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.
Importance for your business plan
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:
- Direct or indirect sales
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.
- Your products/services
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.
- Your target audience
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.
- Online sales channel
- The company website can play a central role in the distribution. You should tell the readers of your business plan, which function the website fulfils. Does it merely serve as a virtual address under which your customers receive specific information about your company? Or to reach your customers in their Internet search for certain products, possibly directing them to your site? Maybe you sell your product via an online shop?
- In any case, you should describe how your target audience will land on your Web page. In other words, how you will generate the necessary “traffic”. Because your potential investors know – as do you, hopefully – finding your website won’t be easy for your target audience. You should accumulate basic knowledge in the area of online marketing (Keyword: search engine optimization) before selling online and mention that in your business plan. If your skills are not sufficient, invest in some consultation with a trusted professional – best before designing and programming your site or your online shops!
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.
- Online marketplaces such as ebay can be used to advertise your website and generate traffic – at least indirectly. Links and even the mere reference to other Web sites are not allowed on ebay (2016). But it can certainly be worth to create a shop with a small product range or offer a particularly good deal that is requested by many users. In a manual confirmation email you can point to more offers on your own website.
- The digital world and the Internet offer many ways in which you can increase your sales without employees or professional consultants due to their reach and interactivity. Here are a few inspirations for your sales strategy:
- Amazon shows us what other customers purchased, when selecting an item in the shopping cart.
- Plug and play is the motto in the digital age. Software delivered today runs without additional effort to and is mostly self-explanatory or at least so simplistic that 90% of all questions can be answered in a curated
- Interactive checklists and advice robots help the customers in the selection of their
- Some things may seem so self-evident that you forget to mention it: You want to open a restaurant? Logically, the customers come to you, not vice versa. Describe it anyways. For example, explain how your restaurant is designed on the outside, how it will attract customers (exterior paint, signs, displays, etc.). Maybe you’re already a special experience to tell? For example, a certificate or a prize for those who eat a Curry Wurst with the hottest sauce. The hot sauce is free for all participants…