How to Research Markets & Sales Channels

This course will help you start your own business through discovering your product’s market and your sales options. You will learn that a comprehensive market research is essential for your business and which aspects you should not neglect. You will also find out how to choose the best fitting distribution channel for your product. 

Who is this course for? 

The course is intended for anyone thinking of starting their own business. 

What will you learn? 

• You will learn how to analyse your market 
• You will get to know your competitors 
• You will understand your customers and their needs
• You will know how to select a suitable channel to sell your craft product

Keywords: Sustainability, tourism, management, entrepreneurship

How to Research Markets

In this section you will learn how to analyze your market and understand your competitors. 

Lesson 1: Starting the project

This is Bintu:

She would like to create her own fashion collection, but doesn’t really know where to start.

Perhaps you are like Bintu. You are good at making several different types of handicrafts or souvenirs. But you aren’t really sure which one might be a good seller?

Choosing what to sell is the most important decision you will make. It will determine the demand for your product, the product competition, the price and profitability, the sales channel, the promotion and therefore the sales.

• Have a product idea
• Set a price
• Create profitability
• Promote your product

Bintu’s role model: Mamadou Wane aka Papi

These are questions that Bintu has been asking for some time. One person who has already answered them successfully is Mamadou Wane aka Papi. The designer and founder of the successful fashion line MWAMI is Bintu’s great role model.  

Do you already know Papi and MWAMI? Allow Bintu to take you into the world of the fashion designer in the next video.

May we introduce: Papi and MWAMI

I think it’s a great time. I don’t think there’s ever been a better time to be an entrepreneur than today.

My name is Papi. I also go by the name L’Artrepreneur. I am a fine artist, a visual artist, and by default ended up being a fashion entrepreneur as well. I’ve always enjoyed turning my ideas into tangible things and then those tangible things into generating revenue. From a very very early age, when I was a child, I’m always already used to draw… anime characters and portraits of my relatives and then sell them to family members. Creating clothing that resembled me, that I wanted to wear, it seems to resonate with other people as well. That’s where it picked up. 

As with anything else that I invest myself into. I see something that’s missing on the market, I see a problem that I believe I can bring a solution to. And that ends up turning into a project that adds value. I associate challenging with motivating. When it comes to adversity though, I think you have to be built for it, man. The thought process comes from whatever is really on my mind constantly. I kind of have these themes that periodically I’ve obsessed over. And those themes get translated into colour schemes, lines, textures, lights and shapes. 

I hoard fabrics. I own way too much fabric. Anything I see that I think can really fall into place, I just get the whole roll of it. It was important to have as much sustainability as we could. So far the approach has been to strictly use either fabrics that are traditionally hand made by local artisans, fabrics that have been in storage for the past 10, 15, 20 years. Somewhere in the village or in a container out of town. I don’t consider Mwami to be an African clothing brand. I think anything I do because I’m African and because it’s all embedded in the fabric of what I make and how I think and how I express myself is by nature African. 

I have a thing called the Mwami Family, which is the people closest to the brand. We share a lot of the same values, so it’s easy for us to collaborate and just help each other out. To me, to this day, sure I love to be able to ship clothing to Asia, America and Europe. But I equally love having that human interaction with my customers and because it’s so limited, it’s easy to actually track who wears what. 

I definitely think people should invest on social media because most of the time it’s relevant to your business. There’s a great revolution happening there.  The direct to consumer, the ability to transcend borders, the fact that the world is literally just one screen tap away from you. To anybody pursuing their dreams, I would recommend to never lose sight of the why.  I think it’s important to see past the product, and to think of people because that’s  who’s really at the center of your enterprise.

An impressive success story, isn’t it? That’s what Bintu thought, too. But everyone starts small.

To choose the right product, you must identify and understand your market first. Have you ever thought about this before? Welcome to: Market research.

Once your market research is completed you can choose and create products people really want to buy. Are you excited about how to do that? 

Let’s begin to explore the market in the next lesson.

Lesson 2: What is market research?

You may already have an idea about market research. It is about identifying and understanding your market. 

Before we get deeper into the topic, let’s see what the definition of market research is:

Market research is a systematic process of collecting, analysing and interpreting information about a target market, consumers, competitors and the industry as a whole.

But what exactly does this mean?

For you as a craft maker market research means collecting information about:

Customers

• who your customers are
  • how they behave
  • where they shop

Purchase

• what influences customers’ purchase decision
  • what kind of craft products are trending

Competition

• what kind of products other craft makers create
  • at what prices other craft items are sold  

You see, there are many questions that you can ask to find out useful information about your market.

Bintu would like to learn more about market research. She is surprised to learn that it is often enough to take a walk around a local market and look at everything that is going on. Who sells what to whom? That is not a big effort for Bintu. Equipped with pen and notepad, she sets off for the local clothing market just around the corner from her home.

Lesson 3: Why is market research important to sell your craft product?

Now that you know what market research is, let’s see why it is so important in selling your craft products successfully.

Imagine that you have spent hours or days and money crafting handmade products, only to realise that nobody will buy it. This is frustrating. You start wondering how this can be?

Well, there can be different reasons for that. Maybe you have created a beautiful craft item, but customers are not interested in buying it because they do not need it. Maybe you tried to sell your product in the wrong place. Or maybe another craft maker is selling the same product for a cheaper price or of better quality. See why it is important to conduct market research first? Papi

Benefits of market research

• Understand what your customers want and need
• Choose and develop products that customers want to buy
• Gain a better understanding of your competitors
• Know sales channels
• Identify what prices customers are willing to pay
• Minimise investment risks
• Uncover ideas and trends
• Do the right promotion

Check your knowledge

1.  What happens if you don’t understand what customers want and need?

• I might spend time creating a product without demand.
• People will still buy the product, if the idea is good enough.
• Nothing. It is more important that I do my own thing.

2.  Is it helpful to see what your competitors are selling?

• Yes, because I can learn from them and try to stand out with my souvenirs and handicrafts.
• No. They are doing their thing and I am doing my thing.
• Not necessarily, when people like my product, they will buy it from me, no matter what it costs.

3.  You realize that sales of your souvenirs and handicrafts have dropped in recent times. What would you do?

• My souvenirs and handicrafts might not be trending anymore among my customers. I will start exploring new trends.
• Nothing. It is just a phase. People come and go.
• I could copy what my competitors are doing. If they are successful, I must be too.

Lesson 4: What do you need to know about the market before doing research?

Before you start your own market research, it is important to know what you should be looking for. 

There are three areas where you need to gather and analyse data. These are:

Customer and Reseller

Customers are people who want to buy your product.

Competitors

Competitors are other craft makers that have similar products and similar customers to you.

Craft making segment

The craft-making segment is all the other craft makers working in the same or similar field as you do.

1. Consumer and Reseller

Your customers are people who are most likely to buy your product. They may be consumers or resellers. Consumers are people who buy your product to use it themselves. Resellers buy your products to resell them to others, thus helping you to reach more consumers.

Types of consumers

• Consumers from your own country
• Foreign consumers visiting your country
• Consumers from neighbouring countries
• International consumers

Types of resellers

• Retailers
• Traders
• Importers
• NGOs

If you understand your customers, you can design products that consumers want to buy. And if THEY like your products, retailers, traders, importers and NGOs  will also want to buy them to sell to their customers. 

Bintu asks herself: What exactly is the difference between selling to consumers and resellers?

Let’s see what Papi has to say…

The difference between selling to consumers versus retailers mostly affects your pricing, your marketing and your sales channels. It gives you more freedom on how to price your product versus when selling to a retailer there are formulae in place. You sell… you gonna have to sell bulk or semi-bulk. And you gonna have to account for the retailer’s profit margin. That is a big difference to take under consideration when choosing your sales channel. 

The difference in terms of social media, promotion and marketing, is that when you are selling directly to consumers, you’re completely responsible for your own promotion. That also means you have more freedom in terms of what you get to say and how get to sell your product. But when it comes to selling with a retailer, you can use each other’s content. It’s also useful because you get to amplify each other and your retailer, if they have the kind of positioning on the market, can help you by bringing you a chunk of their audience

2. Competitors

Your competitors are other craft makers that fulfill the same customer needs as you do with your product.

Looking at who your competitors are, what products they make and which prices they set, helps you to find your specific product niche and create unique and competitive craft items meeting customers’ needs.

Your competitors can be other craft makers in your city, in your country, within a bigger region or even at global level, depending on where you sell your products.

3. The craft-making segment

How do you know about recent developments in your craft segment? You can research online or go to local markets and shops to see what is trending and selling well.

Following recent product developments in your craft-making segment, either online or in your local shops, offers many advantages for advancing your product:

• Collecting new ideas and inspiration for development
• Gaining insight into your customers and what they are responding to well
• Learning more about competitors
• Discovering new opportunities
• Keeping current customers and gaining new customers  

Of course not every trend will be relevant to you, because trends can come and go. Still, keeping an eye on that keeps you up-to-date and helps to explore new opportunities for your own products.

Consumer’s purchasing criteria

Different types of consumers care about different types of products, because they care about different things. These can be:

Style

Fashionable, trendy

Design

Contemporary, traditional, culturally inspired, colour

Quality

Raw material, workmanship, finish, artisanal skill

Exclusivity

Unique, custom made, limited number

Environmental impact

Environmentally friendly material, reduce, reuse, recycle

Social impact

Fair trade, where and how products are made

Price

Good price-quality ratio

How to Research Sales Channels?

Lesson 1: What is a sales channel?

Bintu now has a good overview of the customer group and her competitors. 

The question now is: What are the sales channels? 

 

Understanding sales channels

Understanding what a sales channel is used for is not difficult because you already know this from your daily life…

 

Step 1: Handicraft maker

Step 2: Customer

Step 3: Sales channel

Selling products successfully

Customers decide where they want to buy their product. They show specific preferences to buy a certain product in a particular way, at a particular place. So, considering where your customers will buy your souvenir or handicraft helps you to sell your products more effectively.

Local, regional and international sales

Sales take place on three different levels – Local, regional and international. Each blue arrow indicates when the product is sold. As you can see, some products are sold a number of times before they reach their final consumer.

Check your knowledge

Check which of these options are sales channels: Please tick your choices.

• Personal selling
• Retail
• Wholesale
• E-commerce
• Social Media
• Online marketplace
• Distributors
• Importers
• NGOs
• Local markets
• Craft fairs

Did you check them all? That’s right, they are all potential sales channels for your products!

Why are sales channels important to sell your craft product?

When you put your heart, time and money into creating beautiful souvenirs and handicrafts, your work deserves to be seen and bought.

Drag each product to the most suitable sales channel:

• Car dealer     – Cars
• Clothing store – Sweater
• Craft market – Handicraft
• Supermarket – Canned food

Lesson 2: What types of sales channels exist?

To get a better overview of sales channels, Bintu researches on the internet and learns that there are direct and indirect sales channels

Direct and indirect sales channels

Direct means when you sell your products directly to a consumer. Indirect means when someone else sells your products to consumers.

If you sell directly to consumers, your sales channel could be your own market stall. If someone else sells your products your sales channel can be a retail shop.

Direct channels

1. Your own shop

In a workshop you can sell your products face-to-face, you can showcase your working process and provide hands-on experiences.

Decision factor:  If you already own a workshop or a shop this can be a convenient way to sell your products. But opening a new shop needs many considerations first

2. Events / markets / exhibitions

At events/ markets/ exhibitions you can also sell your souvenirs and handicrafts face-to-face to a target group that is interested in craft items.

Decision factor: Selling at events/markets/exhibitions is a great start as it increases awareness of your craft making, sells more of your products and expands your network circle. You can interact directly with your customers and give them insights into your work, which people really appreciate. Such events typically charge a fee for the space needed for a table or stand. And you need to be well prepared for how to showcase your products.

3. Personal contacts

Your personal contacts are your network of family, friends, consumers, resellers, producers, NGOs and other businesses. Your network can be a great source for finding sales channels and making contact with people working in that sales channel. 

Decision factor: Asking people in your network is easy and it is for free

4. E-commerce (online)

E-commerce is selling through online channels on specific e-commerce shops like Shopify or Etsy or social media.

Decision factor: You can reach a huge number of people no matter where they are located. These options usually cost money to design and maintain. Also, marketing is very important to get a high volume of sales.

Indirect channels

1. Retailer with shop

Retailers specialise in reaching consumers. They buy your products and market and sell them to consumers in shops.

2. Importer

Importers buy your products and sell them to retailers in their local markets

3. Wholesalers

Wholesalers fulfil retail orders, resell products in bulk, focus only on storage and delivery goods and buy from traders/distributors

4. Trader or distributor

Traders or distributors buy your products at wholesale prices and take care of marketing and sales to their network of importers or retailers.

5. NGOs

Some non-governmental organizations (NGOs) have funding from donors to help artisans access markets. They act locally or internationally as traders, importers or retailers

NGOs

Some non-governmental organizations (NGOs) have funding from donors to help artisans access markets. They act locally or internationally as traders, importers or retailers

An example of an indirect channel

Let’s say you make handmade scarves and you find in your market research that international consumers in the UK will be your perfect target group. But you cannot sell directly to them because you don’t know how to reach them. You would have to find an importer who has contact with a retailer in the UK who can reach consumers there. In addition, all of these middlemen also want to earn money, which means that you will get a little less profit than what you might have expected. This is how your handmade scarves can get to a person who loves local, handmade products in the UK.

Keep in mind that the further away your consumers are, the more complicated and costly it is to reach them because of the increased cost of shipping, export and import fees. 

Bintu now understands that it is important to know the direct and indirect sales channels in order to place her product in the right channel. 

Not all sales channels may be suitable for you. Continue to find out how to choose the right sales channel for your product.

Lesson 4: How to choose the right sales channel for your product

You now have a sense of the sales channel types. Depending on what you want and where your customers are located, you may need more than one sales channel. 

To choose the right channels, you will need to know:

• Where your competitors sell, what methods they use and why. If this is working well, you can choose the same channel. Or you might even find a further channel your competitors have overseen.
• Where your customers buy souvenirs and handicrafts. Some might prefer going to a market, some like to buy online. 
• Your product characteristics. Are your products suitable for selling online or might it be better to sell them face-to-face?
• Your costs and benefits. Carefully weigh up the costs and benefits associated with each sales channel.

Direct sales channel

Sales channel	Local	Regional	International
Own workshop/shop	✓
Events/markets/ exhibitions	✓	✓	✓
Personal contacts	✓	✓	✓
e-commerce	✓	✓	✓

Indirect sales channels

Sales channel	Local	Regional	International
Shopkeeper at the market	✓
Retailer	✓	✓	✓
Traders	✓	✓	✓
NGOs	✓	✓	✓

Now that you have successfully completed this unit, you are well prepared to conduct your own market research and find the appropriate sales channels.

Would you also like to learn about pricing and promotion? Then continue with Explore pricing & promotion.