BUSINESS NEWS

JENS BERGERMANN

A sports equipment manufacturer sells its products through its own stores and external online shops, while a fashion company distributes its clothing exclusively through retailers: These are just two examples of completely different business models that differ fundamentally in one key aspect: the choice of sales channel.

What are sales channels? A sales channel is the route through which a product or service reaches the end customer. These channels can also include additional touchpoints and intermediaries. Even though online sales channels are particularly relevant in the digital age, offline sales channels still play a significant role, depending on the industry.

The selection and implementation of the right sales channels is crucial for the success of any business – making a well-thought-out and well-prepared sales strategy all the more important. In this article, we provide you with a comprehensive introduction to the different types of sales channels. You will learn in an easy-to-understand and clear way how to best distribute your products successfully.

What Are Sales Channels?

Sales channels refer to the ways and methods through which products and services are sold to the end customer. Generally, a distinction is made between direct and indirect sales channels.

In direct sales, the manufacturer sells the products directly to the end customer without the involvement of any other parties, such as intermediaries. Classic examples include retail stores or door-to-door sales, but also selling through a company’s own website.

In contrast, indirect sales channels involve intermediaries (e.g., wholesalers, retailers, or online marketplaces), who purchase the products from the manufacturer and then resell them to the end customers. Such a channel can also include multiple intermediary stages, significantly extending the sales path.

Which sales channel is right for me? When answering this critical question, businesses don’t necessarily need to commit to just one option. It is often possible and even recommended to use a combination of direct and indirect methods. For example, companies can offer their products both on their own website and on a popular online marketplace like Amazon. Depending on the integration of the different sales channels, this is called multichannel sales or omnichannel sales.

Why are sales channels important?

Let’s assume you manufacture cosmetics and want to sell them to your end customers. You offer them in your own online store – but the sales figures are disappointingly low. Why? A possible explanation: Consumers want to try products like perfume, makeup, or nail polish before making a purchase, so they prefer physical stores.

This simple example illustrates: The choice of the right sales channel is crucial for effectively selling products and services to the end customer. Sales channels enable businesses to reach their target audience in a targeted and effective way. A well-organized sales channel also improves product visibility in different markets and platforms, contributing to increased brand awareness.

Moreover, sales channels have a significant impact on operational costs. Those looking to make their sales costs more efficient could, therefore, leverage the expertise of distributors and partners to enter new markets more quickly without having to make large initial investments themselves.

In summary, an appropriate sales channel ensures the maximization of reach, market penetration, and ultimately revenue.

What Types of Sales Channels Are There?

Simply categorizing into direct and indirect sales channels does not do justice to the complexity of a comprehensive sales strategy. There are different types of distribution channels that decision-makers in a company need to consider.

These are the main direct sales channels:

• Physical Location: In this form of direct sales, a company sells its products directly to customers, for example, in a store. This allows for closer customer relationships and greater control over the sales experience. However, the downside is the limited geographical reach, along with high fixed costs for rent and staff.

• Direct Sales in E-Commerce: In online retail, the company's website replaces the traditional store. The advantages are the same, but unlike a physical store, there is also global reach. However, the competition is fierce, meaning substantial investments in digital marketing, especially search engine optimization (SEO), are necessary.

• Social Selling: Social media platforms like Meta (Facebook, Instagram) or LinkedIn can also be used to sell products. The target audience can be contacted in a highly targeted and direct manner, and existing networks can be profitably leveraged. However, high advertising costs are often involved. Additionally, most customers still do not see social networks as a credible marketplace.

• Telemarketing: Surprisingly effective even in today's age, product sales by phone. Through personalized communication and direct interaction with customers, a well-trained sales team can convince many customers to purchase the product. This is cost-effective but time-consuming. Furthermore, legal regulations on cold calling need to be observed.

• Network Marketing: This form of direct sales is based on personal contacts and relationships. Therefore, it is mainly suited for the B2B sector, with trade shows being a classic example. The cost per lead is enormous, but long-term customer relationships can be built.

In contrast, indirect sales involve intermediaries. Here are some particularly common examples of indirect sales channels:

• Sales through Wholesalers and Retailers: In multi-step distribution, the manufacturer sells its products through intermediaries – usually wholesalers and retailers. The most common model is the three-step distribution from the manufacturer via the wholesaler to the retailer, who then sells the product to the end customer. This model is standard in B2C business and allows for a wide reach and low costs. However, profit margins are significantly lower.

• Franchising: In franchising, a company allows a franchisee to locally represent its business. This enables rapid expansion and scaling of the business without losing control over the brand. At the same time, the risk is spread across many franchisees, who, in return, receive a significant share of the revenue.

• Multipliers: Influencers, affiliates, or consultants recommend products, for example, through social media or blogs. This method taps into the popularity and reach of prominent multipliers, but these individuals are typically compensated with a substantial commission, which reduces the profit margin.

It is now common to use multiple channels simultaneously. This is referred to as multichannel sales when these channels coexist independently. Even more effective is the integration of all channels into a unified, cohesive customer experience – this strategy is known as Omnichannel Sales. An example of this is Click & Collect, where a customer orders the product online and then picks it up at the store.

Here are the pros and cons of the most important sales types at a glance:

However, it is important to note that no sales channel is inherently superior to another. It is possible to succeed with different strategies as long as they are tailored to the product and the target audience.

Here are three examples of different sales approaches:

• A successful multichannel strategy is exemplified by the sports giant Adidas, which connects B2C channels through other retailers and marketplaces while also serving the D2C sector through its own stores and webshops.

• In contrast, the clothing company Snocks.com has primarily grown into a market leader through direct channels (D2C) and sells its products mainly through its own webshop and social media.

• An entirely different model is followed by the B2B family business Engelbert Strauss, which sells high-quality workwear through its own stores as well as online marketplaces, with a large portion of the products manufactured by partner companies. Engelbert Strauss thus functions as both a manufacturer and a wholesaler.

It is also important to consider country-specific requirements. For example, in Switzerland, the share of online sales in B2C business is steadily increasing, making the Alpine country an increasingly important key market for e-commerce businesses. However, direct sales are highly problematic due to extremely strict customs restrictions, so cooperation with local distribution partners is a better option.

How Do You Choose and Implement the Right Sales Channels?

By choosing and implementing the right sales channels, companies can ensure that their products and services effectively reach their target audience. A well-thought-out sales channel strategy is therefore essential – here are the key steps:

• Market analysis: Identify relevant target markets, analyze competitors, and define your target audience based on these insights.

• Choosing sales channels: Select the appropriate distribution channels by considering your customers' needs and your product range's profile.

• Integration and coordination: Plan how the chosen sales channels can be integrated into a cohesive customer experience. On a strategic level, sales and marketing should go hand in hand.

• Continuous optimization: Your company's distribution strategy must be constantly adjusted, so monitor and optimize performance based on objective KPIs.

Almost all successful brands today rely on the omnichannel approach, which allows them to respond more flexibly to market changes and optimize risk distribution. A complete omnichannel strategy always includes marketplaces such as Amazon (global) or Digitec Galaxus (Switzerland).

However, such marketplaces are – especially in Switzerland – rather niche platforms with limited accessibility. For a reliable connection, a local partner is needed: SURS offers comprehensive fulfillment services for the Swiss market and helps businesses enter the market. You can rely on our years of industry expertise and our extensive network of partnerships.

What challenges may arise?

Managing and optimizing multiple channels is resource-intensive and can consume a lot of organizational and time effort. Additionally, there is a risk of channel conflicts when different sales channels compete and cannibalize each other. Setting up a new sales channel strategy always involves some level of risk – companies must carefully weigh effort against return.

With SURS as a full-service distribution partner, the effort to expand into new Swiss sales channels can be minimized. Our fulfillment offering guarantees you access to all relevant marketplaces and an extensive storage infrastructure. This helps reduce the risk when entering the market.

Best practices and tips for successful sales channel implementation

Here’s what matters when implementing a successful sales channel strategy:

• Conduct market analysis: Start with understanding your target audience. Analyze their shopping habits to select the most effective sales channels.

• Avoid channel conflicts: With multiple sales channels, you aim to reach new customers. Therefore, different channels should target different audiences.

• Ensure customer orientation: Every customer group has unique needs and shopping habits. Make sure each sales channel is tailored to the specific preferences of the customers it targets.

• Monitor performance: Sales are driven by data and numbers. Regularly collect KPIs to measure and adjust the effectiveness of your sales channels.

• Maintain flexibility: Even a good plan can become outdated. Stay flexible and adapt your strategy to new trends.

How Can Sales Channels Be Effectively Used?

Optimizing sales goals is a continuous cycle of measurement, evaluation, and adaptation. Companies must use data-driven analysis and measurements to adjust their strategy accordingly. Particularly, analyzing customer behavior provides valuable insights into the preferences and purchasing patterns of the target audience. With this data, you can refine your marketing strategies and tailor the design of your sales channels accordingly.

In increasing the effectiveness of measures, you should also make use of modern technological tools. These include CRM systems for automating and managing customer relationships, as well as advanced business intelligence tools – these offer comprehensive features for data analysis.

What are the key KPIs for sales channels?

Key performance indicators (KPIs) are essential for measuring the effectiveness of different sales channels. The following variables are particularly relevant:

• Revenue: Ultimately, every business area is measured by this metric. A well-implemented sales channel strategy leads to higher overall revenue and continuous revenue growth.

• Effort: To assess the efficiency of sales measures, both the yield and the invested effort must be considered. Relevant factors include marketing expenses or total costs per sale.

• Units sold: In addition to the total number of products sold through a specific sales channel, online retailers should also pay attention to the average order value.

• Speed: Although short delivery times may not directly affect sales, they contribute to customer satisfaction and retention in the long run. Companies should also track the length of their sales cycle.

Special Case Switzerland: Sales Channels for Switzerland

Selling on Swiss marketplaces is particularly difficult for foreign companies. Despite its geographical location in the heart of Europe, Switzerland has been politically isolated for centuries, which also manifests itself on an economic level: Switzerland is not part of the European Economic Area (EEA) and also has specific import and customs regulations, which significantly increase the cost of importing goods.

These high distribution costs and the complex logistics process, which also involve overcoming legal and administrative hurdles, make market entry extremely challenging. This can only be managed with in-depth market knowledge and local warehouse infrastructure – both of which are usually lacking for foreign online retailers.

What should be considered when exporting to Switzerland?

When exporting to Switzerland, companies must consider the country's specific trade and customs regulations. The most important steps in overcoming these hurdles include:

• Perform export declaration: This is mandatory for goods worth over €1,000, and an electronic declaration must be made. An EORI number is required for this process.

• Import declaration in Switzerland: This is done online via the e-dec Web. Each product is assigned a customs tariff number (ZTIN) to calculate customs duties.

• Pay import tax: The import tax in Switzerland is 8.1% (with reduced rates for certain goods like food). Customs processing fees also apply.

What else should you consider when exporting to Switzerland? Many businesses underestimate the administrative effort required to provide correct import documents. Commercial invoices, certificates of origin, and shipping documents must be thoroughly prepared and submitted on time, and for duty-free imports, a certificate of origin or movement certificate is required.

With SURS, you have the right distribution partner for Switzerland

With SURS, you gain an experienced distribution partner specializing in market entry into Switzerland. You can particularly rely on our local warehouses and country-specific industry knowledge. Our fulfillment offering includes the complete handling of logistics, storage, and distribution.

We ensure that your products reach the lucrative Swiss market efficiently, and we stand by your side not just as a mere distributor, but also as a supporting consultant and general problem solver.

These are the benefits of working with SURS:

• Minimal effort: SURS takes care of all logistics, minimizing the administrative workload for businesses.

• Local networking: Through our local presence and extensive network of marketplaces and service providers, we can quickly respond to market changes.

• Digital processes: At SURS, all processes are digitized – ensuring maximum efficiency and automation.

• Shared capital risk: SURS participates in the capital risk, reducing the financial burden for businesses.

• Transparency & Long-term commitment: SURS values transparent processes and honest communication – this clear and pragmatic way of working forms the foundation for a long-term partnership.

Conclusion on Types of Distribution Channels and Their Effectiveness

Direct and indirect distribution channels each offer specific advantages and disadvantages depending on the product and target audience. Therefore, a comprehensive omnichannel approach that combines the advantages of both approaches is recommended.

For an effective sales channel into the hard-to-access Swiss market, you need a specialized fulfillment partner like SURS – we take care of the entire logistical effort so you can focus on your core business.

FAQs

How can small businesses with limited budgets effectively use sales channels?

Small businesses should focus on cost-effective and results-oriented strategies. Partnering with SURS is especially effective: Our listing price starts at 25 CHF per SKU (larger assortments available upon request). There are no hidden costs with us!

How can businesses ensure their sales channels are well connected?

Businesses should use a central CRM system to integrate all channels. Regular data analysis and the use of automation tools are also helpful for optimizing the connections between channels.

What role does social media play as a sales channel?

In most industries, social media still primarily serves as a marketing channel to increase brand awareness and customer loyalty. While social commerce can certainly generate direct sales, within a sales channel strategy, sales through social networks should primarily play a supportive role.

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