Primary Sales: A Practical Guide to Understanding the First Move in Sales Growth

Sales problems rarely start at the customer’s doorstep. They often begin much earlier, when businesses lack clarity on what is moving from their warehouse to distributors, dealers, or channel partners.

That is where primary sales become important.

In distribution-led industries like FMCG, retail, pharma, and consumer durables, growth depends not only on what customers buy, but also on how smoothly products move through the channel.

What are primary, secondary, and tertiary sales?

The primary sales will be when the brand sells its products to the distributor. At this point, the distributor buys stock from the brand while the brand earns revenues.

The secondary sales will occur when the distributor sells to the retailer. This metric measures how the product moves in the market. This metric is determined by various factors, including retailer demand, availability of stock, brand visibility, and trade deals, among others.

The tertiary sales will be when the retailer sells to the consumer. Tertiary sales are also known as offtake and offer clear indication of consumer demand.

In my opinion, all three stages of sales have significance since each stage reveals a different aspect of the sales process. The primary sales reveal demand by the distributors, while secondary sales reveal demand by the retailers. On the other hand, tertiary sales reveal actual consumer demand.

The proper monitoring of the above sales process by the brands allows for the identification of any problems in the sales cycle and prompt correction thereof. Such corrections may include improving stock availability, retailer push and so forth.

What is primary sales?

The primary sales process refers to the selling of goods from the company to their respective first-level channel members, such as distributors, dealers, stockists or wholesalers.

 In simpler terms, refer to the initial transfer of products from the company to the market. An example of this is when an FMCG company sells goods to distributors.

These are quite different from secondary sales, where distributors sell to retailers and tertiary sales, where retailers sell to end consumers.

It is important to understand that it gives businesses the chance of knowing about sales flow, channel demand and achievement of targets. However, this should not be considered alone. In combination with secondary sales, inventory management and execution in the field, a clearer picture emerges of actual business performance.

What are secondary sales?

Secondary sales take place when a distributor distributes your products to the retail or fills the retailer’s order.

Brand awareness certainly plays a part in this process, but it isn’t everything. The demand from the retailer needs to be met with enough supply, good order management practices, and an effective delivery system.

The trade promotion is another factor in secondary sales because the better the promotion program is, the bigger the number of orders placed by the retailer will be.

From my point of view, it would be wise for the brand to monitor the secondary sales very carefully, as the level of secondary sales will reveal the efficiency of the distribution channel.

Tertiary sales take place when the ultimate buyer purchases the product from the retailer, and at this stage, customer demand becomes visible.

What are Tertiary Sales?

In B2C brands, tertiary sales are often the hardest to predict since customer purchasing behaviour is affected by factors such as visibility, pricing, offers, merchandising, availability, and awareness of the product.

Where strong tertiary sales exist, it implies that there exists some usefulness in the product, and it has become more accessible through visibility, pricing, and proper positioning. At times, when customers don’t purchase the product off the shelves, the problem might not be in distribution but rather inadequate displays, insufficient push from the retailers, poor promotions, and availability of better products in the market.

This is why tertiary data on signals such as shelf visibility, adherence to planograms, activity at the retail outlets, and offtake trends are required. With these insights, together with field activities’ plans, brands can take quick actions during the same sales cycle.

What challenges does primary sales data solve for businesses?

These sales figures are not mere numbers for reporting. When employed properly, they assist companies in overcoming several practical challenges.

1. Early indicator of channel pull

The sales figures help the company measure the extent of product lift by distributors or channel partners. In that way, there will be an early indication of market confidence.

In case the orders by the distributors are falling, it could indicate poor demand, inventory buildup, pricing problems, delayed schemes, or poor relations with the channel members.

This early indicator prevents any unpleasant surprise at the end of the month.

2. It aids in accurately measuring the performance of the sales team.

Many organizations evaluate sales teams based on the amount or value of sales charged to distributors. This information allows organizations to measure if the sales targets allocated to the team are met or not.

What makes this sales figure information valuable is its correlation to operational success. While sales managers need to know if a sales target has been met, it is equally important that they be able to identify what is causing the gap between the two.

3. It enhances distributor and dealer management

Distributors are not just buyers; they are business partners. Sales information assists a company in evaluating distribution buying patterns, frequency of orders, inventory movements, and contributions to revenues.

If there is a distributor who buys in bulk quantities only at the end of every month, there might be an element of coercion involved as opposed to normal demand patterns. In the case of another distributor who buys weekly, he might show discipline in his market segment.

4. It decreases blind spots in inventories

Without these insights, most companies rely on assumptions when managing their inventories. This leads to two scenarios – too much inventory for some products and stock-outs of other items.

This information enables a company to evaluate which products are going out to particular markets. With this in hand, alongside inventory levels and secondary sales statistics, planning becomes simpler.

5. Helps track promotions and schemes better

Companies use trade schemes, discounts, and incentives to promote their products in the channel. Sales analysis will assist you in knowing if those schemes have resulted in increased purchases from your distributors.

However, it is even more important to ask yourself how deep that product penetration was. The reason why primary sales should be analysed together with secondary sales and movement is that the former does not give you the big picture.

6. Assists in identifying performance gaps

The national number may appear good for you, but you should understand that behind it, there could be a lot of discrepancies. One of your regions may be booming due to high product demand, while other regions are performing badly due to poor coverage or field management.

The same thing goes for your products. If some SKUs are over-performing while others are sitting in your channel, then that is something which you should analyze.

Why primary sales matter?

These are important because it indicates if there is actual movement of product from the business to the market.

For channel-oriented companies, goal setting only makes sense if they can measure it through consistent channel movement. Initial sales enable management to monitor revenue, cash flow, inventory management, production requirements, and performance of the sales force.

However, it cannot be considered a simple billing figure. In case teams focus only on pushing products in order to meet their targets, then distribution channels become saturated, and the business mistakenly sees stock movement as genuine demand.

This explains why it should be considered as a performance indicator. It enables managers to find answers to several questions: Are the distributors purchasing regularly? Are the right products sold in the right marketplaces? Is the demand genuine or artificial due to goals?

How does primary sales impact demand forecasting and inventory management?

It also has an impact on demand forecasting and inventory management, as they indicate how the goods are being moved by the company to the channel.

With good first-level sales data, it becomes easier for firms to predict demand trends, schedule replenishments on time, and ensure that their inventories remain balanced. They also help avert two common mistakes, which include having too much inventory in certain markets while lacking enough in others.

I would say that here comes the importance of initial sales going beyond being sales figures. This is because firms will be able to schedule their production and distribution with greater accuracy.

 Conclusion

Primary Sales is among the top-most critical measures of sales performance and is particularly important in firms whose business revolves around distribution channels or dealerships.

The actual value of first-level sales, however, is not really achieved by considering this alone as a revenue measure. The actual value of initial sales is derived from the link it creates between inventory, secondary sales, target achievement, incentives, collections, and field execution

It is at this point that questions such as “are we selling?” can be elevated to questions like “are we selling the way we should?”

This becomes very important for growing organizations.

And this is precisely where JOP Edge becomes valuable. JOP Edge provides sales leaders with greater visibility into their sales team’s performance metrics, incentive movements and execution challenges. JOP Edge connects goal setting, sales performance and action, ensuring that no performance gets stuck in reports.

In summary, primary sales are more than just moving products through the channel; it is all about building a coherent sales machine.