So, you’re in business and wondering how to expand by reaching more customers. How about coming up with another channel through which you can reach your end consumer? Here are some examples of distribution channels that may apply to you:
Wholesale to retailers
Perhaps you currently sell direct to the consumer online. Have you thought about selling direct to retailers offline to increase your reach? Of course, your margin on each product sale will be less, but this is where it’s important to determine a wholesale price to sell to retailers.
It can be tricky because you need to be aware that retailers are expecting a particular margin on the products they sell online or offline. This is where setting a Recommended Retail Price (RRP) will come in handy. In other words, you set a retail price that you recommend the retailer sells your product for. Theoretically, this is also the retail price you currently sell your product for. The RRP can also be the starting point for determining your wholesale price.
Let’s look at an example. Your product retails for $44, inclusive of tax. Let’s convert it back to the exclusive of tax price, which would be $40. Remember, the tax portion is not yours to keep. If a retailer is looking for a margin of 50% (and a 100% markup), then the wholesale price the retailer would be looking for is $20 (exclusive of tax). If the cost of manufacturing your product is $10, then your margin is 50% and markup is 100%, at the wholesale price. For every product you sell as a wholesaler, you receive $10 (after costs). Every product sold through your website would bring in $30 (after costs).
You might assume from these figures that you’d need to sell a greater volume as a wholesaler. This may be true but there are a few other factors to consider. If the product sells through the retailers quite well you will get continual orders from them. Think of it this way, to make the same margin you’d need to sell three wholesale products to one retail product. However, the scope for repeat orders, larger volumes and more brand awareness is substantial. As you can see, setting up an additional distribution channel can be well worth the effort.
Perhaps you sell programs and information products online. You have a website and market yourself on the internet using various techniques such as social media and other more traditional techniques. No matter how much marketing you do, you can only reach so many people. However, what if you got your raving fans to sell your products on your behalf? Your own ‘dedicated workforce’ who only get paid when they sell your product?
This is otherwise known as an affiliate program. An affiliate program is set up by the product owner as an incentive for others to market the product in return for receiving a commission. In other words, the product owner gets a sale that they otherwise would not have got and the affiliate earns commission on a product that they did not have to create themselves. You get your products or programs out there to more people, with minimal effort on your part and you only reward for results. It’s a win-win situation for both the product owner and the affiliate.
If you want to see an example of an affiliate program, have a look at the Bookzkeeper affiliate program. I’m happy for you to replicate this concept in your business.
So if you want to increase your business and increase your reach in the marketplace, consider adding another distribution channel. You might be surprised at how effective it can be!