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SME’s Survival in the Knowledge-Based Economy

Channel Sales – how can utilising a channel strategy help an SME to grow?

Hand drawing Sales Growth Graph with marker on transparent wipe board.

For SMEs in Asia, the difference between boom or bust may depend on finding and maximizing the right channel, or combinations of channels, for selling products or services and this requires careful research and evaluation before adopting a pragmatic approach to meet changing consumer preferences and grow your business. Channel Sales is a strategic method of distribution used by SMEs to sell their products and services, usually by dividing its sales force into groups that focus on different selling conduits such as; an in house sales force, dealers, and retailers or by direct marketing. The sales channel or channels you chose will also influence your pricing strategy and affect your branding. There are a number of Channel Sales options available to SME owners:
Direct Selling
Direct Selling means selling a product to the consumer by the producer, without anything in the middle. This generally happens in the consumer’s home or office by an independent sales representative. Dell is renowned for being one of the first companies to succeed with a direct sales model. Asian cultures tend to be more willing to accept the opportunities offered by Direct Selling, here are three common models used:

1. Door-to-Door Plan In
This type of plan, the Asian agent or dealer obtains an immediate discount from the company, at the point of purchase. He then makes a profit by selling the product to the consumer at the recommended retail price. The line of distribution in such a plan is simple, involving the direct sales company, the dealer and the consumer. In Bangladesh, where female seclusion is practiced, moving beyond the home is a transgression of gender norms. CARE work directly with community elders to secure approval for women to work. CARE personnel assemble a basket of goods for women to sell by recruiting multinationals including Unilever, Danone and Bata. The basket is light enough to take across uneven terrain and includes items that vary by volume, weight, purchase cycle, seasonality and appeal. This carefully balanced portfolio minimises market risk and each woman is free to add anything else she can carry and thinks will sell. Everything from hair ornaments to condoms turns up in these bags.

2. Party Plan
Under this type of plan, the direct seller or retailer arranges with a friend who shall act as ‘hostess’ to invite a group of friends for demonstrations of products. In the course of the party orders are taken. The Asian ‘hostess’ receives merchandise or products as compensation for the use of her home and her help in getting their friends together. A popular example is a Tupperware party and in 2015, Asia-Pacific generates 34% of Tupperware’s global volume.

3. Asian Multi-Level Marketing
This plan allows the direct seller to manage and service a large direct retail network or distributor network. Those interested in this plan must first be sponsored by an existing distributor of the company. With the help of this distributor, he then builds his monthly sales volume to qualify for higher monetary incentives and recognition.
An Asian success story with this model is Qnet which originally sold gold numismatic coins. Qnet then expanded its products to include travel and leisure vacations in 2002. By 2006, Qnet had transitioned to marketing and selling ‘aspiring products’, which claim to boost energy, health and nutrition for buyers. According to their CEO, these types of products account for 30% of Qnet’s sales through its business model. The company has also introduced “life-enhancing products” such as a portable water filtration system and air purifier, which Qnet claims can fix pollution issues in homes.

Indirect selling through Intermediaries
This is using an indirect channel to market and sell goods produced through a retailer or wholesaler/distributor. An example is anything sold in a department store. The EU Business Council advises, “If establishing a local office in Japan does not seem like the right solution, it might be wise to use an intermediary. But the choice of such an intermediary should be made with caution, as there are vast differences between the different types of partners you might find.” Four steps to consider when building a partner channel are;
1. Look for partners that are a DNA fit. SMEs need to look for a complement to their offerings
2. Creating mutually beneficial relationships is key to making a partner channel work. Offer a Win-Win to equip your partners for success
3. Make sure you communicate with your channel partners up front about what the selling process is going to be like and provide sales tools that set them up for success
4. Aim big but not too big. As an SME don’t approach a channel partner who is out of your league

Dual Distribution
This is using more than one way to reach the consumer, often through direct and indirect channels at the same time. Examples include franchising or having a direct online store while also selling via retailers. A popular example is which sells merchandise available in store in the UK through its branded online store direct to Asian consumers crazy to buy their team’s accessories.

Reverse Channels
This is the flow from a consumer to an intermediary without a producer such as the resale of a product or recycling of waste. ‘Talking rubbish’ will help waste processing SME owners to develop channels for their business by working with local authorities to offer tailor-made services, clear pricing structures and guidance on legal responsibilities. By signing up to the commitment, councils agree to provide reliable and regular collections, help businesses recycle and give reasonable, clear fees. Essential to ensure firms recycle their waste in the long term. A good communications campaign, that offers continuous engagement and contributes to retaining customers, is needed to support this new approach,

Innovation in channel sales strategies is increasing with The Financial Times reporting ‘banks are increasingly focused on ways to provide a digital service, including use of video, rather than simply concentrating on product sales, in order to retain customers.
In a recent Global Channel Strategy Awards Competition, entries from India used more channels than entries from other markets; TV, radio, newspapers and outdoor are all significantly more prevalent in Indian campaigns than those from the rest of Asia but use of social media and online video is notably less prevalent. Analysis of creative approaches shows that Indian campaigns employ storytelling and celebrity-led approaches.

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Rhys Brown
Rhys Brown
Our International Country Director & SME Evangelist for Hong Kong, Philippines, Indonesia, Myanmar and the wider International business, Rhys is a 15-year veteran of the accounting software industry, having held senior management roles with MYOB Ltd spanning China, Malaysia and New Zealand.

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