How entrepreneurs can use sales to grow their business

September 16, 2024

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For many new business owners, direct sales may seem like the most cost-effective way to reach customers. Because it doesn't require partnerships, third-party integrations, or revenue shares, costs are the lowest at first glance. However, as businesses grow, a balanced mix of sales channels becomes critical to unlocking new growth opportunities. By strategically diversifying your sales strategy, you can protect your brand and build a more flexible and resilient business model.

Despite their higher costs, distribution partners not only reduce operational costs but can also significantly increase market reach thanks to their established networks. This is especially true in the hotel industry, where distribution has always played a crucial role. Since products cannot be moved, a hotel's entire inventory is replenished through intelligent distribution.

Before the internet, hotel chains' enormous distribution power gave them a huge advantage over independent hotels. But since the early 2000s, hotels have developed new distribution channels through various online channels such as Expedia and Booking. In fact, 65% of all direct bookings today come from guests who first discover the hotel through an online travel agency (OTA).

Across all industries, channel partners regularly prove their value, but they are not a one-size-fits-all solution. To develop an effective channel strategy, it's important to look beyond the competition. Let's explore how you can diversify, innovate, and potentially outperform them.

Related topics: Innovating your product distribution is just as important as innovating your marketing

Balance between direct and partner sales

At its peak in 2011, Toys “R” Us had sales of over $13.9 billion. Just seven years later, the brand filed for bankruptcy and closed all of its U.S. stores, though it has since been revived under new ownership. CEO David Brandon cited the company's “inability to offer expedited shipping options” and “lack of a subscription-based delivery service” as the reason for the closure.

In other words, in a market dominated by online retailers like Amazon, their distribution strategy hasn't evolved. Likewise, mega-chain Blockbuster was pushed out by Netflix and RadioShack was knocked out of the market by its limited e-commerce strategy. No matter how big your brand becomes, maintaining a diverse distribution mix is essential.

In practice, this means continuously monitoring the competition and proactively adapting to market changes. Therefore, regularly collect and analyze data from your sales channels. This will allow you to make quick and effective changes to optimize your sales and market position.

While brands shouldn't rely on direct sales alone, it is a critical factor in maintaining control over brand image, customer experience and pricing. Apple is an industry leader in this regard. Although the company has many retail partners, it also invests heavily in its own retail stores and online direct sales channels, which helps it maintain its market dominance.

Find innovative sales channels

In a competitive market, the path of least resistance is to identify and copy the distribution channels of the larger players. Ironically, this safety-first approach comes with risks. Rather than going commoditized, it may be better to find niche markets. When doing this, you must be aware that some channels are more prevalent in certain markets than others. For example, if you want to expand into a new region, identify channels that have access to demand in that particular area.

In our industry, there are specific OTAs in some Asian countries that are widely used, so listing on these platforms can attract new customers. While investing in specialized segments may not offer the same visibility as mainstream markets, a properly targeted niche strategy can lead to higher sales and higher profitability. Red Bull, for example, has tapped into a $10 billion market in the energy drink industry by targeting extreme athletes through special events and sponsorships.

By addressing unmet needs, you can become the “first choice” solution in a small but profitable market. However, developing this niche approach can take months or even years. While it's still important to leverage the big players, don't lose sight of your unique value proposition in the process. The “be everywhere” strategy can work well if you don't try to be everything to everyone.

Marriott is an example of this balanced approach. While guests can book any of the brand's hotels through the company's central booking system, Marriott uses both direct channels (website, mobile apps) and indirect channels (OTAs, travel agents) to reach different market segments. This allows Marriott to cater to the different preferences of travelers, from business-focused brands like Courtyard by Marriott to leisure-focused hotels like Sheraton.

Related: 8 ways to make sure you're selling solutions through the right channel

Strategic expansion over time

Markets are always subject to fluctuations, but listening to what customers say about where they shop will help you learn about new trends and new places to sell your products. If your distribution strategy is well-mixed and you don't rely too heavily on any one channel, you'll be well-positioned to use changes to your advantage.

At least once a year, replace one or more of the channels that generate the least sales by seeking out new customers. As a rule of thumb, when market demand drops, brands should increase the number of distribution options. Conversely, when market demand is high, be more selective and focus on audience quality, average prices, costs and ease of management. Successful brands often demonstrate this type of adaptability.

Perhaps the biggest name in graphic design, Adobe, even shifted its entire revenue model as the software industry moved to cloud-based solutions. Although Adobe's shift from licensing and upselling its creative software suite to a SaaS model initially drew criticism, it has proven to be a masterstroke – in fiscal 2023, the company posted record revenue of $19.41 billion.

Related: 4 Essential Strategies for Selling Efficiently to Distributors

Premium brands like Apple and Marriott are able to capture ever-greater market share despite their higher prices by continually improving their visibility and engagement. As you prepare your distribution strategy, find ways to build in flexibility. By setting metrics early and recognizing the need to adapt to changing market conditions, you'll be well positioned to test new platforms, explore new niches, and balance a strategy that delivers both immediate revenue and long-term growth.