A continuing and growing trend is for manufacturers to push more emphasis on building or supporting their dealer channel while scaling back their direct sales force. This trend is prevalent across many industries, especially in the IT industry.  

But is it more advantageous for a sales professional to work for a dealer or directly for the manufacturer? There are advantages and disadvantages to both.

The Pricing Factor

The first thought that many have about the advantages of working for directly for a manufacturing is pricing flexibility. While the manufacturer almost always has control over what their product or service is priced at, the pricing that their sales rep ultimately receive is not always lower than what dealers receive.

The main factors involved in whether or not direct pricing is more aggressive than dealer pricing are:

1. Is there an emphasis towards dealers or direct?
2. Overhead expenses

If a manufacturer is trending towards building up their dealer base, they will usually set their dealer pricing more aggressively when compared to their direct sales arm. This is done to help their dealer channel be more aggressive in the market while also improving their relationships with their dealers.

In general, the larger the company the higher their overhead expenses are. A large manufacturer has to cover more salaries, advertising, costs involved with compliancies, distribution, warehousing and the entire burden of manufacturing costs.

Dealers are usually saddled with cost of goods, salaries and marketing. The higher the overhead, the higher the marketed price of goods will be.

Job Security and Advancement

Generally, working directly for the manufacturer allows for more job security and more advancement opportunities. Dealerships, having a smaller sales force, offer less job security and fewer opportunities for advancement.

There are some critical wildcard factors with this topic. The main factor is whether or not the manufacturer is trending towards more focus to their dealers or to their direct sales force. If they are more interested in their dealer channel, then job security might be  a challenge for their employees. The second wildcard factor are the dealers and how stable a particular dealer is. While large manufacturers going out of business is not an extremely rare event, it is more common for a dealer to go belly up than it is for a manufacturer.

Name Recognition and Competitiveness

When you think about mainframe computers, for example, do you think about IBM or one of their dealers? The vast majority of people will think of the manufacturer before thinking about one of their dealers. This name recognition is a tremendous advantage for sales professionals working directly for a manufacturer. This advantage alone can be a huge competitive advantage in the sales field.

This is not to suggest that dealers can't also benefit from name recognition and have the competitive advantage in the market place but it is much less frequent.

Lastly, if a manufacturer has a negative event happen, like a product recall, the negative effects are usually more challenging for the manufacturer than for a dealer, but both can and often are affected.

Final Thoughts

Having worked for both a manufacturer and for dealers, both offer their advantages and both have disadvantages. I feel that the main factor is how the manufacturer feels about the future of their company. If the focus is towards dealers, choosing to sell for a dealer is probably the better long-term career choice.