Direct sales vs channel sales: which model should you use?

Sell direct when the order is large, the sales cycle is long, the buyer needs your engineer in the room, and you can reach the customers with your own people. Sell through channel partners when orders are small and frequent, the product needs local stock or local service, and your buyers are spread across states you cannot cover. Most Indian manufacturers end up with both, and the trouble starts not with the choice but with never writing down which customer belongs to which route.

What each model actually costs you

The honest comparison is not cost versus cost. It is what you give up.

Direct selling keeps the margin, the customer relationship and the data. You know why every deal was lost. You control what is said about your product. In exchange you carry salaries, travel, a manager, a CRM and the time it takes to hire and train people in a city where you have no presence.

Channel selling buys reach you could not afford to build. A dealer in Rajkot already knows the buyers, holds stock, and takes the payment risk. In exchange you give away twenty to thirty per cent of the value forever. You stop hearing why deals are lost. Your brand is represented by somebody who also sells two competing brands.

Direct and channel, compared on the things that decide it

Questions that decide it faster than a spreadsheet

Five questions settle most cases.

Who writes the specification? If a consultant, a project engineer or a purchase committee writes a specification before tendering, you need to be in the room while it is written. That is direct work. A dealer cannot do it and will not try.

How often does the customer buy? Monthly consumables and spares want a local stockist. An annual capital purchase does not.

Does it need service within the day? A breakdown that stops a production line needs somebody within two hours. If you cannot be there, you need a partner who can.

How many buyers are there in total? Two hundred identifiable plants across India is a direct list. Twenty thousand small workshops is a distribution problem.

Can you train a partner to sell it in a day? If the answer needs a week and an engineering background, channel will underperform no matter how many partners you appoint.

A furniture manufacturer in Hosur, and the hybrid that worked

For example, imagine a factory in Hosur making modular office furniture. The details and figures below are illustrative. Its own team of four sold direct in Bengaluru and Chennai, where they could visit sites and work with interior contractors. Orders were large, drawings were involved, and the salespeople were in project meetings for weeks.

Outside those two cities they appointed dealers, and for two years the dealers barely sold anything. The owner assumed the dealers were lazy. They were not. The dealers were being asked to sell a product that needed a site visit, a layout drawing and a three-week production slot. They had none of the drawing support the direct team had. They earned less on a difficult ₹8 lakh office project than on the ready-made chairs they also stocked. Those figures are illustrative, but the incentive was the point.

The split was rewritten. Dealers took standard catalogue items, single-room orders and replacements, with stock and a demonstration set. Anything above a stated order value, or anything needing a layout, went to the direct team, and the dealer whose area it fell in received a percentage for passing it. Dealer revenue rose because they were selling what they could actually sell, and the direct team stopped competing with its own network.

The rules that keep a hybrid model from turning into a fight

Write these down before appointing anybody, and share them with the partners.

• The dividing line, in one sentence: by named account, by order value, by product range or by geography. Pick one and be strict.
• The referral fee a partner gets when a direct deal happens in their territory.
• A named list of house accounts, updated once a year, visible to everyone.
• Who quotes when both have been approached by the same buyer, decided by date of first registration.
• A price floor the partner may not go below, and what happens the second time it is breached.
• A single place where enquiries are logged, so you can see which route produced which order.

That last one is where most SMEs are flying blind. If dealer enquiries arrive on WhatsApp and direct enquiries arrive in an inbox, nobody can tell you the cost of a rupee of revenue through either route. The model is being chosen on instinct.

What to do next

Take last year's order book and tag every line with the route that produced it, the margin after all costs, and the number of visits it took to close. The pattern is usually clear within an hour, and it often contradicts where the business is spending its attention. If you would like that split worked out with you, along with where enquiries are leaking between marketing and sales, tell us what you need.