Balancing Wholesale and Direct-to-Consumer Sales
As an eCommerce business owner, you’ll need to find a way to balance wholesale and direct-to-consumer sales. If you’re only focusing on one channel, or unsure what these two options are, take a look at the pros and cons of each and find out how you can increase your revenue, expand your reach and branch out with a multi-channel eCommerce strategy.
What Is Wholesale?
Instead of selling directly to customers, selling wholesale means marketing to other retailers. There are a few ways to conduct wholesale eCommerce, but you typically sell large quantities of your product to an established retailer. That retailer then puts your items on the shelf, or your listings on their website, and sells your products for you. You still need an engaging, customer-centered product, but you are able to sell large amounts to a company. Wholesale orders often occur consistently, so a satisfied retailer can be a client for years to come.
In order to find out more about wholesale and to determine whether it’s a good channel for your eCommerce business, check out these pros and cons.
Pros of Wholesale
- Consistency: When your products are sold to a retailer you usually have advanced notice of orders. You’ll need to prepare items in bulk, but you can typically rely on consistent orders shipped directly to the retailer. This allows you to plan around income, outgoing product and all the other areas that are far more erratic in direct-to-consumer sales.
- Increased Advertising:Your brand should get a boost of awareness, thanks to your prominent spot on the shelves or online lists of a well-known retailer. Instead of investing in your own marketing to attract customers, you’ll be able to focus more time and energy on making a better product.
Cons of Wholesale
- Lower Profits Per Piece: Putting a retailer in between you and your clients will usually cause you to lose some of the profits. The convenience of a third-party selling your items is balanced by the discount you typically offer a retailer. This can be a downside if your product is especially time consuming to create, or if you don’t sell enough inventory to make up the price difference.
- Less Control: Because you aren’t selling directly to customers, you won’t have the same amount of control over your product and its marketing. You won’t be able to offer customers deals, may have limited power to describe the product and aren’t in control of how prominent a retailer makes your product. This can cause your products to be viewed less than the competition, depending on the retailer’s discretion.
What Is Direct-to-Consumer Sales?
Direct-to-consumer sales is a typical eCommerce strategy. Using the ease of eCommerce websites and tools, you’ll be able to create a unique and attractive listing for customers to order directly from you. This allows you to have complete control of all promotional and marketing materials, as well as handle all customer communication.
Direct-to-consumer requires you to handle order fulfillment. Without a third-party to act as middleman, you’ll need to package, ship and handle questions and returns from all of your customers. This can be a positive feature if you have an excellent, customer-friendly system. However, it can also be a negative feature if you don’t have a smooth system in place or are struggling to keep up with unexpected demand.
Pros of Direct-to-Consumer
- Higher Profit Margins: You won’t have to share a piece of your profits with a third-party retailer. This allows you to keep a larger percentage of your profits or offer your product at a lower price. A lower price will attract more customers and help create a more dynamic, competitive business model.
- Increased Control: Advertising, fulfilling orders and fielding customers’ questions are all completely under your control. For better or worse, you won’t have a retailer speaking for you. This can give you a competitive edge, since you have the power to provide friendly, efficient and professional communication at all stages. However, it also can add more work for you and your team.
Cons of Direct-to-Consumer
- Higher Costs: Because you have to handle the additional responsibilities of order fulfillment and marketing, you may have higher costs. You’ll spend more time, money or both keeping a professional and engaging image across your entire brand.
- Less Consistency: Without a retailer to make large, consistent purchases, you’ll be at the mercy of the ebbs and flows of the market. Large sales one day could be followed by a slow day, week or month.
Find Balance With Multi-Channel Management
The good news? You don’t have to decide. Use an effective multi-channel management strategy to harness the benefits of both wholesale and direct-to-consumer channels. A multi-channel approach is a popular way to expand your company strategically.
If you are unsure about the next steps to take, or need more information about how a multi-channel approach could work with your eCommerce business, contact Listing Mirror today. You’ll learn how a balanced approach to these two popular forms of sales can be highly effective for any brand, including yours.
Sell More. Work Less.
Erin is the Co-Founder of Listing Mirror.