The Middleman Takes Your Margin and Your Customers: When to Open Your Own Sales Channel

What the middleman really takes

If you sell through distributors, agents or platforms, part of your margin goes to the middleman. But they do not take only the margin, they take the contact with the customer. When you decide to open your own channel, you are not just opening a new source of revenue, you are entering conflict with partners who bring you money today. The question is when direct sales bring in more than they cost.

When you should open your own channel

You do not know who your end customers are or why they buy, and you cannot reach them without the middleman. You depend on them, because when they leave, the customers go with them. Direct sales are a way to win that contact back.

The middleman sells little, does not invest in your brand, does not train sales staff, and also sells your competitors. You lose, and you pay them a margin for it. Direct sales can then bring back control, but only if you can truly do it better.

The product needs a direct relationship: training, support, adaptation. If the middleman cannot provide that value, direct sales are the only way. If the product does not need it, the middleman may do better.

When you should not

The middleman does better than you would, with a stronger network, relationships and logistics. Do not replace them, use them. Direct sales are not always better, often just more expensive.

You have no team, logistics or capital to build a channel. Direct sales then cost more than they bring, since they demand investment before they bring revenue.

Direct sales would put you in competition with your own distributors, take their customers or undercut their prices.

Direct sales is not only margin

The first trap is the calculation. A channel opened only for a higher margin, without counting the costs of people, logistics, marketing and support, brings in less than you think. Direct sales are not only margin, they are also cost.

The second trap is the partners. Some will take offence, some will reduce their effort, and some will leave. If you did not count on that, you will learn it by watching relationships you built for years deteriorate.

The third trap is cannibalisation. If direct sales merely take customers your intermediaries already had, you gain nothing new, you only change the road the goods travel. The margin per unit may be higher, but total volume is smaller, and your intermediaries are angry.

What to check before going direct

First, whether your intermediaries know what you are planning, and why it does not threaten their position, if that is truly the case. If they hear it second hand, trust breaks, which is especially dangerous when exclusivity agreements exist.

Second, who you would be selling to. Customers your intermediaries do not reach are a complement, while customers they already serve mean cannibalisation. Answer honestly which of the two stories this is.

Third, how long you can hold out. Direct sales often need a long stretch before the first results. If you cannot wait a year or more for a return without endangering salaries and obligations to suppliers, the risk is too high.

How to open a channel without conflict with partners

Start with a segment partners do not cover: new customers, a new geography, a new channel. There you can learn without taking their customers.

Divide clearly who sells to whom, by customers, geography or products, and stick to it.

Do not sell cheaper than your partners. Keep prices the same or higher, otherwise partners lose customers and you lose partners.

Tell partners before you announce the decision. If they hear it from the market, you lose trust, and if you tell them personally, you can keep the relationship.

Be ready to lose some. The question is whether that cost is smaller than the benefit.

Start with one channel, for example your own web shop with a limited range. If it works, expand step by step, and if it does not, you have not sunk the whole platform.

The cost you pay and the cost you cannot see

Your own channel is a different model with different costs. You are not choosing between a middleman and your own sales here, but between a cost you already pay and a cost you cannot see yet.

If you are thinking about your own sales channel, describe your current channels, costs and plan. You will get a report with options and risks.

The biggest risk is spoiling what already works in the hunt for a bigger margin.

Level we suggest: Consilium (8 AI perspectives, 19 EUR) or Grand Consilium (12 AI perspectives, 29 EUR).