Channel margin is not price minus commission.
Channel margin is not price minus commission. Each channel changes discount, logistics, inventory, payment, returns, fraud, support, acquisition, credit and risk exposure. An apparently expensive channel can be more profitable if it brings incremental orders and efficient service. Calculate by order segment and volume step.
Decision and method.
Grow, renegotiate or reduce a channel based on contribution after cost to serve and genuinely incremental volume. Select order, customer, contract or shipment depending on the cost mechanism; segment basket, geography, weight, return and service level. Rework discounts, credits, financing, trade cooperation and taxes to obtain revenue truly retained per order. Link each cost to its driver—order, line, parcel, kilometre, contact, credit day or return—and document capacity steps. Contribution = net revenue − product − commission − payment − logistics − return − service − variable acquisition; present fixed costs separately. Estimate truly new share, cannibalised share and negotiation-power effect, valuing transfers at forgone margin.
Worked example.
On a €100 order, direct has €40 product, €8 logistics, €3 payment, €6 returns, €4 service and €24 acquisition. Marketplace adds €18 commission but reduces those items to €6, €0, €5, €2 and €10. Direct: 100 − 40 − 8 − 3 − 6 − 4 − 24 = €15. Marketplace: 100 − 40 − 18 − 6 − 5 − 2 − 10 = €19. Difference is +€4 before transfer. Marketplace is preferable for genuinely new orders; if more than 21% replace direct orders worth €15, the advantage disappears.
Checks and limits.
Net price includes every discount and trade cooperation; every cost has an activity and measurable driver; capacity steps remain separate from strictly variable cost; value cannibalised share before extension. Shared costs require debatable allocation conventions; bargaining power and data access evolve with volume; short-term margin can miss strategic coverage value.
Resources and sources.
Download the channel-cost model. Related: measure cross-channel journeys, choose distribution mode, evaluate a new channel. Sources: Kaplan and Cooper (1998); Niraj, Gupta and Narasimhan (2001); Coughlan et al. (2006).