Sales Channels

There are of course multiple sales channels in your market and the US.  In the US it's not uncommon for a company to purse multiple channles at the same time.  In dealing with Australian companies I find many simply want to find a distributor in the US.  While in many instances this will be required it is important to know that just having a distributor alone will not ensure sales.  Outside of the US distributors often times provide marketing and selling for a product line.  In the US, that is not typically the case.  In the consumer electronics and computer world for instance distributors will simply stock the product.  You will have to pay for sponsorship of programs to get the word out regarding your product.  If it does not move then you will be required to take your product.  See the policies section for more information on policies and practices you are likely to encounter.

Direct
The easiest channel to understand.  You will have to hire a direct sales person to represent your line.  This could be a single person or you could use manufacturers representatives.  In many cases even with a direct sales person you will need either a warehouse location or a distributor.  A direct sales person or a manufacturers representative may require an exclusive geographical territory.  For manufacturers representatives this is quite normal.  Manufacturers will be paid a percent of the product shipped into their territory.  Expect to pay about $100,000 and up for a total package for a direct sales person.  It is becoming much more common for people to work out of their homes.  If you don't need an office for meetings very often this is a good option.

Retail
The retail channel is a considerable challenge in the US.  There are large national chains in most of the 50 states, large regional chains that may be in one to dozens of states and local chains in one state or section of a state.  The size of the chains is variable by markets.  There are national grocery chains as well as small chains in a single city.  There are also market segments where there are very few national chains.  In the higher end outdoor recreation market there is only one large chain and they are only in about 15 states, while the rest of the market is small shops or regional chains.  It's very variable.  Some retail chains purchase direct, others will require distribution.  Retailing in larger chains is very sophisticated and you will be required to follow many new and potentially different policies (see below).

Web Sales
Web sales is a great way to get started in the US. Have either a warehouse of a distributor to fufill orders and start selling on the web.  It's the least risky entry strategy of all.  In order to grow sales look for web partners such as catalog sites.  Also consider using affiliate programs (a guide to these will follow shortly).  If you are going to sell using the web you  should consider spending time to enhance your web site to capture traffic, use of Google AdWord promotinal campaigns, and linking efforts.  See Web Site Practices for more details on enhancing your web presence.

Distributors
As menioned earlier distributors inthe US typically act as an order taker, credit provider and warehouse.  You will be responsible for driving demand to the distributor through retail and reseller channels.  They are likely to charge you setup fees to get your products listed in their catalogs, fees for conducting sales training as well as for other promotional activities.  For initial shipments your sales are likely to be consignment only, they will pay when your product sells.  As you build up a sales history then payment will be more regular.  You may be required to have a US bank account to setup an account with a distributor.

Resellers/VARs
Resellers are common in the ICT world.  They purchase from distributors and then provide a solution to the end user.  Typically you should identify key resellers in your target market.  If you sign up a few resellers then you can deliver orders to your distributor.  Resellers will typically be very focused on a specific vertical market.  They will integrate various products together for a full solution and offer training and service.  They are always on the lookout for new products and you may have what they want.

Joint Venture
Another attractive way to get in the market is by partnering with an established company.  Leveraging an existing sales force, support organization and other reseources is certainly attractive.  However, this method requires significant upfront effort in planning and developing a JV agreement.  You must have competent legal advice.  You will also want to closely monitor performance and ensure payment. 

OEM/Private Label
For many products I think this is a good way to go.  Find a manufacturer with a complimentary product line where yours might fit in.  They already have the channel and staffing.  Youalso have better control over the product because you make it and label it.  Be cautious though of contract terms.  Once they buy they own it because you can't resell it. 

Licensing
A more complex relationship, but one well suited for intellectual property.  This arrangement requires legal assstance and provisions for auditing.

Catalogs
Catalogs are a huge business in the US, especially in partnership with a web site.  Most catalog companies do not stock product and will expect orders to be fulfilled out of your facility.

Policies and Programs

Being successful in retail channels requires dealing with a number of policies and programs that impact your margins and marketing expenses.  Not all market segments require everything listed here.  However, but sure you understand all aspects of the selected retailers business model before signing a contract or you will have nasty surprises.

Payment
Net 30 used to be the standard, it's more like net 45 now and many will stretch it out to 60 and 90.  Smaller companies will pay in a more erratic pattern.  Larger ones may take a long time to pay

Stock Rotation
Many distributors and resellers will want stock rotation rights.  If product does not sell they want to send it back.  If you introduce a new product they will likely want to send the older items back as you release the new one.  Examine the contract terms and pay attention to them as you introduce new products.

Price Protection
When you lower the price point of a product a distributor or reseller will want price protection.  This a payment or credit on the difference between the new price and the old price times the stock level.  This is a huge reason to keep on top of run rates and inventory.  In past jobs I've seen price protection payments and credits in hundreds of thousands of dollars and more.  Price protection is a reason that many manufacturers now use rebates to move product, instead of a price reduction.

Rebates
Rebates have become an increasngly popular form of "lowering" the price on a product.  With a rebate a consumer pays the list price but submits a coupon (and a recipt and the UPC code normally) after the sale to a processor for payment.  Personally I do not like rebates, if a manufacturer wants to lower the price then lower the price!  With rebates the responsibility is on the consumer, and manufacturers hope they don't respond.  The manufacturer will be reponsible for creating the rebate program and selecting an administrator.  The consumer will purchase the item at the "normal" price and receive a rebate coupon.  They will return it within a set time period to the fulfillment organization and wait for payment.  Typical payment time is up to three months .

Sales
Another program to enhance sell through is a sale.  Unlike a rebate the manufacturer will have to bear the burden of the reduced price.  It's a bit similar to price protection.  Sales are common with consumer goods like grocery, food items and clothing.

Warranties
Your product will need some sort of warranty in many cases.  You will also need the mechanism to accpet returns of the product.  In most instances a 90 day warranty will be offered (or higher in some instances).  Normally the consumer will return it to the retailer, no questions asked for a full refund.  The manufacturer will normally have to take the returns as is and issue a credit.  Be sure to account for a certain percentage of returns if that is appropriate.

Exclusivity
Many representatives will ask for exclusivity.  In some cases it is appropriate in others, maybe, and in others forget it.  Manufacturers representatives expect it, and this is a normal part of business with this channel.  Distributors may ask for it, but unless you get something significant in return do not do it.  Resellers may request it, but again ask for something in return.  A fair trade for an exclusive (for a time period or a geographical area) is performance targets.  If they reach the targets maybe you extend the period for the exclusive.  Be careful when granting this though, get something in return.  The US is a big place and there is loads of opportunity so be careful in restricting yourself.