How to build direct sales & not upset distributor networks | Acro Media
Laura Meshen
Author Laura Meshen
Content Marketing Specialist
Posted in Digital Commerce , B2B , Manufacturing
August 24, 2021
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How to build direct sales & not upset distributor networks

Distributor networks represent up to 80% of sales for 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?

Most medical manufacturer sales in North America are handled through distributor networks. Some of the larger corporations will sell directly to hospital chains, governments, or other major end-users, as well as group purchasing organizations (GPOs).

Adopting a digital direct sales channel can be seen as undercutting distributor networks. Medical manufacturers need to navigate this change sensitively, or they risk losing a major chunk of their sales.

“Companies increasingly use digital technologies to circumvent distributors and enter into direct relationships with their end-users. These relationships can create efficient new sales channels and powerful feedback mechanisms or unlock entirely new business models. But they also risk alienating the longstanding partners that companies count on for their core business.”
- Harvard Business Review, Building a Direct-to-Consumer Strategy Without Alienating Your Distributors

If Harvard Business Review says it can be done, it must be possible, right? Let’s look at some digital tactics that could work for setting up direct sales channels for medical manufacturers.

Digital direct sales strategies that won’t upset distributors.

B2B - Digital Transformation in MotionThe first thing to do, before deciding on a specific direct sales tactic, is to look at your technical setup. Our blog, Digital Commerce for Medial Manufacturers, outlines the capabilities, limitations and power of digital commerce for medical manufacturers. With the right technical architecture in place, you can then 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:

Choose specific categories to start.

Medical 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.

Start your direct sales channel with a brand new product.

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 to have the new product added to your wholesale product line, but that comes as an after-effect once the direct sales channel has been established.

Create a direct sales channel under a different name.

This is not a new idea, but it can be effective. By building a new brand name for your products, you have the opportunity to start small, stay stealthy, and target very 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.

Pick your channel carefully.

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

Go quietly into new markets.

A location-specific digital commerce website that targets users in a new market is one way around restrictive distribution contracts. Using a headless setup, you can build location-specific sites to reach new markets using your existing same content/architecture. Nice guy Matt Gomez explains. With a localization strategy, businesses can operate in stealth mode by targeting customer segments that have been poorly served or ignored by traditional distributors.

Try out business-to-business marketplaces.

The final suggestion for setting up digital direct sales channels is to look into online marketplaces. Amazon Business and Alibaba Seller are two examples of B2B marketplaces built specifically to help manufacturers and wholesalers reach a broader audience. 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.

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 the 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.

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 the development of 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.

If you need help getting the conversation started, reach out to our team of digital transformation specialists and find out how we can g=help you develop the direct sales channel strategies you need to expand your business and keep your distributor network happy.

Do you need a better B2B digital commerce strategy? Have a no-obligation conversation with our experts today >

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