I have encountered some vendors that think about the way they sell their products through channel partners as merely a volume discount mentality.  What I mean by that is that these kinds of vendors sell their product direct and as is often the case have some large customers to whom they sell their product at a discount because those customers buy in volume.

When that same vendor sells through a channel, they view the transaction in a similar light.  They see a channel partners as "consuming" a large volume of product and therefore being entitled to a discount on the product.  The size of the discount, in this scenario, is often based on the amount of product purchased by the channel partner.  Similar pricing tiers as are available to direct customers are setup for channel partners.

The problem with that approach is two fold:

1. Channel partners don't "consume" products.  They resell them.  They take possession of the product and sell it to the ultimate customer.
2. It misses the point of what a reseller does.  A reseller takes a product to market for a vendor because the vendor believes the reseller can sell the product to its customers at a lower cost that the vendor could do on its own.

In short, resellers are paid by vendors for providing a service...the service of sales and marketing (and possibily technical support and many other services also).  Instead of thinking of the sale in terms of a discount, I encourage vendors to think of the amount paid to resellers as a "commission", but not just a commission that a vendor would pay a sales person in the vendor organization, but a commission for all of the services that the reseller provides.  When a vendor looks at their SGA (Selling, General and Administration costs) and factors those as a percentage of sales, typically they find the cost of selling a product is much higher than they believe it to be on the surface.  That's where a reseller comes in.  They should be able to get the product to market at a lower cost to the vendor.

What are your thoughts?

William Vanderbilt

+1 630 343 6261

WVanderbilt@InnovativeLearningChannels.com

how do you become a reseller Posted by dumisane at 12:40pm

It's the domino effect and the costs the vendor has then rolls down to the reseller. The administrative costs, not to mention the financial financing of those sales to the end clients make these transactions a tough world in the reseller arena to thrive. If not for services wrapped around these sales, of course not many Resellers would survive. Posted by Ann King at 9:51pm