Routes to Market

Whatever your business’ product or service, it is important to establish which routes to market are the most appropriate. That is to say, through which outlets are you going to sell your product or service? From an online shop to online auction sites, mail order and wholesalers, there are any number of methods for selling to your customers. The choices you make here could have a significant impact on the success of your business and your profit margins.

The routes to market you choose will be dependent on numerous factors. The initial areas to think about when making this decision are as follows:

What you’re selling
Where you are based
Where your customers are based
The buying habits or preferences of your customers

In order to drill down into these areas, your best starting point would be to conduct market research. This will help you better understand who your customers are, what they buy, where they buy and why they buy. Once you have indentified these key points, it will be a lot easier to pinpoint the appropriate route to market. Remember, it is highly unlikely that you will select just one route. Most successful retailers utilise at least two.

Let’s take a closer look at some of the main routes to market…

Online Store:

Low running costs
A low volume of traffic may mean few sales. Time and money to be invested in increasing site traffic.

Online Auction Site:

Established sites already have a high volume of traffic
Auction-style mode of selling means profits may vary
Highly competitive which often drives prices down

An Actual Shop:

Goods on display to public
Often somewhere to keep stock
More contact with customers
Can be one of the most expensive forms of direct selling – rent, rates, water, power to be paid before you’ve even made one sale
Staff wages can be very high

Direct selling using sales people:

Best for relatively expensive products where you only need to make a few sales to make a decent profit
Also good if you’re likely to have to explain the products’ features or more than one person is involved in the decision to buy
An expensive way to sell

Sales Agents

Experienced self employed sales people
Often specialise in particular sectors and bring with them a network of contacts
Work on commission
Useful if you are launching a new product or service or to expand sales activities into new or unfamiliar territory

Selling through third party retailer

Will need to convince them on price and quality
Need to be able to guarantee that you can get enough stock to them on a regular basis
Need to find stores appropriate for your product. Find out what they sell, what they’re looking for, their buying policies and procedures.

Wholesaler

Low value products to be sold in quantity
Will often expect you to discount your product quite heavily to offer a better profit margin for them
Usually buy in bulk

Distributors

Operate in a similar way to retailers
Buy your product and sell it on to their contacts
Use different ways of selling to their customers
Usually expect discounts and extended credit arrangements from their suppliers
Might see lower profits from selling this way

Exhibitions and Trade Shows

May only make a few sales at the event but good for generating leads and enquiries that are turned into sales after the event

Mail Order

If you have a range of products to sell
Through brochures or catalogues
Need to be quick to fulfill orders

Consider the above options (and others) carefully before making a decision. The routes to market you opt for could impact significantly on the way your customers interact with you and your products and ultimately effect your profits. Once you have selected and implemented your chosen routes, ensure that you continue to evaluate each of their success. If a particular route is performing significantly better than others, you may wish to invest more money in that area and less in others.

Posted on 9th May 2013 by Stuart in General Business