Sales channels in distribution are always evolving. Whether it’s more traditional channels such as counter sales, show room sales, job contracts and inside sales or more emerging channels such as e-commerce websites, or a mobile app, each channel offers unique opportunities and challenges. How do you know which one is driving the most growth? Is the surge in one channel eating into the sales of another? These are critical questions every distributor needs to ask.

In this blog post, we’ll delve into the importance of analyzing different sales channels, illustrating how this crucial practice can help distributors optimize resources, better understand customer behavior, identify growth opportunities, mitigate risks, and ultimately, enhance profitability.

Sales channel analysis is a critical aspect of business strategy for distributors. If you don’t understand how growth in one channel is affecting sales in other channels, it can be difficult to optimize your resource allocation. For instance, if e-commerce is outperforming traditional sales, it might be beneficial to invest more in improving the online shopping experience or digital marketing efforts.

Sales channel analysis can provide insights into shifting customer behaviors. If customers are increasingly moving from traditional sales to e-commerce, it could indicate a preference for online shopping. This could prompt a shift in strategy to cater to these changing consumer preferences. In turn, that helps you highlight your best growth opportunities. If a particular channel is showing significant growth, there may be opportunities to further enhance that growth. For example, if e-commerce sales are booming, expanding product offerings or introducing new online-exclusive promotions could further boost sales.

But without channel analysis, you face the risk of not really understanding the source of your growth. If the growth in one channel is cannibalizing sales in another, it’s crucial for distributors to understand this and strategize accordingly. They might need to find ways to revitalize the lagging channel or consider whether a shift in focus to the growing channel might be more beneficial in the long run. Different sales channels can have different costs and profit margins. By analyzing the profitability of each channel, distributors can make informed decisions about where to focus their efforts to maximize overall profitability.

A Modern Approach to Sales Channel Analysis

Sales channel analysis provides valuable insights that can help distributors optimize resource allocation, understand and respond to customer behavior, identify growth opportunities, mitigate risks, and enhance profitability. That’s why we built that analysis right into SMP using a data element we call “sales source.”

Here are some of the most important ways distributors can analyze their sales data to help with a deeper sales channel analysis.

Channel Attribution Analysis

Channel attribution analysis is an essential component of sales analytics. It involves assessing the sales generated through different channels over a specified period to understand their contribution to overall sales. This way you can uncover shifting sales trends between different channels.

To conduct a channel attribution analysis, you’ll need to gather data on your sales from each channel. This might include total sales volume, revenue, number of transactions, average transaction value, customer acquisition costs, and any other metrics relevant to your business. This lets you compare the performance of each channel. Look for trends such as increasing or decreasing sales, changes in the average transaction value, or shifts in the cost of customer acquisition.

For example, if you notice that your e-commerce channel’s sales are steadily growing while your traditional store sales are declining, this could indicate a shift in customer behavior towards online shopping. Or, if both channels are growing but e-commerce is growing at a faster rate, this might suggest that your e-commerce efforts are successfully attracting new customers without cannibalizing your traditional sales. It’s also important to consider external factors that might be influencing these trends, such as changes in market conditions, competitive activity, or broader consumer trends.

Channel or sales source attribution analysis can help you understand where your sales are coming from and how your different channels are performing. This information can inform strategic decisions about where to invest your resources to maximize sales and profitability.

Customer Segmentation

Different customers have different characteristics. These characteristics can include buying habits, preferences, demographics, lifestyle, geographic location, and more. Understanding your customer segments can help you tailor your products, value-adds and marketing strategies to delight each of your customer groups.

Here’s how customer segmentation can help identify if certain customer segments prefer online shopping over traditional shopping:

• Buying Habits: By analyzing your customers’ purchasing patterns, you can identify trends that indicate a preference for one channel over another. For instance, if a particular segment consistently makes purchases online, it’s likely they prefer e-commerce.
• Behavioral Data: Take a look at purchasing data such as frequency of purchase or order size. Also look at the type of sales and marketing information they like to respond to.
• Customer Surveys: Distributors can conduct surveys to directly ask customers about their shopping preferences. This can provide valuable insights into why certain segments may prefer online shopping, such as convenience, wider product selection, or the ability to easily compare prices.
• Demographic Data: Certain demographic groups may be more inclined towards online shopping. For example, younger generations who are digital natives might be more comfortable shopping online than older generations. Contractors who need unique parts for specific jobs may still want to buy in-store, while corporate purchases making routine orders may prefer online.
• Geographic Location: Customers in crowded urban areas with easy access to physical stores might still prefer traditional shopping, while those with large orders in rural areas might lean towards e-commerce due to limited local options.

By understanding these different customer segments, distributors can tailor their channel strategies to cater to each group’s preferences. This could involve enhancing the online shopping experience for segments that prefer e-commerce, or finding ways to attract online shoppers to their physical stores. In doing so, they can maximize their reach and sales potential across all channels.

Product Sales Comparison

Product sales comparison is an analysis method that involves comparing the sales of specific products across different channels. This can provide valuable insights into where your products are most popular and potentially reveal if one channel is cannibalizing sales from another.

If you notice that a product is selling significantly more through your e-commerce platform than in your physical store, several scenarios could be at play. Cannibalization can mean that sales in one channel are being eroded by the other. For example, your customers might be finding it more convenient to purchase the product online rather than visiting your physical branch. It’s crucial to identify this trend early to address it and ensure that overall sales growth is not negatively impacted. It might also be that the product appeals more to the type of customer who prefers online shopping. In this case, it’s not so much cannibalization as it is a reflection of differing customer preferences across channels.

Your product marketing plays a role in channel selection as well. The product might be more prominently featured or promoted on your e-commerce site compared to your physical store, leading to higher online sales. If the product is often out of stock in your physical store but consistently available online, customers may opt for the more reliable online option. If the product is priced lower online, including factors like shipping costs, customers might choose the cheaper option.

Understanding these dynamics can help distributors devise strategies to balance sales across channels. For instance, they could enhance in-store product visibility, adjust pricing, or improve stock availability to boost physical store sales. Alternatively, if online sales are robust and profitable, they might choose to further capitalize on this channel’s success while still maintaining their physical store presence for other products or customer segments.

Geographical Sales Data

Geographical sales data provides valuable insights into where your customers are located and how they prefer to shop. This involves analyzing sales data from different geographical locations and comparing the performance of different sales channels within those regions.

If you notice that online sales are high in areas where you have physical stores, it could potentially indicate cannibalization. Here’s what this might mean:

• Changing Customer Preferences: Customers in these areas might be shifting their buying habits, opting for the convenience of online shopping even though a physical store is available. This could suggest a broader trend towards e-commerce that may need to be factored into your business strategy.
• Competitive Factors: High online sales in areas with physical stores could also reflect competitive pressures. For example, customers might be finding better deals or a wider product range online, leading them to choose e-commerce over traditional shopping.
• Convenience Factors: Even if a physical store is available, customers might find online shopping more convenient. This could be due to factors such as time constraints, ease of product comparison, home delivery options, or the ability to shop outside of store hours.
• Store Attributes: There might be issues with the physical stores themselves that are driving customers online. This could include factors like poor customer service, limited stock availability, lack of product variety, or an unappealing store environment.

By understanding these geographical trends, distributors can adapt their strategies accordingly. This might involve improving the in-store shopping experience, offering competitive deals in physical stores, or enhancing their online offerings to capitalize on the growth of e-commerce. The key is to use this data to create a balanced multichannel strategy that meets customers’ evolving needs and preferences.

Market Basket Analysis

Distributors are very familiar with the fact that the sale of one type of product can influence the sale of another. There are numerous cross-selling and upselling strategies available to you. Conducting a market basket analysis helps you to understand the relationship between groups of products or even entire product lines.

Again, cannibalization refers to the reduction in sales volume, sales revenue, or market share of one product as a result of the introduction of a new product by the same producer. In terms of market basket analysis and cannibalization, these concepts intersect when a new product replaces an older one in the market basket of the consumer. For example, if a customer usually buys Product A, but after introducing Product B they start buying B instead of A, it may lead to cannibalization.

To prevent this, businesses can conduct a comprehensive data-driven basket analysis to identify both cannibalization and complementarity products. This way, they can strategically place the new product in the market without significantly harming the older one.

However, cannibalization isn’t always negative. Sometimes, it can be a strategic move, for instance, when a company introduces a new product to phase out an older, less profitable one. It’s all about balancing the portfolio of products to maximize overall profitability. Cannibalization could mean your e-commerce platform is successful. However, understanding its impact on traditional sales can help you make informed business decisions.

Sales Analysis Made Easy

SMP revolutionizes the process of sales channel analysis by making it incredibly easy and accessible. Picture an analytics tool so user-friendly that anyone within your organization, regardless of their technical expertise, can effortlessly create custom reports and dynamic dashboards. SMP allows you to dive deep into vast pools of data, enabling you to unearth valuable insights that can drive strategic decision-making.

At the heart of SMP is a groundbreaking self-service data visualization and discovery application. This application has been meticulously designed to cater to individuals, teams, and entire organizations, ensuring everyone can leverage its capabilities to the fullest.

Self-Service Creation: SMP empowers users with a drag-and-drop feature, allowing you to construct your own visualizations without the need for any technical know-how. You don’t need to be a data scientist or a designer to create meaningful data representations; SMP simplifies the process, putting the power of data visualization in your hands.

Intuitive Design: SMP boasts a simple, intuitive interface that lets you create flexible and interactive data visualizations. Its smart visualization feature automatically adapts to the parameters you set, eliminating the need for developers or data scientists. You can explore your data in ways that make the most sense to you, uncovering insights that might otherwise remain hidden.

Smart Search Feature: Navigating complex information becomes a breeze with SMP’s natural search function. This feature accelerates the process of discovery, helping you find the data you need quickly and efficiently. No matter how dense or intricate your data might be, SMP’s smart search function guides you towards the insights that matter the most.

And of course, SMP is more than just an analytics tool. It’s a comprehensive solution that democratizes data visualization and discovery, enabling everyone in your organization to engage with data in a meaningful, insightful way. But it is also the leading platform for growth in distribution including CRM, business intelligence, proactive marketing and sales enablement.