Vertical vs Horizontal sales channel
Vertical Sales Channel
Let’s start with the vertical sales channel. The vertical sales channel unifies the different levels in the sales channel.
In a conventional marketing system, the wholesalers aim to make a profit at the cost of the retailers’ profit and vice versa. For example, in the apparel industry, profit margins for retail clothes are generally within a range of 4 per cent to 13 per cent. If the wholesale profit margin is increased, the profit of the retailer would decrease. The profit margin of the retailers must cover expenses like transportation costs and storage costs. Therefore, both the wholesalers and the retailers must not have conflicting interests.
Horizontal Sales Channel
The horizontal sales channel as the name suggests involves the combination of two or more companies on equal terms. As these companies are from the same level, there is no hierarchy and the arrangement is mutually benefiting.
Have you ever waited for that one collaboration music video of your favourite singers? For the customers, when two companies come together for a venture, it creates the same kind of excitement. When the collaboration happens between well-established companies, like Uber and Spotify, the buzz generated is extensive, to say the least. Some collaborations may even make you wonder what brought them together. An example of this kind of collaboration is when Forever 21 launched a clothing range for the Taco Bell fan base. Fashion and food may not be an obvious pairing but what made this collaboration a success was the similarity in their target audiences. Both Taco Bell and Forever 21 cater to the youth and provide affordable products.
Conclusion
Choosing the right combination of sales channels for your company can be trying. When you are creating the sales channels you want to follow, firstly, make sure you have a clear cut idea on who your target audience is and what their needs are. The system you choose must ensure that you reach your target audience and fulfil their needs. The second point to keep in mind is the resources and capital you have. For example, you have limited resources and wish to expand your target audience, consider a horizontal system and choose a contributing company with the expertise and resources that can complement yours. And thirdly analyse which system gives your company the maximum profit. Making an informed choice can make all the difference as you are getting ready to start your venture.