You make a unique consumer product. You can sell directly to individual consumers via your e-commerce website, or you can sell indirectly by selling wholesale to a smaller number of relatively high-volume retailers. Wholesale versus retail – which marketing channel should you emphasize? How do you decide? It's a classic dilemma for human scale businesses.

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The Dilemma

Imagine you know the following about your average retail (direct channel) and wholesale (indirect channel) customers:

Table 1

Your retail price is $100 per product, so you have to sell it wholesale at a 50% discount, or $50. Your direct costs include the net costs you incur to get your product to your customers. Bulk packaging and shipping offers some cost advantage in selling to wholesale customers, so your direct cost per product is $25 for a retail customer and $22 for a wholesale customer. You figure your average retail customer will buy two of your products per year. Let's say your wholesale buyers tend to be fairly small, niche retailers, themselves. So, they don't buy enormous quantities of your product. Nevertheless, the average wholesale customer still buys 164 items per year.

On the one hand, that retail margin is really attractive: ($100 price per product - $25 direct cost per product) / $100 price per product = 75%. That said, even with an apparent profit of $75 per product, that only translates to $75 per product x 2 products per year per customer = $150 per customer per year.