There are a few different ways that product-based businesses can operate:
- The company designs and manufactures (either in-house or by outsourcing to a specific manufacturing company) their own products, and then sells the finished products directly to customers
- Alternatively, a company may design and manufacture their own products, but they do not sell directly to customers – instead, they sell to distributors, retail stores, and similar parties, and these parties are then responsible for selling the item to customers
If you are considering creating your own products, then choosing one of these routes will be one of the most important decisions you will face. Below, we have outlined a few of the pros and cons of the two choices, so you can decide which might be the right choice for your venture.
Selling via third parties
- By far the biggest advantage of selling via others is simplicity. You do not need to worry about opening a retail store, managing listings, or manage direct-to-customer advertising campaigns.
- The route affords the ability to focus much of your effort, time, and resources directly into product development. While you will need to develop relationships with suppliers and ensure that minimum advertised price enforcement is performed, these requirements are very straightforward – especially in comparison to managing an entire sales effort.
- Selling to third parties also means that your products will reach the widest range of customers. Third parties are already accustomed to promoting and marketing products successfully, and many will have an existing customer base that will ensure your products are seen by a large number of people in a short space of time- for example, if you sell to a retail store, then the customers who frequently patronize that store will definitely see your product when they next choose to visit.
Selling direct to customers
- One reason this choice tends to be popular is that it allows you to control the entire process for customers; you are responsible for everything, from advertising to processing customer orders directly. While this is usually significantly more work, it can be seen as beneficial, as it builds direct relationships with the people who will be buying your products for many years to come.
- Selling directly to customers can also help with reputation management, as you have complete control over the entire experience for customers, from the original concept of the product to processing the sale. As every step is under your direct control, you can shape your brand’s reputation and ensures customers enjoy a favorable experience.
- However, the costs incurred when selling direct to customers can be significant – there will essentially be two “halves” of your business: the product design and manufacturing side, and the retail side. As a result, this type of business requires significant investment as well as a high volume of employees, which may not be suitable for new startups.
It’s important to note that both of the above routes can be very successful, so ultimately, the choice is predominantly yours. However, if you are just getting started, then selling via third parties is perhaps the more straightforward option – you can just focus on getting your product exactly right, and the third parties can sell to customers on your behalf.