Channel Choice — Wholesale v. Online Tradeoffs

When assessing the pros and cons of selling through wholesale versus direct-to-consumer online channels, a first obvious difference is margins. Selling direct-to-consumer allows the human scale business to retain healthy margins to reinvest in the business, while selling wholesale to other retailers requires you to lower margins, creating room for the retailer’s markup, often double your wholesale price. In essence, you are paying the retailer to manage the marketing, logistics, and transactions for you. In addition to pros and cons, there are other dimensions of channel choice worth considering, Dave Bayless says. I spoke with him about elements of channel choice.


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Pacing

Developing a robust online business takes time. Even though plug-and-play storefronts like Etsy and Handmade at Amazon, or popup storefronts like Shopify or Squarespace or Etsy’s Pattern, allow you to start selling goods quickly, developing a following who finds you, likes you, and buys from you can be a slow process. Selling wholesale to retailers may allow you to achieve higher volumes of sales more rapidly. It’s worth asking: How fast do you need to reach a certain sales volume, and why?

Activities

Activities for selling wholesale include going to trade shows and talking with retail buyers to land the accounts—and then reliably and intensively managing the supply line, obtaining the financing to cover delays between paying your suppliers and receiving retailers’ payments, and communicating with the retailers, many of whom have specialized portals for vendors. Selling direct-to-consumer, on the other hand, involves digital publishing, such as creating videos and blogs that authentically tell the story of you and your products, as well as technical back-end work, fulfillment logistics, and managing financial transactions with your customers. What exactly do you like to do? While you can outsource or automate some aspects of some activities, a founder cannot afford to be unfamiliar with or ignorant of any part of the business.

How it feels

Dave provides insight into how the business founder may feel while managing different channels. While selling direct-to-consumer provides you with more control in shaping your customers’ experiences of your product and message, the operations of selling online can feel isolating and lonely. And while you may get a rush talking with buyers at trade shows, operational follow-through may require you to babysit retailers’ concerns about packaging, pallets, and exception reports. Being aware of the range of feelings you may experience as you manage each kind of channel can help you recognize what you’re getting into—and also help you practice great self-care, so you find ways to get emotional nourishment along the way.

Today most businesses sell and distribute through multiple channels; the single-channel seller is the exception. This opens opportunities for you to emphasize different channels during different eras of your business trajectory. What does your business need at THIS point?

Selling through established retailers can help build legitimacy for your products as well as provide valuable information about which target markets find your goods appealing when you’re starting out. Do you need to achieve certain monthly sales volumes to break even and cover your fixed monthly expenses? Selling wholesale may help reach higher volumes more quickly, but helping your business thrive, and not just survive, may require a quantum leap in steady sales volumes beyond that.

Selling online allows you to communicate in authentic, specific ways that just cannot be replicated when you’re relying on someone else to merchandise, display, and market your products. Starting out with a plug-and-play store gives you the chance to hone your marketing message and gradually build the technical skills to manage an e-commerce site that offers more control over design, message, and customer paths through the digital interactions. Selling online allows you to build volumes more incrementally.

Choosing the right channels for you, your products, and your business is a decision you can make more than once, as your customers, operations, and own aspirations evolve. These dimensions merit thought as you consider which channels, and which activities, deserve your most valuable resource: your attention.

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