Your product or service reaches the customers via the sales channels. This means not only the ‘physical’ way, but also where and how the customer finds your product. Most of the products and services get through to the customer through multiple paths.
No matter, whether you produce car parts or are a freelance designer – you must ensure that your product finds its way to your customers. How and through which channels it gets to your customer interesting to the reader of your business plan. Marketing and acquisition belong in this chapter of your business plan as well.
Typical distribution channels are the sales through wholesale and retail, using Internet or telephone. Depending on the business concept, sales or trade fair stands, shops, catalogues or franchise systems are also an option. For some time, the various social media channels have been gaining importance for sales: Advertising your products via Twitter, Facebook, mobile apps or your own blog.
Of course, not every sales channel fits each product and audience. In your business plan, show that you understand this and have thought about which way your product/your service reaches the right audience in sufficient quantity and at the right time.
The optimal distribution channel or the optimal mix of distribution channels for your company depends on various points. Here are the most important:
In direct marketing, you’re selling your product directly to the customer (for example, through a retail store, a practice, a private call centre or an online shop). The indirect way leads to the customer (E.g. via wholesalers, retail outlets, franchisees) via one or more intermediate agencies. It is suitable if you offer largely standardized, intuitive and simple products. Complex and individualized services should be sold directly.
If you’re selling high-quality, personalized items, you should select distribution channels for your business that allow for an intensive consultation. This does not necessarily have to happen in the shop. Also, advisory or “tailor-made” offers can now be sold on the Internet (Keyword: Mass Customization), such as tours, electronic articles or even your own cereal or cake.
The optimal distribution channel also depends on the desires, habits and needs of your intended audience. Maybe this could be the decisive competitive advantage, which makes your business successful by choosing an innovative distribution channel. A moveable beach bar, with which you are always present, where the most joyful celebrating people are, may make more sales than a stationary shop.
Depending on the startup project, the costs of distribution (transport costs, dealer discounts, commissions, etc.) can far exceed production costs. You should therefore research and plan carefully.
Distribution via the Internet is usually cheaper than the distribution via a retail store or an intermediary. For entrepreneurs, it is particularly attractive because it saves negotiation time with middlemen and the product can be developed in tandem. The advantage lies in the higher range of this distribution channel.
The former auction platform ebay has become an Internet department store. Together with other online marketplaces such as amazon or even Rakuten they offer a sales channel, which can be especially interesting for startups and small companies. Because the financial risk for providers is very small and easily calculable. The marketplace fees are manageable and lie between €19 and €49 per month for the three mentioned online platforms, plus 5-11 % Commission. The market operator is responsible for correct and targeted search results – as well as payment operations and data protection.