What is Channel Sales? A Complete Guide

Channel sales drive about 75% of global sales and consumer market. Many businesses still find it challenging to grasp this revenue-generating powerhouse. Our experience shows how this sales model can reshape the scene for companies. The numbers back this up - 63.5% of companies see higher annual revenue after they put channel partner strategies to work.

The software sector paints an impressive picture. Channel sales revenue will likely hit $70 billion in 2023, jumping from $30 billion in 2019. On top of that, 37% of mid-sized companies choose to buy through resellers or managed service providers instead of manufacturers. This piece breaks down the real meaning of channel sales and its growing importance across businesses.

You'll learn how to build an economical sales channel strategy without expanding your in-house team. Some startups have grown from zero to over 10,000 clients in just two years through strategic collaborations.

What is a channel sales?

Channel sales represents a strategic approach where companies team up with third-party organizations to market and sell their products or services. Companies work together with intermediaries such as distributors, resellers, or affiliates who connect the company to customers instead of handling all sales internally.

Why use channel sales? Benefits and advantages

Partner ecosystems are growing faster, with McKinsey forecasting that by 2030, ecosystems will play a major role in almost every aspect of the global economy, driving around $80 trillion in annual revenue. Several key advantages fuel this growth:

Channel sales helps businesses scale without increasing overhead costs. Companies can match their sales rates with production capacity by partnering with established sales channels when production outpaces sales capabilities.

Businesses can access new markets through their partners' customer bases and regional expertise. They can penetrate markets without the huge investment needed to establish a local presence.

Companies can focus on core tasks like product development and quality control because channel sales improves operational efficiency. Research by Forrester found that organizations using effective partner management systems achieved a 296% return on investment over three years.

What is the difference between channel sales and direct sales?

The main difference comes down to who handles the sales process. Companies sell their products straight to end customers in direct sales and keep complete control over the sales cycle. Channel sales relies on third-party partners who handle marketing and selling products to customers.

Direct sales offers better control over customer relationships and brand messaging but needs significant investment in an internal sales team. Channel sales makes use of external expertise and existing networks but gives up some control over product presentation and sales.

How to measure channel sales program success?

Success measurement needs specific metrics beyond revenue figures. Program health metrics look at design, communication, and partner motivation, while partner performance metrics evaluate whether partners drive desired behaviors.

Key performance indicators worth monitoring include:

• Pipeline metrics: Deal registrations, leads generated, and opportunities created

• Partner engagement: Portal logins, training completion rates, and marketing collateral utilization

• Sales data: Revenue growth, average deal size, and goal attainment

• Customer success: Satisfaction scores, retention rates, and product adoption

Organizations with effective channel management report 28% higher revenue growth rates, making reliable measurement frameworks essential for program optimization.

How to implement a channel sales strategy

A successful channel sales strategy needs proper planning and execution. Your first step is to build a dedicated channel team that will find partners, manage relationships, and optimize processes based on results. This team will serve as your channel sales operation's foundation and ensure everything runs smoothly.

You should have clear goals for your channel sales program. Set specific, measurable targets that support your company's business objectives. The targets should reflect market demand, the digital world, and what potential partners can deliver.

Finding the right channel partners is a vital step. Create a profile of an "ideal partner" based on their market reputation, customer base, how products work together, sales skills, and shared business values. Note that partners differ greatly, so ask qualifying questions about their size, industry focus, and how much they'll invest in sales and marketing.

A complete onboarding process helps new partners succeed. Give them product training, sales and marketing support, technical guidance, and spell out what you expect. Your partners need the right tools and knowledge to sell your products well.

What are the 4 types of sales channels?

Businesses need to know how different sales channels work to reach their target customers effectively. Industry experts have studied many distribution models and found four main types of sales channels.

1. Retail Sales Channels

Retail means selling products straight to customers through stores, online marketplaces, or dedicated webstores. This method lets businesses control their customer relationships and brand message better. Retail sales are projected to grow 3.3% to $5.53 trillion in 2019.

Advantages: Better control of customer interactions, deeper insights into consumer behavior, higher profits than wholesale, and a strong brand identity.

Challenges: Bigger marketing budgets and high customer expectations.

2. Wholesale Sales Channels

Wholesale means selling products in bulk to retailers or outlets who then resell them. This model represents 7% of private industry GDP in the United States.

Advantages: Better brand visibility, simpler logistics with drop-shipping options, and easier global expansion.

Challenges: Less control over brand and large warehouse needs.

3. Direct-to-Consumer (DTC) Sales Channels

DTC has grown popular as manufacturers sell straight to end users instead of just through retailers. About 22% of US brands plan to start DTC e-commerce next year, joining the 71% that already use this channel.

Advantages: Full control of brand experience, better customer data, and higher profits.

Challenges: Fast delivery demands and possible conflicts with retail partners.

4. B2B Sales Channels

B2B channels sell to businesses who use the products themselves. This market should reach $1.20 trillion by 2021.

Advantages: Deep client relationships, higher prices than retail, and niche market opportunities.

Challenges: Small market size, slow purchase cycles, and complex sales processes.

Companies should assess each channel based on their goals, products, and target audience before creating their sales strategy.

Conclusion

This piece explores how channel sales works as a revenue-generating approach for businesses in any discipline. Channel sales without doubt brings the most important advantages - companies can scale quickly without increasing overhead costs and gain instant access to new markets through time-tested partners.

Channel sales success depends on smart implementation. Companies need careful partner selection, complete onboarding, and ongoing support as the foundations of effective channel strategies. Businesses should set clear goals, create dedicated channel teams, and track performance through relevant KPIs.

The four main sales channels—retail, wholesale, direct-to-consumer, and B2B—come with their own benefits and challenges. Companies should review which channel mix arranges best with their products, target audiences, and growth goals. This balanced strategy helps businesses reach more markets while keeping operations streamlined.

Companies looking to improve their channel sales capabilities can use tools like those at Persana.ai to streamline partner management and optimize sales processes.

Channel sales means a fundamental change from traditional direct sales approaches. Its potential to accelerate growth makes it worth serious thought. The question isn't whether to use channel sales, but how to implement it best for your business needs.

FAQ

Is channel sales B2B or b2c?

Channel sales exists mostly in the B2B (business-to-business) space. The B2B sales model allows companies to sell their products through partners instead of selling directly to end customers. These partners range from resellers and distributors to brokers and consultants who connect businesses with the right solutions.

Third-party sales teams serve as intermediaries between the product company and the end customer. This setup earned channel sales its alternate name "indirect sales". The model builds on business partnerships and relationship management between companies, which makes it fundamentally B2B.

The end customers reached through channel partners could be businesses or consumers, depending on the product and industry. Notwithstanding that, the channel relationship stays firmly in the B2B domain.

What is the difference between channel sales and distribution sales?

People often use these terms interchangeably, but channel sales and distribution sales have unique characteristics. Distribution sales forms just one part of the broader channel sales approach.

Distribution partners buy products from your company and resell them. They act as middlemen between your products and customers. Channel partners, on the other hand, cover various partnership types:

• Distributors

• Vendors

• Retailers

• Service delivery partners

• Systems integrators

• Technology alliance partners

• Value-added resellers