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Strategic Dilemma: Direct Sales vs. Reseller Network Expansion for Product Producers

Since we have been working with brands since 2016, sometimes we have a quite hot discussion with them about what is better to do - sell to final customers for better margins, or invest in building a reseller network and work with them on smaller margins.

What do you think? What is better?

This strategic dilemma requires careful consideration, as the choice made can significantly impact the business's growth, profitability, and market presence. 

We always believe that to have a stable company - it is good to work on both sides - B2C and B2B, but each of these areas should have a different strategy.

In this article, we'll explore the pros and cons of both approaches to help producers navigate this critical decision.

Selling to Final Clients: The Direct Approach

Selling directly to final clients allows producers to retain the maximum profit margins from each sale. This can contribute to higher overall profitability. There are also another pros - direct sales enable producers to build and maintain direct relationships with their end customers. This can lead to valuable insights into customer preferences and feedback.

In our opinion, it also helps to have more control over how their brand is presented and perceived by end customers. This control is crucial for maintaining a consistent brand image.

However, there are also a lot of cons, or to put it better, some areas to not underestimate.

Selling directly may limit the overall market reach, as producers are responsible for reaching individual consumers without the assistance of a broader reseller network. Simple reason. Direct sales often require significant resources in terms of marketing, customer support, and order fulfilment.

This can be demanding for smaller or resource-constrained businesses. I think that it is good to highlight also that handling individual orders, shipping, and returns can pose logistical challenges, especially as the business scales. Not always brands are ready for massive increase of orders - especially when the brand start to become famous.

Let’s see now what can be pros and cons of growing the reseller network.

Growing the Reseller Network: Collaboration for Expansion

We will always highlight that working with resellers of items allows you to reach a wider market for your items. Establishing a network of resellers exponentially expands the market reach of a producer's products. Resellers can tap into diverse customer bases and geographical locations. And this brings to much smaller marketing costs.

With resellers actively promoting and selling products, producers can benefit from reduced marketing costs compared to individual consumer-focused marketing efforts. Not to mention that in this way, producers can concentrate on what they do best—product development and manufacturing—while resellers handle sales and customer interactions.

Now, some suppliers tell us that there are cons of building a network of resellers. We see that differently - as the cost of growing business. Why? Because reseller partnerships often come with lower profit margins for producers, as resellers require a share of the revenue for their services. The success of the business becomes partially dependent on the performance of resellers. If resellers struggle or underperform, it can impact the overall sales and revenue. But this is why we always instruct the companies to invest on both sides of the business - B2B and B2C.

Finding the Right Balance: A Holistic Approach

While the choice between selling directly to final clients and growing a reseller network may seem dichotomous, a balanced approach can often yield the best results. Here are some considerations for finding that balance:

  • Identify product lines or categories that may be better suited for direct sales, while others may thrive in a reseller network.

  • Cultivate strategic partnerships with resellers who align with your brand values and have a track record of success.

  • Explore a combination of direct sales and reseller network expansion to diversify revenue streams and mitigate risks associated with dependency on one model.

  • Leverage technology and e-commerce platforms to streamline both direct sales and reseller management, ensuring operational efficiency.

In a few words - make it work as a pro! 🙂 And remember. The optimal strategy depends on the nature of the products, the target market, and the resources available to the producer. By carefully weighing the pros and cons of each approach and adopting a customized strategy, producers can navigate this strategic dilemma to achieve sustainable growth and success in the competitive marketplace.

Ultimately, success lies in finding the right balance that aligns with the unique goals and dynamics of the business.


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