Times they are a changing. The customer base is declining. The numbers of potential sales doors are disappearing. So how does a modern day sales brand best service the UK & Irish marketplace? Reps? Agents? How many? How many brands should they/can they carry? How big a sales territory?
It’s a question that many brands have been addressing lately – not least Pentland, who have recently unveiled a new strategy bringing Canterbury, Mitre, Berghaus and Speedo under a combined sales force rather than the separate sales teams that they have historically had.
Back in the 1990s, when I took my baby steps in this industry, it was commonplace to service just the UK with a field sales force of up to six covering six geographical regions and scheduling three or four sales calls per day.
Northern Ireland was usually serviced by one rep and, for many brands, the Republic of Ireland was served, more often than not, through a distributor.
Roll forward to today and it is simply untenable to financially support such a sales force network and generate the relevant revenues to justify such an approach.
Ireland, in many cases, is now viewed as one territory, and the UK often supported with a team of two or three.
Historically the rule of thumb to support a full time field sales rep with company car, expenses etc was that the patch needed to generate approx £600K of revenue.
Today, setting aside key accounts (and placing them under a key account manager), for many businesses the only way to generate such revenues has been to increase the size of the sales area and reduce the numbers of reps - many brands simply have Northern and Southern representatives now.
More distance between calls. Less calls per day. Increased demand from the brand owner for sales calls to be more lucrative.
All this against a background of retailers being more and more reluctant to place forward orders.
More working hand to mouth and fewer placing orders even when the rep does turn up. So where does that leave the sales agent versus sales rep discussion?
Agents or Reps?
There are a variety of factors that one needs to take into consideration not least territory, type of product being taken to market, price points of the range and breadth of product range to name but a few, however setting these aside there are some clear pros and cons to each approach.
Advantages of Hiring a Sales Agent Instead of Hiring a Sales Rep
i) Lower costs
- What does the average direct sales employee cost a company? Let’s add it up. Start with a base pay of £20-25,000. Now add the cost of car and travel expenses, sick leave, holidays and holiday pay, pension and other expenses. Current estimates put this at £20,000 to £30,000.
Now add in payroll taxes, liability insurance, and general expenses such as trade shows and these may be an additional £10,000 plus and all together this average salesperson could be costing you £60,000 plus per year. The question is, what is he bringing back for you?
ii) No hidden costs
- Hiring an employee has costs beyond just their wage - the cost of giving them office space, equipment, travel costs as well as holidays, insurance and other benefits. A cost of hiring a sales agent is clear and obvious since there are no hidden costs - the agent sells for you but is in business for himself and the cost they incur while selling your products is their responsibility.
iii) Pay for performance
- Sales agents are typically paid for their performance through a commission only wage structure, which means that you only pay out money if they actually make a sale. This means that hiring a sales agent can cost next to nothing to start with and the products they must sell first will cover all the money you’ll pay them.
iv) Give immediate access to the market
- With the agents, manufacturers have an experienced sales team in the territory immediately. The agent will be very familiar with the area and have a number of good prospects whom they feel would be ready to consider your product line.
v) Provides a broader sales context for your product
- Because he sells several related but non-competing product lines, the agent is in a position to expose you to a wider variety of prospects and customers. By doing this he often finds applications for your products which would be missed by the single-line salesperson.
vi) Value for money for small businesses
- Some small businesses will not have enough prospects to justify hiring a full-time sales representative and hiring one could initially cost more than the profits they bring in. In this scenario, a sales agent representing your products and services part-time can have the same effect and bring in the same income without straining your payroll unnecessarily.
Disadvantages of Hiring a Sales Agent Instead of Hiring a Sales Rep
i) Lower degree of control
- Although they will be selling your products, a sales agent is independent, and you cannot control them in the same way you can one of your own employees. Their sales process will be their own, as will their style and their manner, and they are unlikely to sell according to the methods in which you train your in-house sales representatives, even if you offer them training.
ii) May sell other products
- Hiring a sales agent may result in your products being sold by someone who also represents and sells goods and services produced by other companies in your area.
If these other companies are running a promotion or increase their commission you might find that your own sales suffer due to a reduced focus from your agents, something that is completely out of your control.
iii) Dilution of brand and product message
– as the number of independent sports retailers continues to decline so does the number of doors that are available for an agent to sell to.
The result is that many agents are carrying more and more brands to maintain their income levels and inevitably will dilute the brand and range messages often picking “the winners” from each brand that they represent in a bid to maximise sales.
iv) No long term strategy
– Since the agent is working independently they may not buy into your company / brand strategy in the long run as they continue to maximise short term opportunities to maintain their revenue.
v) Conflict of interest
– as more and more brands push their product ranges into new areas agents are finding more and more that their product ranges may be in conflict. In the short term this can simply cause market confusion. In the long term it may result in the brand terminating the agency agreement and thus having to find an alternative solution.
vi) Who drives key account business?
- some argue that an agent cannot represent the supplier at key account level as many of the decisions taken have much broader business implications where a senior staff member needs to be involved.
More agents carrying more products covering smaller areas or less sales agents covering bigger areas with (or without) a larger product portfolio – in a nutshell that’s the core dilemma today.
Hiring a sales agent instead of hiring a sales rep can be a wise choice that saves you money and reduces the amount of management work you need to do, however before hiring a sales agent, you need to understand your own sales objectives and then work out if you can achieve these through a force of sales agents or if they can only be achieved by in-house employees.
Typically, the main deciding factor is whether you are willing to give up some control of the sales process in return for lower costs - the more important control is to you the less advantageous it is to hire a sales agent.
Inevitably it does seem clear that multiple brand owners such as Pentland are being forced to try and maintain a core sales force covering similar sized historical patches but, in effect, giving them more product (brands) to sell.
With mono brand owners the sales patches have to be bigger to generate the sales, and, despite the views of many brand owners, telesales/online ordering portals cannot replace that rep/customer relationship.
This will undoubtedly mean that customers will be seen less often, the relationships won’t be as strong, the rep knowledge won’t be as good and competitor brands may indeed take some share.
But what choice? Fewer customers does indeed equal fewer sales reps.