Indirect Sales Definition & Examples
The indirect sales model is a type of reselling model in which goods or services get sold by a third-party seller to other businesses. This is different from direct sales, which involves selling goods or services directly to a consumer.
What’s more, indirect selling can be useful in business when you sell something that is not directly related to your core business. In this article, we’ll discuss the indirect sales model in detail and what you need to know as a seller.
Table of Contents
- Indirect sales refer to the marketing and selling of goods or services by third parties to end-user customers.
- Indirect sales go through affiliate networks, independent salespeople, and resellers.
- Indirect sales involve a middleman. As such, producers are more exposed to risks, such as reduced control.
What Are Indirect Sales?
Indirect sales occur when products or services get sold by a third party to other businesses. These are often referred to as resellers, distributors, or wholesalers. The intermediary buys from the manufacturer and sells to other businesses.
You can contrast indirect sales with direct sales. In direct sales, the consumer buys goods and services straight from the manufacturer.
How Indirect Sales Work
Direct sales can help companies increase their sales quickly, without the need to hire additional sales staff. Indirect sales are often used by companies when demand is greater than the company’s ability to hire qualified salespeople. Or the product’s price is too low for them to justify hiring a large indirect sales team.
Indirect sales channels are also efficient because they allow the price of a sale to be proportional to the success of a reseller. As such, consumers don’t have to shop at specialty stores for the type of product they need. This makes it easier for indirect sellers to target ideal customers.
Indirect Sales Strategies
If you’re ready to build an indirect sales channel, you have several avenues to consider taking. Explore your options below to get a better idea of how you want to proceed.
An affiliate is a business that commissions the sale of a customer’s products without providing any service in return. When a customer signs up with an affiliate network, they place orders with the network.
But they are also placing orders with the affiliate they signed up with. Once an order gets placed by an affiliate, payment usually goes to the affiliate network.
A reseller is a business that purchases products or services to resell. A seller may opt to sell their products through a reseller, which is often called a direct sale. A seller may also elect to work through an intermediary, such as an affiliate or reseller, to sell the products of another business.
This is often referred to as an indirect sale. A seller may choose to sell through an affiliate or reseller for a number of reasons, including the following:
- Selling through an affiliate or reseller can help reach a wider audience than selling directly.
- Affiliates or resellers can help test new products.
- Working through an affiliate or reseller can help reduce overhead.
Independent Sales Representatives
An independent sales representative sells a seller’s products for a percentage of the sales price. A seller may hire an independent sales representative to represent the products in a certain market.
An independent sales representative works on a commission basis. The percentage of sales that the representative receives is usually determined by the seller.
The representative usually maintains a smaller inventory of products. This means the representative can’t stock every customer’s request. To solve this, the representative can use order-management software that keeps track of each customer’s request. They then fulfill the request when the client is ready.
A system integrator is essentially a consultant. Many e-commerce businesses choose to work with a system integrator for complex projects. E-commerce businesses often use system integrators due to their expertise in e-commerce challenges.
The indirect sales model is very flexible. It’s used by many different types of companies, from manufacturers to consultants and everything in between. As a result, it offers a lot of benefits for both the owners and the customers.
Frequently Asked Questions about Indirect Sales
What are the benefits of using the indirect sales model?
There are numerous benefits to the indirect sales model. For starters, you’re selling directly to your customers. It’s more cost-efficient than traditional retail. You can sell globally via online marketplaces. It’s more convenient than traditional retail. It can be easily integrated with other business activities.
How to set up an indirect sales model?
There are several ways you can do this. You can choose to sell goods and services through a distributor. This could be through a contract manufacturing agreement. Your manufacturer agrees to purchase your goods or services, and your supplier agrees to resell them.
Or you might sell goods and services through an e-commerce platform. Bottom line: you have plenty of options.
How to sell goods and services with indirect sales?
The ideal situation is that your customers also buy goods or services from you as a direct seller. This will create a recurring income without you needing to do anything.
Why pursue an indirect sales business?
You don’t have to worry about expensive marketing. And your initial investment is low. You can also target consumers who want something not attainable in retail stores.
WHY BUSINESS OWNERS LOVE FRESHBOOKS
SAVE UP TO 553 HOURS EACH YEAR BY USING FRESHBOOKS
SAVE UP TO $7000 IN BILLABLE HOURS EVERY YEAR
OVER 30 MILLION PEOPLE HAVE USED FRESHBOOKS WORLDWIDE