Channel economics across industries: direct, retail, marketplaces, distributors and sales teams
What each route to the customer keeps from the price, what it costs you, and when it is worth it, with real fee and margin figures.
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Key takeaways
- A channel is the route a product takes to the customer. Every channel keeps part of the price or charges you to serve the customer yourself.
- A carmaker sells through dealers who keep part of the price and handle service.
- Common mistakes: Adding the retailer's margin to your own when you go direct, and forgetting that direct selling has its own costs: delivery, returns, payments, service and advertising.
Key idea
A channel is the route a product takes to the customer. Every channel keeps part of the price or charges you to serve the customer yourself. Compare channels on what you keep per unit after all channel costs, then on how many customers each one reaches.
The five main routes
- Direct: your own website, app, stores or phone line. You keep the full price but pay to win, serve and deliver to every customer.
- Retail: supermarkets, pharmacies, electronics chains. You sell at a wholesale price; the retailer keeps the gap to the shelf price and often charges for promotions and shelf space (trade spend).
- Marketplaces and app stores: Amazon, Noon, Flipkart, Shopee, Apple's App Store, Google Play. You set the price and the platform takes a fee per sale (its take rate), plus fees for delivery or advertising if you use them.
- Distributors and wholesalers: firms that buy from you and resell to thousands of small shops you could not visit yourself, such as India's neighbourhood stores (general trade). Each layer keeps a margin.
- Sales teams: people who sell to businesses, often for large or complex purchases. The cost is salaries and commission per customer won.
| Channel | What it keeps or charges | Source |
|---|---|---|
| Supermarkets and grocers (US listed companies) | Gross margin about 26 percent of sales; net margin about 1.3 percent | NYU Stern data set, January 2026 |
| General retailers (US listed companies) | Gross margin about 33 percent of sales | NYU Stern data set, January 2026 |
| Distributors (US listed companies) | Gross margin about 31 percent of sales | NYU Stern data set, January 2026 |
| Amazon US marketplace | Referral fee per item, mostly 8 to 15 percent of the price depending on category, plus fulfilment fees if Amazon stores and ships | Amazon seller fees page |
| Apple App Store | 15 percent commission for developers with up to USD 1 million of proceeds a year; a higher standard rate above that | Apple Developer |
| Google Play (standard tier) | 15 percent on the first USD 1 million a year, 30 percent above it, 15 percent on renewing subscriptions; new regional fee plans are being rolled out | Google Play Console Help |
| Online share of US retail | E-commerce was 17.1 percent of US retail sales in the second quarter of 2026 | US Census Bureau |
So-what
A retailer's gross margin is roughly the share of the shelf price it keeps from your product, here a quarter to a third. A marketplace keeps less per sale, but you pay for delivery, advertising and service yourself.
A retailer that buys at 75 and sells at 100 keeps 25. As a margin (share of the selling price) that is 25 percent. As a markup (share of the cost) it is 25 divided by 75, about 33 percent. Ask which one people mean before you use the number.
Worked case
Four routes for a skincare brand in India
The prompt
A fictional skincare brand in India sells a cream at INR 500 to the consumer (all figures exclude tax). Making it costs INR 150. In modern trade (supermarket chains) the retailer keeps 25 percent of the shelf price, and the brand spends INR 25 a unit on promotions and INR 15 on logistics. In general trade the shop keeps 15 percent and the distributor 8 percent; logistics cost INR 10 and the brand's own sales team INR 30 a unit. On a marketplace the fee is 15 percent, delivery through the platform INR 60 and on-platform ads INR 50 a unit. On its own website the brand pays 2 percent for payments, INR 70 delivery, INR 15 of returns and INR 120 of advertising to win each order. Which route earns the most per unit? (Figures are illustrative.)
The structure
- Contribution per unit = what the brand receives minus product and channel costs
- Modern trade: shelf price minus retailer margin, minus promotions and logistics
- General trade: minus shop and distributor margins, minus logistics and sales team
- Marketplace: minus fee, delivery and ads
- Key: Own website: minus payments, delivery, returns and the cost to win the order
Working it through
1. Modern trade
The brand receives 75 percent of INR 500, then pays promotions, logistics and the product.
Modern trade contribution (INR per unit):500 × 0.75 - 25 - 15 - 150 = 1852. General trade
The brand receives 500 minus 15 and 8 percent margins, then pays logistics, sales team and product.
General trade contribution (INR per unit):500 × (1 - 0.15 - 0.08) - 10 - 30 - 150 = 1953. Marketplace
Full price minus the 15 percent fee, delivery, ads and product.
Marketplace contribution (INR per unit):500 - 500 × 0.15 - 60 - 50 - 150 = 1654. Own website, first order
Full price minus payments, delivery, returns, advertising and product.
Website contribution, first order (INR):500 - 500 × 0.02 - 70 - 15 - 120 - 150 = 1355. Own website, repeat order
A customer who comes back costs no advertising.
Website contribution, repeat order (INR):500 - 10 - 70 - 15 - 150 = 2556. Own website, three orders
If a customer orders three times, the INR 120 to win them is spread over three orders.
Website contribution per order over three orders (INR):500 - 10 - 70 - 15 - 150 - 120 ÷ 3 = 215
The recommendation
Per unit, general trade earns the most at INR 195 and the brand's own website the least on a first order at INR 135, so the brand should keep shops and supermarkets as its base. The website only wins when customers come back: over three orders it earns INR 215 per order, more than any other route. The risk is that each route reaches different shoppers, so the choice is about mix, not one winner. As a next step, measure how many website buyers order again within six months; that number decides how hard to push direct.
A carmaker sells through dealers who keep part of the price and handle service. A software company in the US may pay a sales team for large clients and sell self-serve online to small ones. An airline sells direct on its app and through online travel agents that charge a commission. An insurer in the Gulf sells through brokers and banks. In each case ask the same two things: what does the channel keep per sale, and could we reach these customers more cheaply another way?
Read the retail industry briefA software firm selling to businesses in the US pays each salesperson USD 150,000 a year including commission and costs. One salesperson wins 20 new customers a year. What is the sales cost to win one customer, in USD?
A drinks brand in Spain sells a bottle to a supermarket for EUR 1.50, and the supermarket sells it at EUR 2.00. What share of the shelf price does the supermarket keep, in percent?
Adding the retailer's margin to your own when you go direct, and forgetting that direct selling has its own costs: delivery, returns, payments, service and advertising. Comparing one order instead of a customer's lifetime. Ignoring reach: a channel with a lower margin per unit may reach ten times as many buyers. Forgetting channel conflict: a retailer whose prices you undercut online may give your shelf space to a rival.
A brand moves sales from supermarkets to its own website. Which cost does it take on that it did not have before?
When is a field sales team the right channel?
Sources for this lesson (6)
- Recognized public explanations of case-interview concepts and terms
- NYU Stern School of Business data set: margins by industry (US listed companies), data as of January 2026
- Amazon, Selling on Amazon: fees and pricing (US referral fees by category)
- Apple Developer, App Store Small Business Program
- Google Play Console Help, Service fees
- US Census Bureau, Quarterly Retail E-Commerce Sales, second quarter 2026 (released 18 August 2026)
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