Illustrative case: deciding to open a new channel with costs and transfers.
Key distinctions
Three conditions before calculating.
Full cost
Net price, commission, payment, picking, delivery, return, fraud, support and promotion must be expressed per order. Fixed costs are separated in order to compute a threshold.
Origin of the orders
Sales coming from an internal channel do not create the same value as customers won. The margin lost is valued on the source channel and on the costs genuinely avoided.
Prudent future value
Repeat purchase is added only for customers who are identifiable, consenting and genuinely new. It is discounted, net of the cost to serve, and capped by historical evidence.
Method
Computing the threshold before turning a pilot into a rollout
- 01Build the unit economics
Compute contribution per order in the new channel, with a distribution of basket, return and logistics cost rather than a single average.
- 02Attribute the sources
Estimate created demand, competitive conquest and transfers through a geo test, a survey, identifiers or a cohort comparison, and publish a range.
- 03Add costs and future
Deduct lost margin, integration, content, stock, team and launch marketing; add only the demonstrable future value of new customers.
- 04Solve and steer
Compute the break-even volume and test several transfer rates; limit the pilot to the area where service and data allow learning.
The economic bridge from order to portfolio
The channel is assessed per order, then corrected for the margin lost on transfers and for launch costs to obtain its volume threshold.
700 orders stay below a threshold of 1,261
A marketplace brings 700 orders at €31 of unit contribution. Thirty percent are transferred from an internal channel at €48 of contribution. Forty percent are new customers generating €18 of future contribution. Fixed costs are €30,000.
Incremental contribution per order: 31 − 30% × 48 + 40% × 18 = €23.80. Threshold: 30,000 ÷ 23.80 = 1,261 orders. At 700 orders: 700 × 23.80 − 30,000 = −€13,340.
Full opening is refused. The pilot can continue in order to reduce costs or to prove more new demand, but the channel must not be judged on its €21,700 of apparent margin.
Acceptance conditions
What must be true to act.
- 01
The contribution per order includes every variable cost of the channel.
- 02
Internal transfers are valued with the margin of the source channel.
- 03
Future value concerns only genuinely new customers.
- 04
The expected volume exceeds the threshold in a prudent scenario.
Limits
What this analysis does not prove.
- Order sources change after the novelty phase.
- Logistics costs vary strongly with density and returns.
- A partner can change commission, visibility or access rules.
References
Works cited.
- Yoo, W. S. & Lee, E. (2011), “Internet Channel Entry: A Strategic Analysis of Mixed Channel Structures”, Marketing Science, 30(1), 29–41.
- Balasubramanian, S. (1998), “Mail versus Mall: A Strategic Analysis of Competition Between Direct Marketers and Conventional Retailers”, Marketing Science, 17(3), 181–195.
- Fisher, M., Gallino, S. & Xu, J. J. (2019), “The Value of Rapid Delivery in Omnichannel Retailing”, Journal of Marketing Research, 56(5), 732–748.