Secondary Sales: Knowing What Secondary Sales Are All About

Companies face challenges with sluggish market sales despite experiencing high order levels from distributors. This is where secondary sales become important.

Within sectors ranging from FMCG, retail, pharmaceuticals, and consumer goods, there are factors affecting business performance other than shipments from the company’s warehouse. Actual success can only be measured by how well products are being sold and distributed from distributors to retailers and then into the end market.

Definition of Secondary Sales

The secondary sales will occur when the distributor sells your product to the retailer or replenishes the stock of the retailer based on the order placed by the retailer. In simpler terms, trade sales are nothing but the transfer of inventory from the distributor to the retail market.

While it cannot be denied that brand awareness is an important determinant of the secondary sales, there are other factors as well that play an important role. Some of these factors include reliable stock availability, good delivery, proper order fulfillment, and good trade promotion, which encourage the retailers to reorder.

It can thus be said that the companies should focus on trade sales to determine whether or not their distributors are delivering on promises made to them and whether they are effectively meeting market demands. If the distributor consistently fails in meeting the desired standards, the company will require a replacement.

To take an example, a popular brand such as Britannia will receive more orders from the retailer since they are known for sure that the customers will buy the product. However, if the brand in question is relatively less well-known, the brand needs to focus on promotional activities.

Importance of Tracking Secondary Sales

Here is how monitoring channel sales helps:

Demand Forecasting

The sales in the secondary market can better illustrate demand since they indicate how products are moving from distributors to retailers. By knowing what the real demand is, companies can more effectively forecast it.

Inventory Control

The monitoring of channel sales will enable organizations to have control of the amount of inventory at the various stages within the channel. It will help minimize the chances of having excess inventory, under-supply, or stale stock by providing information on what is being sold.

Evaluating Distributor Performance

Monitoring of downstream sales gives organizations useful information that they can use in evaluating the effectiveness of the distributors when selling to the retailers. Such information includes stock turnover, the number of outlets covered, and general distributor performance.

Engaging with Retailers

Through monitoring of secondary sales, it becomes possible for organizations to determine the buying behavior of the retailers and hence identify areas where improvements are necessary in order to maximize their performance.

Market Penetration Knowledge Points

Insights from downstream sales help companies understand the effectiveness of their branding at getting their products into retailers in other areas and markets. This provides valuable knowledge for expanding into new markets.

What’s an Example of a Secondary Sale?

Let’s assume an instance of an FMCG product.

A brand of personal care products sells bottles of its shampoo product to the distributor based in Delhi. The process where the company sells the bottles of shampoo to the distributor falls under primary sales.

However, when the distributor sells the bottles of shampoo to supermarket stores, drugstores, cosmetic shops, or even the local kirana shops, this falls under secondary sales.

For instance, if the distributor sells 500 bottles to retailer A, 300 bottles to retailer B, and 200 bottles to retailer C, then the distributor-to-retailer would be equal to 1,000 bottles. This means that the bottles are being moved into the retail sector instead of sitting in the hands of the distributor.

If we consider that the company sells 10,000 bottles to the distributor but only manages to sell 2,000 bottles to the retailers, this indicates poor distributor-to-retailer figures despite good primary sales figures.

How Secondary Sales Help Sales Teams Take Better Decisions

This has been my observation about retail movement information because it becomes more relevant and valuable to the sales team if it is analyzed periodically rather than at the end of the month.

This analysis, done on a day-to-day or weekly basis, enables teams to detect trends and act on them promptly. They may notice, for instance, why a certain product is performing well in one territory and not in others, and then address such issues.

Another advantage of regular analysis of this information is that it makes sales meetings much more productive since they no longer depend on presumptions.

Managers will be able to discuss retailer performance, movement of SKUs, inventory position, outlets covered, and beat management. Such sales reviews are very important for companies with large field sales forces.

Final Thoughts

Retail movement goes beyond being a sales measure. This tells you how effectively your goods are sold in the market.

Primary sales can help determine the amount of your stock in the distribution pipeline. Meanwhile, this tells you whether or not the goods from the pipeline reach the retailers and create demand for them.

This is especially critical for businesses selling their goods via distributors, dealers, wholesalers, or retailers, allowing them to improve demand forecasting, better control inventory, analyze their distributors’ performance, and develop the markets.

The most essential advantage of secondary sales measurement, however, lies elsewhere. Visibility gives you clarity on what goes in the market and allows you to make the right choices in no time.

If you want to monitor secondary sales, distributor movement, field execution, and incentive performance in one place, you can try using JOP Edge.