Businesses have traditionally generated revenues by either selling direct-to-consumer (D2C) or adopting a business-to-business (B2B) model.
In the latter scenario, retailers sell their goods directly to other companies instead of individuals or families. While selling directly to consumers may create a more extensive customer base, selling to companies may allow for more significant transactions. Let's examine how combining the two methods may enable you to grow and sustain your company for years or decades.
The Benefits of Selling Directly to Consumers
The most significant benefit of using the D2C model is retaining complete control over the sale process. For instance, you get to determine which items are available for sale, how much to sell them for, and when they are available for purchase. In most cases, D2C sales are completed online, meaning you don't need a physical storefront and the overhead that comes with maintaining it.
Furthermore, you can pass shipping and other costs off to your customers, which helps to increase your profit margin per sale. Using analytic tools may provide your company with real-time information about your customers that can be used to understand better what they want and need. Ultimately, this can help to increase brand loyalty and engagement and the revenue that comes with it.
Why Use the Wholesale Model?
The primary benefit of selling products to other companies is that the end retailer will handle distribution and other logistics issues on your behalf. Essentially, you only have to ensure that inventory is delivered to your retail customer by the date stated in your purchase agreement.
The Potential Drawbacks to the Wholesale Model
While selling products wholesale may enable your company to generate consistent revenue, it may erode your profit margins. This is because the wholesale customer will need to ensure that it can profit when it sells its goods to its customers. It's also important to remember that wholesale customers may ask for up to 90 days after goods are delivered to pay for them.
What Does Your Direct Customer Want?
Consumers want to interact with clothing, footwear, or electronics before buying them. Consumers may also want to test a car, farm equipment, or other expensive items before purchasing. Therefore, if your company sells a physical product, it may be best to have a retail presence to accommodate their needs.
Of course, your website can still take orders from those who may already have experience with your brand and trust that the products they buy meet their standards. An eCommerce platform is also an ideal place to sell subscriptions or digital products used in tandem with a physical item. For example, customers may be open to buying an extended warranty or similar products for their cars online, even if they wouldn't want to purchase the actual vehicle online.
What Do Wholesale Customers Want?
Wholesale customers are going to buy products for one of two primary reasons. First, they will buy items they intend to resell for profit through their physical or digital retail properties. Alternatively, they will purchase products because they will use them to run their own companies.
Therefore, you should limit wholesale offerings to products you know will sell quickly or have some value to a retailer. For instance, your company may have a particular running shoe color that outperforms the rest of your offerings. That may be something that you agree to sell in retail locations as it presents an opportunity for everyone to make money.
Suppose your company sells restaurant supplies such as aprons, pants, or work shirts. In such a scenario, a wholesaler may be willing to buy them because they need these items to take notes during meetings or for many other mundane reasons. As your wholesale customer has no intent to resell such things, it may be easier to negotiate a deal because you won't have to worry about exclusivity agreements or to meet sales targets.
Other Variables to Consider
In recent years, online retailers have turned to physical retailers to handle returns and other issues that might arise. This may be ideal because your customers may feel more comfortable buying something from your website if they know it can be returned somewhere close to home. Physical retailers may agree to such a deal because it increases traffic to their stores and may lead to increased revenues.
Having a physical retail presence may help you meet the needs of consumers looking to make emergency purchases. For example, if a customer's luggage is lost after a flight, that person might need new clothes right now. If you have a retail presence, that customer can purchase your products without waiting several hours or days for items to be shipped.
If your company sells perishable items, it may be a good idea to accept orders online that can be fulfilled at a physical retail location. This ensures you don't lose money on products that spoil while sitting on a store shelf or in a warehouse waiting to be sold. Furthermore, you may save on shipping and handling costs as you are less likely to waste money on glass jars, boxes, or other packaging used to improve the presentation of food products.
Ideally, your business will look to exploit as many channels as possible in the quest to obtain customers and maximize profits. If your firm has a dedicated marketing or accounting department, consulting with those groups may be a good idea when developing a sales strategy. If not, consider working with an outside consultant or talking with other business owners to learn more about various sales methods.