50% of sales come through the entrepreneur’s own store, and 30% comes through the website. Sales through other stores represent about 5% of sales, while direct sales to businesses and organizations constitute 15 % of sales. The biggest proportion of annual sales come at three peak periods (Christmas, Valentine’s Day and Mother’s Day), and most of these sales are through the entrepreneur’s own store and the website. The other sales channels are more emphasized during the rest of the year.