Direct sales or dealer network
Discussion
I am in the process of setting up a second company, all being well we will be launching in Mid-Late August.
Our product is custom made and will be a new brand within its sector, although its initially two main products we have plans to expand within 12 months and bring new products to the range, as well as merchandise and some clothing such as jerseys, t-shirts etc.
I am currently the director of one company in the same sector so know it well and can really see this product taking off, there is others on the market but ours are custom made and have many features the others don't plus better pricing and warranty.
Anyway its based solely online and we planned to sell direct to the customers, our audience is literally world wide so we thought this maybe the best solution as we can keep the price down and offer cheap postage.
It costs us approx £350 to manufacture the product, we planned to sell it at £899. With the intention of walking away with £500 profit once the card fees and other fees deducted.
However after thinking about it we are now considering looking for dealers after a few months, although we would only look to make about £200 profit instead of £500 we might be able to get quite a few dealers on board and if we do a minimum order of 20 sets we could look at making around £4000 per dealer on an initial order. This could add up if we have 25 - 50 dealers world wide.
My question is has anyone on here done the same? If so did you find your profits overall increased?
Also regarding pricing, what would be enough margin for a dealer, we would aim to sell them to dealers at £550-600, they can then re-sell for £899 however we feel the product could sell for £1000 without any bother, we aimed for £899 to keep it the right side of £900 (just
)
Thanks in advance, any advice is appreciated.
Our product is custom made and will be a new brand within its sector, although its initially two main products we have plans to expand within 12 months and bring new products to the range, as well as merchandise and some clothing such as jerseys, t-shirts etc.
I am currently the director of one company in the same sector so know it well and can really see this product taking off, there is others on the market but ours are custom made and have many features the others don't plus better pricing and warranty.
Anyway its based solely online and we planned to sell direct to the customers, our audience is literally world wide so we thought this maybe the best solution as we can keep the price down and offer cheap postage.
It costs us approx £350 to manufacture the product, we planned to sell it at £899. With the intention of walking away with £500 profit once the card fees and other fees deducted.
However after thinking about it we are now considering looking for dealers after a few months, although we would only look to make about £200 profit instead of £500 we might be able to get quite a few dealers on board and if we do a minimum order of 20 sets we could look at making around £4000 per dealer on an initial order. This could add up if we have 25 - 50 dealers world wide.
My question is has anyone on here done the same? If so did you find your profits overall increased?
Also regarding pricing, what would be enough margin for a dealer, we would aim to sell them to dealers at £550-600, they can then re-sell for £899 however we feel the product could sell for £1000 without any bother, we aimed for £899 to keep it the right side of £900 (just
)Thanks in advance, any advice is appreciated.
Why not do both? Plenty of companies manufacturer, sell direct and also to a dealer network..
Or keep the new company to dealers/trade only and then sell to your other company and sell to retail via that one (via the company itself or a trading name) if it really needs to be a separate company.
I'm doing the same thing in my industry, toying with the idea of a second company but part of me wonders what the point would be in a second company when you could just use a trading name for the "trade" side.
Or keep the new company to dealers/trade only and then sell to your other company and sell to retail via that one (via the company itself or a trading name) if it really needs to be a separate company.
I'm doing the same thing in my industry, toying with the idea of a second company but part of me wonders what the point would be in a second company when you could just use a trading name for the "trade" side.
The products will be sold to the general public, there not a trade only type product.
Based within the cycling industry, reasons I can see a dealer network been better is the customer can see, feel and try the products at numerous dealers world wide. The shop also has the chance to up sell this product on the higher spec bikes.
I do like the idea of selling through my other company also, I want to keep them separate on paper as they are both in the same sector but not really similar.
I might try the internet only sales for a few months, then look at advertising for dealers once our product has been reviewed in magazines etc and has a bit of a name.
My second company could become the 'first' dealer and hopefully get the ball rolling.
Based within the cycling industry, reasons I can see a dealer network been better is the customer can see, feel and try the products at numerous dealers world wide. The shop also has the chance to up sell this product on the higher spec bikes.
I do like the idea of selling through my other company also, I want to keep them separate on paper as they are both in the same sector but not really similar.
I might try the internet only sales for a few months, then look at advertising for dealers once our product has been reviewed in magazines etc and has a bit of a name.
My second company could become the 'first' dealer and hopefully get the ball rolling.
Selling direct and through dealers at the same time is fraught with issues. It happens a fair bit in the industry I'm involved with, and usually ends in grief.
Dealers always feel they are being shafted on price/availability by the manufacturer's direct arm.
Selling through dealers will be easier on worldwide sales as they can hold spares/replacements. If the market increases, then you can make one of your dealers the importer for that country and they can recruit other dealers within the locale.
Dealers always feel they are being shafted on price/availability by the manufacturer's direct arm.
Selling through dealers will be easier on worldwide sales as they can hold spares/replacements. If the market increases, then you can make one of your dealers the importer for that country and they can recruit other dealers within the locale.
If i was going through a dealer network I wouldn't sell direct, it would be one or the other.
I might supply my other company with stock but that would be treated the same as any other, same price, warranty etc.
20 items would be viable in my opinion, that would be an order of approx £10-11k which is fair considering the product however i could have a bit of leeway if i smaller supplier wanted to become a dealer.
I might supply my other company with stock but that would be treated the same as any other, same price, warranty etc.
20 items would be viable in my opinion, that would be an order of approx £10-11k which is fair considering the product however i could have a bit of leeway if i smaller supplier wanted to become a dealer.
The type of bike shop we will be selling to are the higher end ones who will regularly have thousands of pounds sat in components alone.
A price of a bike alone can be in excess of £5000 quite easily.
We can offer this initially, if there concern is putting 11k down then we will work with them.. Its all a bit of a learning curve at the moment.
A price of a bike alone can be in excess of £5000 quite easily.
We can offer this initially, if there concern is putting 11k down then we will work with them.. Its all a bit of a learning curve at the moment.
In my experience (as a consumer) consumers don't like a dealer arrangement.
Think about it from their side. They go to your website and see the prices for UK sale - lovely. Then they click on the "buy" button and are directed to your dealer's website which is likely to be not as good as your own, and where they have to pay the dealer's markup (which will be on the duty paid price). That will be a lost sale in quite a few circumstances.
Dealer networks were great 150 years ago when it was difficult and expensive for a company to be "present" in all markets it wanted to serve. The internet has made it redundant for non-bespoke consumer goods, and if you are in control of all sales you'll be in control of the whole customer experience, which is important if you are positioning as a premium brand IMO.
Think about it from their side. They go to your website and see the prices for UK sale - lovely. Then they click on the "buy" button and are directed to your dealer's website which is likely to be not as good as your own, and where they have to pay the dealer's markup (which will be on the duty paid price). That will be a lost sale in quite a few circumstances.
Dealer networks were great 150 years ago when it was difficult and expensive for a company to be "present" in all markets it wanted to serve. The internet has made it redundant for non-bespoke consumer goods, and if you are in control of all sales you'll be in control of the whole customer experience, which is important if you are positioning as a premium brand IMO.
Nothing more to add in terms of your original question; last answer is my view too.
I do however wonder about your timing. You're clearly pitching to the adult market from what I can see so I wonder if heading in to winter is wise (if it was for the children's market then not so bad with Christmas coming up)? Have you done a SWOT re the timing of your launch? If you're linking it to something specific in the autumn (bike race; bike show; celebrity endorsement etc) then that may not be so bad.
I do however wonder about your timing. You're clearly pitching to the adult market from what I can see so I wonder if heading in to winter is wise (if it was for the children's market then not so bad with Christmas coming up)? Have you done a SWOT re the timing of your launch? If you're linking it to something specific in the autumn (bike race; bike show; celebrity endorsement etc) then that may not be so bad.
I'm probably the opposite to some of the people above - if I was spending £899 on something for the bike I would much rather either buy from a shop or from somone like Wiggle - simply because I know if I have an issue I can get it swapped. If I buy direct from a manufacturer I have no previous experience of them so therefore no trust.
Sounds exciting though! Do you need a backer :-)
Sounds exciting though! Do you need a backer :-)
Hmmm, it does seem to be mixed reviews at the moment. I really wanted to go one way or the other.
What I am now thinking is base it online only for the time being, I can then have the products sent out, tested/reviewed, get some feedback from customers etc then look at a dealer plan in around 6 - 12 months once we have a bit of back ground. We could then phase it out to just a dealer only product over a year or so after getting a few on board.
I do think seeing them in person would be better, the shop is more likely to up sell them plus from experience in the industry you get a lot of people wanting the newest/best kit and buy on a whim, its very common to be honest.
Releasing this time of year doesn't bother me, we are targeting the adult market who are seriously in to biking, although you get a peak in summer its due to the fair weather riders. The people who will be looking at my product will be year round hardcore riders.
NorthDave - No backers as of yet but I am throwing a quite a bit of money into this and phase 2 - 3 might need some backing, its something I will likely be considering to give this a real boost.
AB - How does your plan work then, do you provide stock to the shop or do you supply on demand, so if they bag you a sale they take 10% of the sale price and you send the product out to them?
PM me if you would prefer not to discuss on here.
Thanks again everyone, feedback like this is invaluable and great food for thought
What I am now thinking is base it online only for the time being, I can then have the products sent out, tested/reviewed, get some feedback from customers etc then look at a dealer plan in around 6 - 12 months once we have a bit of back ground. We could then phase it out to just a dealer only product over a year or so after getting a few on board.
I do think seeing them in person would be better, the shop is more likely to up sell them plus from experience in the industry you get a lot of people wanting the newest/best kit and buy on a whim, its very common to be honest.
Releasing this time of year doesn't bother me, we are targeting the adult market who are seriously in to biking, although you get a peak in summer its due to the fair weather riders. The people who will be looking at my product will be year round hardcore riders.
NorthDave - No backers as of yet but I am throwing a quite a bit of money into this and phase 2 - 3 might need some backing, its something I will likely be considering to give this a real boost.
AB - How does your plan work then, do you provide stock to the shop or do you supply on demand, so if they bag you a sale they take 10% of the sale price and you send the product out to them?
PM me if you would prefer not to discuss on here.
Thanks again everyone, feedback like this is invaluable and great food for thought
JCKST1 said:
...we feel the product could sell for £1000 without any bother, we aimed for £899 to keep it the right side of £900...
Why? If it will sell for £1000, sell it for £1000, not £899!Also, a dealer will provide your customers with demo product, after-sales support etc which may encourage more sales than an unknown item sold online only. But there is nothing to lose from using both dealer network and online direct channels.
If you start direct, you'll always have that problem of once you've got scale, you wont want to give direct customers to your channel, because they'll want 30/40/50% discount from business that walks in your door.
You wont attract a channel if you've got 0 customers, because they cant see the margin opportunity and wont want to recommend you incase you're not around in 6 months time
The easiest way to figure this out is survey some customers and find out where they'd usually go to to buy this sort of thing. Then go to those companies, show them what you've got and a revenue / pipeline and ask them how much it's going to cost you to get in with them, and you show them what the GP opportunity is with your sales projections .
You'll pretty much need to sell all the stuff through them, because largely a dealer network wont give a s
t and will be reactive to what a customer wants. They'll wait for the question rather than say 'and have you thought about x'
If you do go through a channel, whatever your Marketing budget is, triple it and then double that figure as that's where you'll end up
You wont attract a channel if you've got 0 customers, because they cant see the margin opportunity and wont want to recommend you incase you're not around in 6 months time
The easiest way to figure this out is survey some customers and find out where they'd usually go to to buy this sort of thing. Then go to those companies, show them what you've got and a revenue / pipeline and ask them how much it's going to cost you to get in with them, and you show them what the GP opportunity is with your sales projections .
You'll pretty much need to sell all the stuff through them, because largely a dealer network wont give a s
t and will be reactive to what a customer wants. They'll wait for the question rather than say 'and have you thought about x' If you do go through a channel, whatever your Marketing budget is, triple it and then double that figure as that's where you'll end up
There will be too variations, one we will price at £899 and the other £950. Both giving he same profit. I dont want to be at £1000 and then tipping over to £1050. I would like to keep it this side of £1000 as it will be a bit of a selling point.
Andy-xr, thanks for the feedback on that. We will carry out a survey once we get the website up and running and have some traffic on there, it will be interesting to see people's views focused on this product rather than a general 'online vs shop' scenario.
In the cycling industry there is always shops looking for the new brand/product so they can be the one to claim 'first dealer' rights on it, without these new products most bike shops are the same.
I am hoping once we get more known we can approach some of the individual cycle shops and show our product and chances are we will be contacted before also.
We will see how it plays out but it looks initially we will keep it online, 6/8/10 months down the line we can re-plan and aim to get some shops on board.
Any more input is appreciated
Andy-xr, thanks for the feedback on that. We will carry out a survey once we get the website up and running and have some traffic on there, it will be interesting to see people's views focused on this product rather than a general 'online vs shop' scenario.
In the cycling industry there is always shops looking for the new brand/product so they can be the one to claim 'first dealer' rights on it, without these new products most bike shops are the same.
I am hoping once we get more known we can approach some of the individual cycle shops and show our product and chances are we will be contacted before also.
We will see how it plays out but it looks initially we will keep it online, 6/8/10 months down the line we can re-plan and aim to get some shops on board.
Any more input is appreciated
New product to an existing market, I wouldnt give exclusivity to anyone unless they can prove themselves by placing an upfront order and even the it would be a time limited exclusive. You're basically giving away all your bargaining and bizdev for not a lot in return otherwise.
I had it once where a distie signed the company I was working at and basically blocked us doing =75% more business throughout the whole of Turkey. It was a nightmare with the exclusivity contract as there was no fixed term on it. I think the regional manager ended up signing 4 other partners who strangely also had exclusivity for the country. How they never found out was beyond me
I had it once where a distie signed the company I was working at and basically blocked us doing =75% more business throughout the whole of Turkey. It was a nightmare with the exclusivity contract as there was no fixed term on it. I think the regional manager ended up signing 4 other partners who strangely also had exclusivity for the country. How they never found out was beyond me
If it's a partnership then you'll be showing them the gp on it and how they cant get this anywhere else and how their customers needs are met by it, and they'll be showing you the available market in the hope you get $$ signs in your eyes. If it's not the right fit, there's no harm in walking away. Better to have a tricky conversation early on than be waving bits of paper around 12 months down the line.
Margin will always be a bone of contention, if you're way out from what they're expecting, they wont be shy in telling you. Set realistic targets and a plan, do kickbacks where you need to for meeting the targets and an accelerator for overachievement. Incentivise the feet on the street when you've got stock and an order in at a dealer, even if it's just t shirts and vouchers. When people see they can get something back for punting on your widgets they're more likely to do it again and again
Margin will always be a bone of contention, if you're way out from what they're expecting, they wont be shy in telling you. Set realistic targets and a plan, do kickbacks where you need to for meeting the targets and an accelerator for overachievement. Incentivise the feet on the street when you've got stock and an order in at a dealer, even if it's just t shirts and vouchers. When people see they can get something back for punting on your widgets they're more likely to do it again and again
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