The Selling Factory

Distributor Companies vs Direct-to-Retailer Strategy: Diversify for Sales Success

Written by Adam Grossman

An ordained rabbi who has founded multiple ventures focused on workforce development, Adam is a cofounder and the chief development officer at The Selling Factory.

Photo by Tim Douglas from Pexels

As a supplier, there are many benefits to using distributor companies. A distributor company

  • Already has a built-in customer base to scale sales

  • Has expertise in selling similar products 

  • Can purchase the product directly, providing immediate cash

However, while the distributor-to-retailer model offers various advantages, solely relying on it can be detrimental to your business.  

Challenges with Distributors

A distributor company’s main goal is to build their business, not yours. 

Distributors want to minimize the number of suppliers that speak to individual retailers by promoting the idea that it’s easier to go through one distributor versus many individual suppliers for product needs. The idea being a retailer can receive many great product lines without the hassle of managing supplier relationships. 

In theory, suppliers would benefit equally, yet this does not happen in practice. By distancing suppliers from their product, retailers build loyalty with the distributor brand rather than the suppliers’. When something goes well with the product, the distributor receives the credit. When there is a product issue, the fault is placed on the supplier. 

Suppliers have another disadvantage. Distributors control product pricing, which means they can lower prices to hurt a supplier’s direct-to-retailer approach. This handcuffs a supplier’s growth, especially if a distributor goes out of business or decides to stop selling a supplier’s product. 

The solution? To be more profitable, a direct-to-retailer supplier needs to diversify its sales approach. 

Diversified Sales Approach

Diversification is not a new investment strategy. Financial planners have long preached that asset diversification is one of the top investing rules. This approach protects your assets, works to avoid catastrophic losses, and expands your wealth. 

Diversifying from distributor-retailer relationships to direct-to-retailer sales builds loyalty with your company, ensures price control, and allows you to own your brand messaging in the market. Moreover, this can prevent a major business impact if a distributor company decides to eliminate your product, reduce their volume of orders, or in extreme cases, goes out of business. 

Internal Sales Team

When building a direct-to-retailer strategy, there is no quick fix. It takes time. Yet, for this to work, it is essential to secure a sales team that is dedicated solely to your product and is affordable. 

For product developers with low-cost products, this makes hiring a fully functional internal sales team unrealistic. Cost-effective alternatives include hiring only a few salespeople or contracting with independent sales reps or manufacturing reps. 

There are additional disadvantages to hiring many salespeople, especially with lower-priced product businesses. The return on investment to build the necessary sales infrastructure to support and coach salespeople effectively is unviable. 

Those that resort to this plan, realize quickly that they have high employee turnover rates or their current salespeople are unable to live up to expectations. 

Independent Sales Representatives

Another avenue is to utilize independent sales representatives (reps). 

Independent sales reps work on commission, and similar to distributors, represent multiple product lines. While it is beneficial to pay an individual only when they sell your product, there are concerns. 

Independent reps focus on the brands that give them the path of least resistance to make a sale. Since it’s difficult to control a sales rep’s representation of your brand, these reps can take short-cuts and make brand-damaging decisions, especially with messaging. 

Outsource Sales Company

A novel method for building your portfolio of retailers and limiting your reliance on distributors is to outsource inside sales to a dedicated agency instead of a single rep.

The client team represents only your brand in sales interactions with retailers so both parties’ interests are aligned (whereas a freelance rep may focus on their other clients). Companies that outsource sales to dedicated agencies get the benefits of an internal sales team without the high costs and avoid the pitfalls of hiring independent sales agents. 

Benefits include: 

  • Building personal relationships with your retailers and distributors

  • Receiving key customer feedback directly from your retailers and distributors

  • Having complete control of your marketing, messaging, and pricing structure

  • Not having to recruit, hire, and manage high-turnover sales staff

  • Focusing on creating amazing products while the outsourced sales team manages the selling process

  • Outsource sales management is easier because the agency isn’t weighing your interests against other clients’ interests

While using an outsource sales company might initially create a schism with a distributor, when a strategy is crafted in collaboration it can ultimately scale sales for both parties.

Conclusion

For many distributor companies, the top 5% of accounts represent over 70% percent of their sales. A product in a distributors’ portfolio is only seeing a small portion of potential buyers. This means there is a vast and untapped market available outside of a distributor’s focus. Diversifying your sales strategy and working fully with a distributor to share your plan and strategy can work to increase sales for both you and your distributor.

Kira Baker

Campaign Manager

Kira is a recent graduate from the University of Florida where she received her Master of Science in Entrepreneurship. She is passionate about helping businesses grow and connecting with new people. Some of her hobbies include traveling and hiking. She hope to visit all of the National Parks one day!

kira@thesellingfactory.com

Jared Glosser

Vice President

After graduating from UF in 2014 with a B.A. in history, Jared started his professional career Fundraising for a non-partisan political lobby in South Florida. In 2016, Jared moved back to Gainesville to work for a non-profit, recruit students for international travel opportunities, and pursue his MBA at UF. Jared has been with The Selling Factory since 2019 focusing on operations, client onboarding, and client success.

jared@thesellingfactory.com

Ian Massenburg

Chief Operating Officer

A graduate of University of Florida (B.A. 2001), Ian Massenburg brings over 18 years of sales executive and sales management experience to The Selling Factory. Before coming on-board, Ian worked alongside Brad at Infinite Energy, and then spent his next 3 years as VP of Partnerships selling SaaS products B2B. Ian brings his vast knowledge and experience to the team and to our partner companies served.

ian@thesellingfactory.com

Damien Paulk

Campaign Manager

Damien is a University of Florida graduate that recently joined the team full time after working as a Sales Development Intern for one year. As a Campaign Manager, Damien looks forward to contributing to the growth and success of The Selling Factory. When Damien is not at work he enjoys exploring Gainesville with his girlfriend and dog or watching the Gators dominate college football.

damien@thesellingfactory.com

Brendan Viehman

Campaign Manager

Brendan graduated from Liberty University with a Bachelor of Science in Business Administration and Project Management. For the past 5 years, he has enjoyed working with blockchain technology and cryptocurrency development. In his free time, he surfs and makes personal finance videos for his YouTube channel.

brendan@thesellingfactory.com

Savannah Howard

Campaign Manager

A graduate from the University of Florida’s College of Journalism and Communications, Savannah obtained her Bachelor of Science in public relations with a concentration in French. After almost two years as a sales development intern for The Selling Factory, she joined the leadership team in 2021 taking on the role of Campaign Manager. In her free time, Savannah enjoys going to concerts and festivals and cooking for her friends and family.

savannah@thesellingfactory.com

Zack Kampf

Campaign Manager

Zack is a creative technologist with experience in advertising, event planning, and game design. He started as an SDR in 2018 and has been with TSF ever since. Upon graduating UF in 2019 he became a campaign manager and is currently seeking a master's degree from NYU. In his spare time, you can find him at the intersection of Art & Technology!

zack@thesellingfactory.com

Josiah Blakemore

Campaign Manager

Josiah has over 8 years of sales experience, worked with Brad and Ian at Infinite Energy, and also spent time selling SaaS as Director of Partnerships at SharpSpring. He’s always been very competitive and has a love for sports and games. He enjoys solving problems and coaching team members to do the same!

josiah@thesellingfactory.com

Sue-Ming Frauenhofer

Marketing Manager

Sue-Ming received both her B.S. in Psychology and M.S. in Management from The University of Florida. As a student, she led a psychology research lab on goal achievement and life satisfaction and took on multiple roles while interning at The Selling Factory, including sales development, marketing, and recruiting, eventually leading to her current role as Marketing Manager. Through her creative and methodical vision, she engages both students and entrepreneurs to help them find their version of success.

sueming@thesellingfactory.com

Adam Grossman

Chief Development Officer

Adam is an ordained rabbi, who has founded multiple ventures focused on workforce development. Hired as CEO by a failing non-profit, in over 5 years, his ingenuity saved the organization, which led Slingshotfund.org to recognize it as one of North America’s most innovative Jewish non-profits. His expertise to identify, cultivate, and on-board talent ensures our student teams meet our partners’ needs.

adam@thesellingfactory.com

Brad Gamble

Chief Executive Officer

After graduating from UF in 1999 with a B.S.B.A, Brad Gamble has dedicated himself to sales management, branding, coaching, and building companies. He served as the VP of Sales & Marketing for Infinite Energy until 2014, when he founded The Selling Factory. He has dedicated himself to teaching critical skills to tomorrow’s leaders, and helping companies achieve sales success and revenue growth.

brad@thesellingfactory.com