Indirect Sales: What it is, How it Works

What Are Indirect Sales?

Indirect sales are the sale of a good or service by a third-party, such as a partner or affiliate, rather than a company's personnel. Indirect sales may be used in conjunction with a company's direct sales efforts or may be used in lieu of hiring sales staff. Indirect sales are often made through resellers, such as specialty stores and big-box retailers.

Indirect sales may be contrasted with direct sales, in which consumers purchase directly from the manufacturer.

How Indirect Sales Work

Indirect sales can allow a company to increase sales quickly without having to hire more sales personnel. Companies often resort to indirect sales when the demand for the product is outpacing the ability of the company to hire competent salespeople, or when the price of the product is too low to justify a large sales force. Utilizing an indirect sales strategy is also efficient in that it allows the cost associated with a sale to be in proportion to how much success a reseller is.

Indirect sales strategies do have a few downsides, however. For one, added fees can cut into margins. And in some cases, the use of affiliates or resellers may lead to reduced control of the brand message and compromised customer service. Because companies cannot manage indirect sales teams as easily as if they were in-house any problems that may arise from the use of third-party sellers can be difficult and costly to remedy. Companies using indirect sales may also have a harder time communicating their goals and objectives to the customer.

Indirect Sales Strategies

There are several channels for building an indirect sales network. They include:

• Affiliates: A company that sells products or services for a commission. A common internet-based sales strategy in which third-party intermediaries link companies to affiliate sellers. Companies will often create campaigns for their products that affiliates will promote. This structure is efficient because affiliates are paid only when a sale is made.
• Resellers: Similar to affiliate selling and common with sales of tech products, such as mobile devices and software. Resellers often interact with the customer in face-to-face sales on behalf of a company. A good example is how you might buy a smartphone at a service provider's store rather than the manufacturer's store.
• Independent sales representatives/agents: These independent sales reps are basically hired guns. Their appeal is that they are easily scaled up or down, which means lower overhead. A good example of this is insurance agents who are paid on commission.
• System integrators: Commonly found in business-to-business product or services sales, system integrators are often consultants who also pitch solutions to customers. For example, a company that offers both tech advice and hardware/software products may utilize a system integrator in a hybrid consultant/sales role.