With the rise of online shopping, companies have increasingly leveraged third-party partners to expand their market reach. From small businesses selling through Cratejoy and Etsy to SaaS vendors partnering with established tech sellers, selling through partner channels – “channel sales” – is now a popular strategy for businesses.
In this article, we will examine channel sales, including what it is and how to approach it. We’ll also consider ways all-in-one document automation with Docubee can help streamline the process for firms that decide to adopt this strategy.
What is Channel Sales?
Channel sales refers to the strategy of selling products through third-party facilitators. This includes:
- Brick-and-mortar retailers
- Online distributors or resellers like Zappos, Chewy, Overstock, and Wayfair
- Online hosting platforms for solo sellers or small businesses, like eBay, Amazon, Instagram Shops, Etsy, Zazzle, and Cratejoy
- Agents, dealers, and affiliates who may earn commissions or other incentives for helping a firm sell its products.
The Importance of Channel Sales
Channel sales offer an opportunity to expand your business with new service offerings that help your clients find more value in your solution. This creates a mutually beneficial relationship in which you and your partner can expand revenue with minimal effort from your team.
Channel Sales vs. Direct Sales
Unlike channel sales, direct sales involve a merchant selling their own products without a third-party intermediary or traditional retail store. They may do this by selling:
- From their own website
- In person (for example, door to door or through multi-level marketing)
- By phone
Direct sellers often rely on word of mouth to create awareness about their products, but they may also use paid ads and a social media presence. This can also be true of channel sales merchants, yet the latter can also rely on their chosen sales channels’ marketing structures to help reach their intended audience.
Merchants may choose to be direct sellers when they want to centralize control over their positioning, pricing, and relationship with customers, and want to avoid a traditional retail model. Alternatively, sellers may find channel sales beneficial if they have limited means to reach customers or want to leverage established firms’ resources to scale affordably.
Benefits and Advantages of Channel Sales
Adopting channel sales as a strategy offers firms key advantages, including:
- Increased market coverage – Smaller firms can expand their target audience quickly by tapping into a third party’s established customer base, including their marketing and sales tactics.
- Reduced costs – This expansion comes at a significantly lower cost than scaling on a firm’s own resources. In a case study by Channel as A Service (CAAS), a leading software developer was able to save by leveraging their partners’ resources and distribution networks. The model was also shown to save firms money by streamlining customer support and marketing costs.
- Faster time to market – Using the same established partner networks allows firms’ products to reach the market faster, as there is less heavy lifting involved.
Firms that decide to implement a channel marketing strategy for these reasons can further intensify their efficiency by implementing a document automation tool. This type of solution can complement an already lean sales process by automating the repetitive, yet unavoidable, paperwork involved in sales and certain types of agreements with partners.
Types of Channel Sales
There are many types of sales channels. Some include traditional retail partners with brick-and-mortar stores, as well as their online counterparts. However, with the advent of online shopping, various types of online channel partnerships have emerged. These cater to a variety of business models.
(For clarity, a channel partner is defined as the third-party entity you enter into a channel sales business arrangement with.)
According to Hubspot, Shopify, and Amazon, a few common types of sales channels include:
- Resellers, retailers, and dealers – These buy products from the company of origin and sell it at a profit to customers, other businesses, or wholesalers. These are traditional models for companies that want to take advantage of a larger firm’s broad reach and budget without having to scale to the same level themselves. Examples include Target, Macy’s, CVS, and boutique shops.
- Wholesalers – Wholesalers serve as intermediaries, selling a firm’s products in bulk to other businesses, such as retailers.
- Affiliate partners – Affiliates promote a company’s product and gain a commission on sales generated through their promotion. They do not sell the products themselves. For example, a social media influencer might review a new makeup or software brand and earn commissions on sales made through their special link or using their discount code.
- Agents – Agents sell a product on behalf of the owning business and are paid on commission. The most well-known example is a real estate agent, who earns a commission on a sale they make on behalf of the property owner.
- Social commerce – Social commerce platforms allow individuals and small businesses to sell products directly on social media. Examples include Facebook Marketplace and Instagram Shops.
- eCommerce marketplaces – eCommerce marketplaces allow people and businesses to sell items using their established reach and customer base. Examples include Amazon, Etsy, and eBay.
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Key Considerations About Channel Sales
Before adopting a channel sales model, it is crucial to research the available channel partners and their areas of specialization. It’s essential to strategically select partners who align with your offering, brand positioning, business model, and target audience.
For example, Stephanie Pellett points out in her Learn with Shopify series that a business selling unique items should avoid platforms focused on mass production, while a luxury goods business is unlikely to be a match for discount-focused partners. She also highlights the importance of understanding the impact of each partnership on aspects such as inventory, manufacturing, and payment – if these are not aligned, it could spell problems for your business.
For example, if you manufacture your own items and choose a partner that drastically increases demand for your products, it’s important to consider whether your current production model can support the new customer base.
Channel Sales Strategy: What It Is & How to Implement One
A channel sales strategy is a structured approach to using channel partnerships, ensuring alignment with your business model and bang-for-buck.
First, consider what a channel sales model is, and whether it makes sense for your business. Would it specifically improve key areas like audience reach, marketing resources, and scaling beyond your internal capacity? And would that approach make more sense than scaling in-house?
Once you’ve determined you want to adopt channel sales, consider the following factors:
- Ideal partner profile – Consider your ideal customer base, marketing resources, industry, and brand voice. An ideal partner should align on these and integrate well with the way you run things.
- Channel fit – Evaluate specific channels in light of your ideal profile. Cut the ones that don’t align.
- Partner onboarding & training – Do your ideal partners need to be trained and onboarded? This might be especially true of brokers, agents, or other partners working on commission.
- Partner incentives & support structures – How are your partners incentivized: is it built into the model (as with Etsy) or is incentivizing up to you? Develop a plan for this.
- Rules of engagement between internal sales & partners – If there’s any potential clashing between internal sales and external partners, lay down guidelines to avoid conflict, which can undermine the benefits partners bring.
- Program tracking & optimization – Consider which metrics you’ll use to keep tabs on which partnerships are performing optimally, which need revision, and which need to be cut. Your needs may change over time, so it’s best not to assume what works now will still work later.
Creating a strategy with its accompanying documentation and standard operating procedures (SOPs) can involve a lot of repetitive work. Consider sales process automation software to make this easier.
Build Stronger Partnerships in Your Channel Sales Strategy with Docubee
Firms seeking to leverage channel sales benefits, such as faster time to market, reduced costs, and expanded market coverage, should adopt a personalized approach to selecting partners. Regardless, Docubee can help automate the paperwork involved and its associated workflows. With flexible APIs, firms will find ease of integration with their existing tech stack. Pairing Docubee with channel sales can enhance efficiency for businesses seeking to revamp their sales approach.
Want to learn more about optimizing your channel sales paperwork? Chat with a Docubee expert today!
