We can’t go direct-to-market & compete with our distributors!

How to build direct sales & not upset distributor networks

Distributor networks represent up to 80% of sales for B2B and medical manufacturers. Building digital sales channels that target end-users directly can open up a company’s reach, improve market share and increase sales. But how do you do one without upsetting the other?

"75% of B2B manufacturers will sell directly to their customers via digital commerce by 2025." -
Gartner’s 2021 Digital Commerce State of the Union

Manufacturers have recognized the advantages of building online channels to capture new customers as well as service the existing ones who need and love their product. But there is a massive concern for many on how to do that without stepping on the distributor network that has allowed them to grow into the successful businesses they have become.

The benefits can’t be ignored once you overcome the required infrastructure to do so:

• Better customer experience & relationships
  • The buying experience can be controlled and customized
  • Pricing can be controlled
  • Efficiency can be improved and the burden reduced for buyers
  • The best support can be provided
  • Data can be gathered to study buying preferences and behaviours
• Greater ability to adapt to changing market conditions
  • Disruptions and changing circumstances with supply chains and markets are more easily navigated
• Expanded market reach to find and add new customers
  • There are no limitations around the customer base that can be sold to
  • There are no geographic limitations or territories to deal with
• Improved cost efficiency
  • Better margins are gained without the distributor costs
  • Overhead of in-person sales and marketing costs are reduced
• More opportunities
  • Sales and marketing can focus on gaining new customers instead of servicing the existing ones
  • There are no limitations on how the products are brought to market

Overall, embracing direct-to-market strategies can drive growth, efficiency, and customer satisfaction in today’s digital landscape.

But how do you take this on without your distributors perceiving you as a threat and dropping your product line?

With careful planning, communication, and consideration, here are some approaches, with little risk, that can help you test the waters and work towards this objective.

Digital direct sales strategies that won’t upset distributors.

The first thing to do before deciding on a specific direct sales tactic is to look at your technical setup. Our article, Digital Commerce & New Sales Channels for B2B Companies, outlines digital commerce's capabilities, limitations and power for companies trying to move away from solely relying on distributors. With the right technical architecture in place, you can start building business use cases for the strategies that may work for your organization.

Here are some of our suggestions for establishing direct digital sales channels:

Start with a specific product or category

B2B manufacturers generally make more than one category of product. Identify which categories would have the least friction to distributor networks, yet have enough demand to justify a new sales channel and start there. Creating a pilot project with a limited number of products allows you to test the pushback you may receive from your distributors. 

Pick a product to sell direct that has little to no impact on your network. This could be replacement parts or an add-on service that can only be provided by you directly. This has minimal impact on the distributor, but can greatly improve the customer experience and establish a direct connection with the customer base for future servicing, marketing, tracking and future transactions.

Launch new products directly

With the above in mind, look at any new products you’re bringing to market as an opportunity to sell direct. Creating exclusive products, only available through you directly, can begin to build those customer relationships without threatening the existing distributor network.

A new product entry point into a market is a great opportunity to build a dedicated digital sales channel outside of distributor networks. Create an identity for the new product and support that identity exclusively with a digital commerce direct sales strategy. Distributors may eventually want the new product added to their wholesale product line, but that comes as an after-effect once the direct sales channel has been established.

Create a supplementary brand

Creating a new brand name for specific products or a niche market segment is another creative way to accomplish the same objective. Can a product(s) be marketed for a different use case unrelated to what your network is doing? As long as you’re not undercutting your distributors on price, creating a supplementary brand allows you to penetrate specific markets discreetly, minimizing potential pushback.

This is not a new idea, but it can be effective. By building a new brand name for your products, you can start small, stay stealthy, and target specific accounts. Targeting a niche group of buyers may not be seen as a direct threat to distributors and allows your business the opportunity to potentially better penetrate that particular market because your offering is small and agile.

Strategic channel selection

You can further reduce the threat by avoiding direct-to-consumer functionality on your current platform, which currently caters to driving leads to your distributors, by building a secondary site. Creating a clear delineation will help avoid any confusion for your customers and the perceived competition to your distributors.

Turning your current website, the one servicing and targeting your existing distributor network, into a direct-to-consumer ecommerce machine will send a big red flag. Instead, think about how you can build a secondary site with specific products or target certain geographies that will minimize the effect on your distributors. 

Expand into new markets 

Location-specific digital commerce channels with a focus on any poorly served customer segments or territories can circumvent your distribution network. By using a headless setup, you can serve those territories directly, replacing the weak players, or an area not being covered at all, without raising concerns among distributors. With a localization strategy, businesses can operate in stealth mode by targeting customer segments that you know haven't received the attention they deserve.

Consider B2B marketplaces

Exploring online B2B marketplaces like Amazon Business and Alibaba Seller can provide an avenue to reach a broader audience without necessarily offering the entire product line. This approach allows you to gauge the effectiveness of the channel and the distributors' reactions. Again, be cautious not to compete on price or any other advantage the distributor can’t accomplish themselves.

As mentioned before, your strategy can be to start small on these types of platforms by adding individual products and not your entire product line, to gauge the effectiveness of the channel and how your distributor network may react.

Enable your distributor network

If you want to truly control the online experience for all your customers who buy your product, elect to provide the customer experience directly. With a headless setup, you can offer the online buying experience within your distributors’ brands, tying the sales to that brand, but being fulfilled by you directly. This obviously doesn’t work for distributors who sell competing products but is a nice solution for those that sell your product line exclusively. 

Digital transformation alignment

These are just a few ideas to test the waters, but regardless of what direction you take, it's crucial to get company leadership aligned with your digital transformation and growth.

Getting your company leadership aligned for digital transformation and growth is the key to overcoming the standoff between risk and opportunity. This is done by building a strong business case for developing new digital sales strategies and digital transformation, highlighting the importance of acting quickly, analyzing the risks and benefits and identifying the strategy for moving ahead that works for your organization.

Conclusion

Digital sales channels represent a significant opportunity for many medical manufacturing organizations. It also means some risk. Not developing digital sales channels gives competitors and new entrants a chance to get out in front of new audiences, potentially gobbling up market share, while taking the leap and developing new channels risks retaliation from existing partners. 

The key to successfully going direct-to-market lies in open communication with distributors, involving them in the decision-making process where appropriate, and being transparent about the reasons for the shift. By carefully selecting product categories, employing stealthy approaches, and gradually expanding into new channels, you can embrace digital sales without causing significant disruption to your distributor network.

Should you want to discuss any of these ideas and how they could be applied to your business, or ask any questions about any new ideas, contact us, and we’d be glad to help.

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Note from the editor — This article was originally published on August 24, 2021. It has been updated for accuracy and freshness. Enjoy!