Sales Channels Compared: Direct Sales, Dealers, Platforms, Partners

Which sales channel fits your business?

A manufacturer of measuring instruments has sold through two in-house field reps for twenty years. A wholesaler asks whether it may add the range to its catalog. An industry portal offers a listing with an ordering function. And an engineering firm would like to sell the instruments as part of its projects. Each of these options sounds like more revenue. But each has its own costs, its own rules, and its own side effects on existing customers.

The question this article sets out to answer: which sales channel fits which offering, and how does a small business combine several channels without them harming each other? To answer it, we first clarify the four channels, then introduce the task grid by Moriarty and Moran as a mental model, review what research shows about in-house and outside sales, weigh two views, and finally compare the channels with a worked example and an overview.

A sales channel is not an advertising space but a decision about who owns the customer relationship.

The four sales channels: terms and differences

A sales channel is the route by which an offering travels from the business to the customer, including the people and companies who sell along the way. For small and mid-sized businesses, four basic forms are common.

In direct sales, the business sells itself, through the owner, its own field sales reps, inside sales, or its own website. A dealer buys the goods on its own account and resells them; it bears the inventory risk and earns the margin. A platform is a marketplace or portal through which customers order from or send inquiries to many providers; the operator sets the rules. A partner sells the offering without buying it, for example as a sales agent working on commission or as a partner business that refers customers or makes a joint offer. The guide Setting up sales partnerships describes the forms of partnership in detail.

The second column is the most important. It corresponds to the distinction between rented land and owned land introduced in the article Platform dependence: rented land consists of channels where someone else sets the rules and controls the customer relationship. Owned land consists of channels where you decide whom you reach, when, and how. In this sense, dealers and platforms are rented land, direct sales is owned land, and partners lie in between.

The mental model: the task grid by Moriarty and Moran

Rowland Moriarty and Ursula Moran (1990) observed that companies that once went to market only one way were increasingly using several channels at the same time. They call such systems hybrid and expect them to replace pure single-channel strategies. Their key idea is a shift in perspective: the building blocks of a sales system are not the channels but the tasks involved in selling.

Their tool is a grid with the tasks in the columns and the channels in the rows. For each task, you decide which channel takes it on. A channel does not have to do everything. A platform can find customers but cannot advise them. A field rep can advise but is too expensive to take small orders. For owners, I translate the model into six tasks.

The grid forces two questions that are rarely asked in practice. First: is there a task that no channel takes on? In the example, that would be the case if no one trained the platform's customers after the purchase. Second: do two channels take on the same task for the same customer? Then conflict arises. Moriarty and Moran explicitly name conflict and control as the two difficulties of hybrid systems: conflict because units compete for the same customers, control because outside channels are harder to steer.

Selling yourself or having others sell: what research shows

Whether a business sells through its own salespeople or through independent agents is essentially a make-or-buy decision. Erin Anderson (1985) examined it using transaction cost analysis. This approach goes back to Oliver Williamson and explains when companies perform an activity themselves instead of buying it in the market: when the costs of selecting, steering, and monitoring an outside partner are higher than the costs of their own organization.

Anderson analyzed data from 13 U.S. manufacturers of electronic components that together covered 159 sales districts. For each district, she checked whether it was staffed with employee salespeople or with manufacturers' representatives and tested 15 possible explanations. Her main finding: the harder it was to evaluate a salesperson's performance, the more likely companies were to use employee salespeople. They then replaced control through commission with supervision. An in-house sales force was also associated with complex, hard-to-learn products and with districts that required many activities besides selling, such as reports, trade shows, and service.

The factors that showed no relationship are also noteworthy: company size, the amount of travel in the district, and the importance of key accounts. The study is old, limited to one industry, and describes what companies did, not what was successful. Its core remains useful: whether a business should sell itself is not decided by its own size but by how much explanation the offering needs and how well you can measure whether an outside salesperson is doing good work.

Sa Vinhas and Anderson (2005) studied when B2B manufacturers use in-house and outside channels in parallel. Sometimes it is impossible to prevent them from competing, for example because both approach the same customer or the customer plays them off against each other. The more frequent and consequential such situations are, the less companies use parallel channels.

Two views: control or reach

The first view emphasizes control. Employee salespeople can be directed, they take on tasks without an immediate return, and customer data stay in the business. Anderson summarizes the advocates' arguments this way: employee salespeople are more willing to push new products, persist through long sales cycles, and handle activities besides selling. In this view, independent agents are reluctant to do anything that does not bring an immediate commission.

The second view emphasizes reach and cost. A sales agent brings existing customer relationships, costs money only in case of success, and bundles the products of several manufacturers, so that visits pay off that would be too expensive for a single product range. A dealer brings inventory and delivery capability in the region. A platform brings buyers the business could never reach on its own.

I consider both views correct, but for different offerings. For offerings that need explanation and lengthy advice, much speaks in favor of an in-house sales force. For standard products with many small buyers, much speaks in favor of dealers and platforms. Partners fit where another business serves the same customers with a complementary offering. The decision is therefore not made once for the whole business, but per offering and customer group.

What a channel costs: a worked example

The most important economic difference lies in the type of cost. An in-house salesperson costs roughly the same no matter how much he or she sells. Dealers, platforms, and agents cost a share of revenue. This creates a threshold above which the in-house salesperson becomes cheaper.

In the following worked example, an in-house field rep costs 90,000 euros a year including salary, ancillary costs, vehicle, and travel. A sales agent receives an 8 percent commission, a platform keeps a 12 percent fee, and a dealer works with a 25 percent margin on the selling price. The figures are freely chosen and do not replace your own calculation.

At 600,000 euros of revenue, the sales agent in the example is cheaper than the in-house field rep. The threshold lies at 90,000 euros divided by 8 percent, that is, at 1,125,000 euros. Only above that does the in-house salesperson become cheaper. The calculation compares costs only, not the additional tasks of the in-house salesperson or the value of owning customer data. The guide Contribution margin per order describes how to check whether an offering pays off through a channel at all. The article Sales compensation compares what an in-house salesperson costs in pay.

The four channels compared

The article Selling through marketplaces or on your own goes deeper into weighing a marketplace against your own online sales. The guide Hiring your first salesperson describes when the first in-house salesperson makes sense and what he or she can achieve in the first months.

Multiple channels without channel conflict

A channel conflict arises when two channels of the same business compete for the same customer, for example when the dealer makes an offer and the field rep supplies the same customer at the lower factory price. The dealer then loses trust, and the customer learns to play the channels off against each other.

Fürst and Scholl (2022) used a large-scale survey to study the means companies use to manage multichannel sales. They distinguish instructions, incentives, and communication between the channels. All three increased the success of the multichannel strategy, but in different ways and to different degrees. As the number of channels grew, instructions and communication became more effective, while incentives became less effective. For a small business, this means: clear rules and open coordination go further than bonuses for the channel that is supposed to hold back.

A new channel also increases dependence. As a rule of thumb, I consider it risky when more than a third of orders come through a single channel you do not control, whether a dealer or a platform.

Conclusion and what you can do this week

Which sales channel fits which offering, and how does a small business combine several channels without them harming each other? Offerings that need explanation and serve large customers fit an in-house sales force, standard products for many small buyers fit dealers and platforms, and complementary offerings for the same customers fit partners. Research on transaction cost analysis supports this assignment: an in-house sales force pays off where performance is hard to measure and the product is hard to explain. Multiple channels work when each task has exactly one channel in charge per customer group and clear rules anticipate conflicts.

1. This week: Write down the six tasks of the task grid and enter which channel handles them today for which customer group.
2. Next week: Mark gaps, meaning tasks without anyone in charge, and overlaps, meaning customers served by two channels.
3. In a month: For the channel you want to expand, calculate the cost threshold and set rules on customer protection and prices before it starts.

A good sales channel does not just bring revenue. It brings revenue without damaging another channel.