The Benefits -And Drawbacks- Of Embracing An Indirect Sales Model

By Kellie Auman Posted on 1/30/18 10:00 AM

We talk a lot about channel sales theory in this post, but it’s important to remember that indirect sales are a fast-growing area of business. Every day, more companies are investigating at least the possibility of moving to an indirect-sales channel model, if not actively taking steps to grow an ecosystem.

With that in mind, we’ve decided to publish a series of blogs intended to be a complete resource on the basics of indirect sales and the formation of indirect-sale ecosystems. If you’re new to the concept, these are the blogs for you! To start off: Why become an indirect sales focused vendor in the first place?

examining the europe network

The Benefits -And Drawbacks- Of Embracing An Indirect Sales Model

Embracing indirect sales channels can be a big leap. You’re no longer selling to the public directly, instead selling to authorized third-parties who are working on your behalf to provide your goods and services. The key distinction is that these sales and distribution partners don’t work for you directly. Instead, you’re building a network of such partners regionally, nationally, or even globally.

The Benefits:

  • Faster expansion: When you’re almost exclusively working with established outlets, that drastically cuts the costs and time involved with expanding your operations, compared to setting up your own outlets.
  • Leveraging brand recognition: Maybe few in the public have heard of your brand, but if you’re selling through a major retailer plenty of people are going to hear about your brand.
  • Streamlining operations: Having a huge operation with hundreds or thousands (or more!) employees creates considerable drag and can become a logistical burden. You might think of this as “outsourcing” your sales outlets! Your focus as a vendor becomes much more narrow, dealing almost solely with improving your product or service.
  • Cost of lead acquisition and sales: You're going to slash your operational overhead when you move to an indirect sales model. Overhead will grow more slowly in proportion to your overall reach, compared to owning your own outlets.
  • Customer access: Many local sales partners makes it easier for customers to connect with your brand, and receiving the training or other information they need to make the most of it.
  • Experimentation: Whether it’s trying out new marketing campaigns or testing out new products, there will always be a sales partner willing to help you test the waters.

Of course, there are disadvantages as well – although most can be mostly mitigated through smart management and technology investments that support your sales network.

The Drawbacks:

  • Loss of control: While it’s now easier to manage your sales partners thanks to online connections, you will never have the same level of direct managerial control as you would owning your own outlets.
  • Lower per-unit profits: Obviously, with new middlemen in place, your raw profits will be lower. However, in a well-managed ecosystem, this should be mitigated by the overall lower costs.
  • Competition for channels: Top sales outlets can be courted just as heavily as any other business partner. You’ll need to put in work maintaining mindshare and engagement across your sales channels.
  • Difficulty coordinating: Efforts such as simultaneous product rollouts can be extra-challenging when your sales channels are independent. However, even global rollouts are still possible!
  • Slower feedback cycles: Having retailers between you and your end-customers can create challenges maintaining proper feedback. This too can be mitigated with good communication.

So, moving to indirect sales isn’t entirely without risk – but plenty of companies are finding that the benefits, particularly the lower costs, are worth that risk.

LogicBay Can Put You On The Path Forward

Interested in becoming a channel sales vendor? LogicBay’s proprietary methodology and technologies can get you off to the best possible start. Contact us today to learn more!

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