The Right route to market

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Just as important as deciding what to sell, is deciding how to sell it. There is no right or wrong answer here – different routes to market will suit different kinds of products and services. The secret is to make it as simple and straightforward as possible for your customers to discover what you are selling – and then to buy it.

To decide which sales route would be best for your business, you need to consider:

1. Are you selling to consumers, other firms or national/local government?

2. Do your customers have to be actively persuaded to buy your product or do they need to buy it anyway?

3. Are you selling a product or a service?

4. Do you customers need to inspect your products before they buy them?

5. Will customers see your product or service as a major purchase, a mid-range purchase or an incidental purchase?

6. Where are you primarily targeting your product or service – locally, regionally, nationally or internationally?

7. Does the product or service need to be installed or fitted at the customer’s premises?

Depending on your answers to the above, here are some options you may wish to consider:

1. Selling online

The value of online sales has soared in the past couple of years as Internet connections have become faster and payment transactions have become more secure. Now it is the preferred method of buying for many people, and there is very little that cannot be brought online.

One nice tweak to selling online is Click and Collect, as pioneered by Asda but now taken up by John Lewis and others. Customers order or reserve goods online but then go to a physical shop to collect them. Save on delivery charges and gives customers greater flexibility about when to collect their goods. Depending on your business, you might choose to allow customers to reserve without obligation, as Asda does, or to buy and pay before collection, as John Lewis does.

Advantages

Quick, easy and open for business 24/7 – location and distance barriers disappear, and no travel or parking is required.

Disadvantages

Customers may be deterred from buying goods they can’t see, feel or try on before they buy them. There are also some customers that are reluctant to buy things online for fear of fraud.

2. Opening a shop

The traditional way to do it, and still useful for goods that customers need to see and touch before they buy, or for products that they need to buy instantly – food and household goods, for example.

Advantages

Personal interaction with customers and the ability to satisfy requests immediately. A pleasant shopping environment can encourage people to browse and therefore buy more than they might have otherwise.

Disadvantages

Big overheads – rent, business rates, furnishings, staff costs, etc. Customer reach limited by geographical location and opening hours.

3. Pop-up shops

Pop-up shops are temporary shops which can be set up in any empty space for a day, a few days or a few weeks. There are two main types of pop-up shop — those held in empty retail premises, and those in non-traditional venues, which can be anything from a village hall to a garage, to an artist’s studio. The idea and the big appeal is that they are not around for long – from a day to several weeks; a season at most. That gives the venture both an element of surprise, and one of urgency.

Advantages

Cheap and low risk. Excellent opportunity to experiment with selling different types of products. You also receive instant feedback from customers.

Disadvantages

No opportunity to build a long-term loyal customer base.

Case study

Kate Ward and her sister Sarah Loader have found the idea of temporary venues so appealing that they have swapped their bricks and mortar tea shop for a pop-up version. The pair used to run The Silver Apples – a vintage tea room in West Didsbury, Manchester. But after three years they were so fed up of seeing their profits being eaten up by rent and rates they closed their doors and hit the road with a pop-up version of their tea room. Their temporary tea room can be created in both indoor and outdoor spaces, and the two of them go to great lengths to make it look exactly like a proper English traditional tea room, bringing tables, chairs, a counter, cake stands, linen and vintage crockery with them to decorate the space. They play period music on a record player and to complete the look the two of them  (who do the waitressing) dress up in old-fashioned tea dresses.

Ward said: “We can really transform a space and make it look gorgeous, and that is what we like about it. People love it because it looks like a proper tea room. They like the thought which has gone into it to make it nice for them.” Now every weekend the sisters load up their van and head for venues such as the market hall at Altrincham, Cheshire, where they create their tea room for the monthly vintage fair. Customers can find out where they will be next by checking on their website. The tearoom also promotes the sisters’ catering company, which makes the cakes they serve, and they don’t intend on ever going back to using permanent premises.

4. Selling to retailers

You many choose to sell your product to retailers such as a high street supermarket or department store, which will then display it on their shelves and sell it to their customers.

Advantages

High visibility for your product, and the potential to quickly build a high-volume business.

Disadvantages

The retailer is in a powerful position to beat you down on price, and you are likely to have to operate on a small profit margin. As a general rule retailers expect to mark up the products they buy by at least 100% which means you will have to sell to them at half the price you would sell directly to customers via your website.

If you are supplying the retailer for their own label range, there will be no opportunity to build your brand.

Case study

Michael Hall owns Fallen Fruits – a gift-ware and gardening business in Ludlow, Shropshire. He had been selling his children’s horse-shaped swings – made from a recycled tyre – through garden centres when he contacted the buyers at John Lewis two years ago.

Within three months, Hall had received an order for the swings, which sell at £79.95. Since then, John Lewis has asked Hall to make a dinosaur swing, which went on sale last year, while he is also working on a wooden version. Now John Lewis accounts for most of his firm’s production. Apart from the many forms that need to be filled in, supplying a large retailer has been very straightforward, Hall said. “The fact that we get the orders so far in advance has been fantastic for us. We look after them, and they look after us.”

5. Selling to wholesalers or distributors

Wholesalers and distributors act as a middleman between suppliers and the end customer, whether that is retailers or large businesses.

Advantages

An easy way to sell large volumes – it is much simpler to deliver 300 units to one wholesaler than one unit each to 300 retailers.

Disadvantages

Wholesalers need to make a profit too, so your selling price will be considerably lower than selling directly to a customer, or even to a retailer. Your product will be very much a commodity – there will be no opportunity to build a personal relationship with the end user. Also because you are not selling directly to the end-user, it will be difficult to build and establish a brand name.

6. Selling via mail order catalogues

You can distribute catalogues to prospective customers – they then ring or go online to place orders. Often used as a way to sell to other businesses because it makes it so much easier for them to see what you sell.

Advantages

A great way of showing prospective customers the range of products you sell. High-quality catalogues will be kept and noticed and so used over and over again

Disadvantages

It can be very expensive to produce a high-quality catalogue, and many of those you distribute will not hit their target and will be quickly thrown away or discarded. It’s a rather old-fashioned method of buying things, likely to appeal to an older generation who’s less accustomed to buying things online.

Case study

Charles Hunt started a mail order business at the age of 26 with £500, selling bed linen and towels from his flat in Battersea, south London. It took off and did well for eight years, reaching annual sales of £6 million. But the business was dealt a fatal blow in 2005 when a postal strike prevented catalogues from reaching customers during the valuable pre-Christmas sales period.

Hunt said: “They sat at Royal Mail from the end of November to the end of December and so we lost our entire Christmas trade. We lost hundreds of thousands of pounds in revenue.” The business struggled on for a while but never recovered and went into administration at the beginning of 2007. Even worse, Charles had personally guaranteed the debt and so was left owing the bank more than £500,000. Fortunately, Hunt has since bounced back with a new online venture, Duvet and Pillow Warehouse, which has a turnover of £5 million. But the experience taught him an important lesson: “We had too much in one basket. We had everything banked on catalogues and Royal Mail distributing them, so it took only one incident like that to knock down the business.”

7. Using sales agents

Sales agents are generally freelance, self-employed people who work on a commission basis – in other words, they only get paid if they sell. They normally operate in their own specialist sectors and have an established portfolio of business-to-business customers.

Advantages

A quick and cheap way to get your product in front of lots of potential customers without having to spend time and resources recruiting your own sales force. Particularly useful for new products which the sales agent will be able to demonstrate and explain in person to the potential customer.

Disadvantages

You have little control over the way in which your products are described or explained.

Things to consider

If you are starting a business without much money, you need to choose a route to market your customers already feel comfortable using in order to minimise your risk. If you have to educate potential customers about how to buy your product, it will take time and money that you probably don’t have.

Top tip one

Sometimes a business can become really successful selling well-known goods and services in an unusual way. Tupperware parties and Ann Summer parties are both classic examples – the idea of selling plastic storage boxes or lingerie via gatherings of friends in people’s homes was considered extraordinary when the idea was first launched.

Top tip two

Have multiple routes to market. Sell via retailers and also via your own website, for example. Or sell via a market stall and also by mail order. That way you will reach different groups of people and find out which routes work best for your business. Additionally, you have a fallback option so that if one route to market fails to work, you can still reach your customers and they can still buy things from you.

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