Direct Sales 3

Meaning of Direct Sales Part 3

What does direct sales look like in practice?

When it comes to direct sales in practice, you have to differentiate between B2B and B2C. A B2C relationship always exists between you and potential customers who are private individuals. One speaks here of the ” business-to-consumer relationship “. If, on the other hand, your potential customers are other companies, then we speak of “business-to-business sales”. The two areas require different paths from you. Especially in the area of ​​marketing, you have to set up completely different strategies. Furthermore, sales in B2B are usually much more consultation-intensive and the prices are usually in the higher range. In B2C, on the other hand, you tend to serve the mass market. In most cases, the profit margins tend to be in the lower range.

The advantages and disadvantages of direct selling

Advantages of direct sales Disadvantages of direct sales
  • you always have full control over your sales
  • you can control sales according to your ideas and needs
  • there are no costs for intermediaries or other intermediaries
  • in direct contact with the customer, you can react more quickly to their wishes and needs
  • it is easier to increase customer loyalty
  • direct selling is very labor-intensive and cost-driving after starting a business
  • there is a great deal of effort in control processes
  • you need to create the necessary know-how and the right sales structures
  • for founders, it is often difficult at first to recognize new potential in the market and trends with customers

What does indirect sales look like?

In the case of indirect sales, most entrepreneurs use either the dealer model or the broker model.

The dealer model

With this model, one or more retailers, either from specialist retailers or wholesalers, are responsible for the sale of your products or services. This means that you do not address your offer to the end customer, only to the retailer. You then carry out a resale, so to speak. For you, however, the dealer model has the disadvantage that your profits are reduced. The dealers strive to buy your goods as cheaply as possible. For them, the difference between the purchase price and the sales price represents their profit.

The advantages and disadvantages of the dealer model:
Advantages of the dealer model Disadvantages of the dealer model
  • processing sales easier for you. As a rule, you only receive large orders and not many small ones
  • you can benefit from the awareness of the dealers
  • you can save costs and resources for customer advice because these are housed at the dealer
  • direct communication with the customer is made more difficult
  • it is difficult for you to control and influence sales
  • the final sales price is determined by the dealer. A kind of dependency relationship can arise for you

The mediator model

With this model, a partner or an independent sales representative is commissioned by you to sell your products or services. In your name he tries to bring your goods to the customer. For each product sold, he receives a jointly agreed commission. You can design these yourself. Either a fixed price or a share of the turnover. Compared to the dealer model, you have lower risks here.

Advantages of the intermediary model Disadvantages of the intermediary model
  • You can calculate the costs better
  • Intermediary is very interested in selling your products because it makes money
  • You save a lot of money because you don’t need your own sales team
  • In contrast to your own sales staff, intermediaries are difficult to control
  • The intermediary must be carefully prepared for his appearance at the customer, so that this goes entirely on your behalf
  • Know-how and quality can fall by the wayside

Organization and costs of direct sales

If you choose direct sales, you will usually do so with your own employees. For you, this means that the fixed costs for you are on average highest with direct sales. You not only have to pay salaries and pay social security contributions, but also train and qualify employees accordingly. Most salespeople only receive a basic salary in practice. Depending on the successful work, a commission is added to this. You definitely have to take this into account. In addition, the development, management and constant improvement of direct sales require a great deal of effort. For this reason, many also choose a mixture of direct and indirect sales.

Criticism of direct sales

According to POLYHOBBIES.COM, the subject of direct sales is repeatedly confronted with criticism in Germany. This is especially true for network marketing companies and for so-called multi-level marketing. The biggest point of criticism is always the very low income of the employees. If you are looking for work and want to get into direct sales, it is very difficult to assess what income opportunities there are for you. Many companies keep saying how high the earning potential can be, but that usually has nothing to do with reality.

Conclusion

Direct sales can be a very worthwhile form of sales for you. But it is also a fact that, above all, the necessary knowledge must be available. You need good salespeople who absolutely identify with your company and your product. Direct selling will cost you quite a bit of money, depending on the size of your business. Alternatively, you can opt for a hybrid between direct sales and indirect sales.

Direct Sales 3