What if I told you there was a group of people out there who would pay you to market and sell your original products for you? They’d put them in a beautiful place where hundreds or thousands of people who are in a buying mindset will be able to see them, touch them and try them out. They’ll say nice things about them and encourage people to purchase them. And best of all, they’ll pay you up front for the privilege
You’d say, “What’s the catch?”
Of course, I’m talking about retail store owners and the catch is that you are splitting the end purchase price with them. However, if you’ve got your margins right, you’ve already factored this in as the cost of doing business. On the other hand, if you’ve based your margins on the assumption that you’ll only be selling direct through your website, you may be in for a rude awakening if and when you need to change your game plan.
It’s true that there are examples of brands that have launched and become successful while selling directly to consumers, however most either had significant financing, which allowed them to lose money for extended periods as they established a market presence, or they had a product or brand that was so novel and unique that it went Viral – which is an extremely difficult feat to engineer. I would not recommend building your business plan around this expectation.
The promise of e-Commerce
At our e-commerce business, we love e-Commerce sales as they allow us to capture 2 – 3 times the margin of selling through wholesalers, and I would strongly encourage any brand to invest time and effort into growing their online presence. It’s a channel that allows us to own our customer outright and develop a long term relationship as we usually also get an email address attached to a sale. Plus it’s a medium where we have total control over the customer experience, allowing us to present our brand in the best possible light.
The problem of e-Commerce
While the cost and barriers to setting up an online store have dropped dramatically in the last 5 years, the flip side is that there is now MUCH more competition online. Driving significant traffic to your site to generate sales is an uphill battle for a new brand and it can be costly to buy traffic through search engines or banner ads. While social media marketing can prove to be very effective, it is generally not a short term solution, as it also requires significant time and effort to gain momentum and deliver results.
Why wholesaling to retail is one of fastest ways to grow your business and your brand:
A retail presence helps you sell more online
In the beginning, you need to create a brand presence. Aligning yourself with established retailers who already own the audience you are trying to reach can give a credibility and visibility boost to your brand, which in the long term will increase your online sales. This has certainly been the case with our e-commerce business. By wholesaling to retail, we’ve seen online sales increasingly grow to represent a greater and greater share of our overall revenue.
Retailers and sales reps will give you direct feedback on your products
One of the most compelling reasons to open up a wholesale channel is the feedback you will get from both the buyers and end consumers who are exposed to your products. When you’re waiting for sales on your online store, you won’t know why people aren’t buying. Maybe it’s the products themselves, or maybe it’s your website design. However, when your products aren’t selling in stores, you’ll get real feedback as to what people’s objections are, allowing you to make the appropriate adjustments in your line or pricing. On the other hand, if your products are selling well, you’ll find what people like most about the products and can emphasize that in your materials
Sales Volume can more than compensate for lower margins
Simply selling to a handful of large retail chains can dramatically increase your revenue and volume. And while there are some risks involved with selling to large retailers, once you’ve made the initial sale, you’ve ideally built a reliably profitable channel that you simply have to feed more product. So, while the margins may be lower, the high volume can more than make up for it on your bottom line.
If you can build your business with an online only model, all the power to you. But if you’re not getting the results you need through your website, get out and start selling through other channels such as retailers. Wholesaling your products is marketing and is one of the best ways to get traction for your business – just make sure you have the margins to support it.