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If your sales are growing rapidly and you feel it’s time to expand into new channels, there are many options available. Depending on your product, your market, and the resources you have available (for example, if you’ve partnered with a 3PL for fulfillment support), the next channel you choose will be a big decision. Here is a quick list of the types of sales channels you can pursue, and tips on when to know which one is right for your brand.
Ecommerce: Easy When You’re Starting Up
Arguably the lowest barrier to entry, ecommerce is how most consumer brands get started. Basic ecommerce sales come from your own website storefront. This means you are selling directly to your customers, managing everything from marketing and site appearance, to order fulfillment, shipping, and customer service. While it may be the simplest at the beginning, it can become very time consuming once your products take off. Flawlessly managing all the details that happen in between an order being placed and it arriving at your customer’s doorstep can become overwhelming once you hit higher volumes. As any online shopper knows, one misstep by a brand (wrong product, late shipment, poor customer service) means losing a customer for life.
What is the best way to start an ecommerce business?
Ecommerce is a great place to start a business. You can build your online presence from anywhere, and customize it to really stand out from the competition.
“While not without challenges, ecommerce sales from your own site is the easiest channel for sellers to quickly launch, and do so cost effectively. Sellers can directly manage the client relationship and experience without the red tape of a middleman (wholesale, retail, dropship). Most importantly, it will help the seller understand very quickly what their clients likes and dislikes are and continuously iterate on their products and sales formula.”
Many sellers start with in-house fulfillment, until they outgrow your space or your time and company bandwidth. It’s also perfectly reasonable to outsourcing fulfillment with a 3PL from the start. Not only will it free you up to navigate the other stresses of owning a business, a 3PL will be able to help you assess the right moments to move into other channels. They will have the infrastructure to take all the logistics off your plate, so that you can focus on marketing your product and building your team. For example, a progressive 3PL will employ modern technology platforms and automated systems to help streamline your order management across a variety of sales channels with established technology connections, relationships and experience. Increasing your order volume means more administrative details to juggle, but a 3PL will ease the load by automating the processes to ensure every order is fulfilled exactly as intended.
Online Marketplaces: The Sweet-Spot of Growth and Support
If you have a product that you can easily market without the customer needing to touch, smell, open, or play with it, then online marketplaces are going to be a great fit. Similar to ecommerce, online marketplaces offer a fairly easy entry to selling, much more so than retail. You will have to conform to the structure and rules of the marketplace, but you will also have the benefit of happenstance consumers finding your products while they are browsing others on the site. This can be a big growth opportunity with relatively little effort.
Amazon and eBay are the biggest online marketplaces in North America. Each has their own set of rules and regulations. Depending on the volume you sell, your administrative resources, and the capital you have to spend, you may have more success with one platform over the other. While eBay is fairly hands off in terms of supporting your operational needs, Amazon has various tiered programs that you can leverage. As an Amazon seller you can choose to handle all the logistics yourself, or opt into the Amazon infrastructure for some, or all of your ecommerce fulfillment and shipping.
Sellers need to consider how they can stand out, this is particularly true when they are on a crowded online marketplace. In 2019, it was estimated that Amazon had over 2.5 million sellers in the Amazon FBA program. Leveraging the marketing tools these marketplaces offer is critical to the sellers’ success—having strong customer reviews is also hugely important.
Should I consider dropshipping?
Dropshipping is a popular fulfillment method associated with online marketplace sales. It’s a leaner method of fulfillment where the store doesn’t keep products in stock, rather they purchase items from a third party (or from you) then ships directly to the customer.
For example, Target buys many products in bulk, and then sells each direct to the consumer through their online marketplace. Depending on the contract you have set up, you may still fulfill the product, or they may take over with the transportation and shipping. Since online shopping has become synonymous with all retail, there is a bit of a grey area between what is considered strictly online marketplace dropshipping, and selling through a retailer. You may choose to work with a big box retailer and have separate contracts for their online marketplace and their brick-and-mortar store.
When is a good time to get your product onto an online marketplace?
Scalability factors such as storage capacity and fulfillment logistics are a big consideration when expanding into online marketplaces. It’s a natural next step from direct-to-consumer ecommerce, but the jump in volume may have you scrambling to meet orders if you’re not organized.
“Once you understand your core consumer and have found the recipe to drive awareness and sales efficiently on your own website, the next step is to expand to online retail and learn how to replicate that success with a broader audience and where you have less control over the platform. Test, learn, and iterate online until your cost to acquire a customer (CAC) through an online retailer is inline with your target CAC.”
Outsourcing your logistics will help tremendously with the transition. Areas that a third-party provider can support include: warehouse and storage, automation, extensive process controls, inventory management, picking, packing, bulk rates on shipping, breadth of shipping geography, order tracking, payment processing, faster customer service and returns management, and much more.
Retail and Wholesale: The Make-or-Break It Channel
Products that sell best when the customer can touch, see, and interact with it are likely best off in the hands of a brick-and-mortar retail seller. In our current COVID-19 climate, there has been far less in-person sales, though stores are still stocking shelves for limited shopping hours and product delivery services (Instacart, for example).
Selling through a retailer (also called wholesaler) can be beneficial because they buy products from you in bulk, which can be great for topline revenue but sellers take a major hit on their margins. More than that, a big-name retailer gives your brand industry validation that will naturally help boost sales.
The pitfalls of retail sales are just as big as the bonuses. Hard to break into, this channel is as tough as it gets. You’ll need to adapt to the old school sales model where you’re trying to sell your product to people who literally see hundreds, if not thousands, of similar products each month. Shipping to retail means steep competition and a notoriously rigid system. Each store has specifications that are so precise (and different from one another) it truly takes an expert to excel at ensuring everything runs smoothly.
Is it worth it to go after traditional retail sales?
If your product is consumable (food, household or beauty products, consumables, etc) you’ll be successful with retailers sooner than if you produce one-time purchase items. The retailer is more likely to buy consumable products because they know their customers will be coming back for more.
“Retail is a great place to scale sales, but it can be a challenging place to discover the recipe to drive sales of your product efficiently and effectively. Doing the work online first to understand your sales funnel and how to move prospective customers through it meaningfully increases the likelihood of success when expanding distribution to traditional brick and mortar retailers. In retail, the prize is significant but the feedback loop is limited, and costs can be high.”
Working with a retailer is a great option if you manufacture your own products. If you are completely inundated with direct-to-consumer sales, selling in bulk is a great way to make large sales with fewer interactions. Plus if the relationship feels good on both sides, it’s often a guaranteed sale when other channels may be waning due to seasonal drop-off.
Managing the relationship is a dealbreaker for this channel. While stores like Walmart, Target, and Best Buy can mean a big boost for your business, they are notorious for playing hardball with vendors. Plus each store has its own set of rules, EDI connections, routing guides, and more. Getting into retail stores is probably the hardest channel to get into.
Once you’re in with them, that doesn’t mean it’s smooth sailing either. Fostering a great long-term relationship is constant work. They basically have the pick of every product available, so if you wrap a pallet wrong, or hand over an incorrect form, it’s likely they will issue a chargeback (read: steep cash fee), deny your product (read: logistical headache to return it or fix the issue on the spot), or just drop your contract all together (read: burnt bridge for life). Bottom line, you’ll want an experienced 3PL with relationships to these companies to help you navigate this channel.
Storage may be a significant consideration when adding a retail channel. If you choose to outsource fulfillment, retail relationship management, and the EDI connections to a 3PL, you will have storage and inventory management baked-into your strategy already. If you are still storing your own product, you’ll need to consider your capacity before starting with a big retail contract. The bottom line with this channel is that you don’t want to get any detail wrong, or else it might be the end of that relationship.
International Markets: A Big Step With Lots of Promise
Selling abroad is in its own category of itself, mostly because it can come with some pretty big hurdles. Those hurdles include shipping strategy (how do you pass along the higher costs of shipping, customs, duties, taxes to your customers), freight forwarding (which mode is best for your strategy—ocean or air?), and any cultural differences you need to overcome (translating your website, currency conversion, labels, etc).
What is the best way to start selling abroad?
Finding market fit and customer demand before shipping internationally is one of the biggest leaps to starting to sell abroad. It’s worth noting that international shipping pairs really well with a strictly ecommerce business. Using off-the-shelf website analytics tools, a seller can quickly identify regions and countries where their site is getting traffic. This tends to be a strong indicator of purchase intent and a seller can shift some of their marketing focus to those areas.
While the US is the crown jewel of the ecommerce consumer market today, international markets are growing and you’ll want to narrow your focus on a select few countries as a start and expand from there. The largest ecommerce markets outside of the US are China, the UK, Japan, Germany, France, and Canada, but sellers will need to determine which markets are the most suitable to enter and sustain growth.
The profit margin and opportunity for big growth are sometimes higher in international markets, it’s also a riskier channel to pursue. Sellers really need to rely on experts to ensure they are doing it right. A 3PL who can support cross-border shipping will have experts on their team or in their network to help. They likely have international partners or a network of partners who can help with on-the-ground decisions. They should be able to keep you updated on the latest trade compliance regulations, help find the best freight forwarding service, and manage any labeling changes you need to consider for cultural reasons.
Get Going—Considerations Before Launching a New Sales Channel
Identifying the channel you want to expand into is only the beginning. Operationally, you’ll need to set up systems that ensure you get products out the door, to the right customer, at the right time, and shipped to the right place. All while maintaining flawless delivery to the existing customers you have netted.
A few things you’ll need to consider:
- Who is your target customer? What market segment do they occupy?
- New locations where your products will need to go. Do you need to enlist a different fulfillment center?
- The complexities of order tracking will increase. Do you have the technology to accurately track each one?
- Do the packaging, boxes, labels, and branded shipping materials you are using still work within the new channel? Freight is a big consideration in most growth opportunities.
- Does your current carrier support your next steps? Is switching carriers a better option?
Each channel has its own challenges and needs. Ecommerce may mean more time spent managing storage, fulfillment, and transportation, but online marketplaces may arbitrarily restrict your sales with little or no notice (for example, Amazon at the beginning of the COVID pandemic).
Once you are selling from multiple channels, it’s likely that you’ll want to start outsourcing fulfillment and logistics to a third-party. It will relieve you from so many of the small administrative tasks, so that you can focus on growing into more channels.
If you think outsourcing fulfillment and logistics is the right option for you, you’ll want to do your research and find the right third-party logistics company that fits your needs. Each 3PL has specialty services that may help with certain channels but not others.
If you’re looking to expand to a new sales channel, and you need an experienced 3PL to help, reach out to our team. DCL Logistics works with high-growth companies working in all sales channels. Read what our customers say about us.