Ecommerce & Digital
The Wholesale vs Ecommerce Decision: How to Model It Properly
1 April 2025
The wholesale versus ecommerce decision is one that every product business faces at some point, and most make it on incomplete information. The standard comparison looks at the price achieved per unit in each channel and concludes that ecommerce wins because the retail price is higher than the wholesale price.
That comparison is not wrong. It is incomplete. And the parts it leaves out are the parts that determine whether the decision is actually correct.
I have made this decision under pressure, with Brexit dismantling a wholesale model overnight and ecommerce as the only viable alternative. I have also made it deliberately, as a strategic channel choice. The financial model for both looks different from the inside.
What the simple comparison misses
The cost of acquiring the customer. In wholesale, the retailer acquires the customer. Your product is on their shelf, in their catalogue, in their email marketing. You pay for that through the margin you give them. In ecommerce, you acquire the customer. Through paid media, SEO, marketplaces, email, or word of mouth. The cost of customer acquisition is real and it is yours.
The question is not whether the ecommerce unit price is higher than the wholesale unit price. The question is whether the DTC margin, net of customer acquisition cost, is higher than the wholesale unit price net of the margin given to the retailer.
Per-unit fulfilment at retail versus pallet economics at wholesale. Shipping a single unit to a consumer costs more per unit than shipping a pallet to a retailer. The savings on the retail margin can be partially or fully offset by the increase in fulfilment cost per unit. Model the actual per-unit fulfilment cost in each channel, not an assumption.
The returns rate difference. Ecommerce returns rates are typically higher than wholesale returns rates, particularly in categories where fit, colour, or expectation matching is imprecise. A 10% return rate in ecommerce versus 1% in wholesale represents a meaningful cost difference that belongs in the comparison.
The capital requirement difference. Wholesale typically involves large orders paid on terms of thirty to ninety days. You produce in volume, ship in volume, wait for payment. Ecommerce involves smaller orders paid immediately but requires you to hold retail-level inventory across more SKUs and replenish frequently. The working capital requirement can be higher or lower depending on your specific model. Model it rather than assuming.
The model structure
Build a channel P&L for each option that includes: revenue per unit, cost of goods, fulfilment, customer acquisition or retailer margin, returns, payment processing, and an allocation of shared overhead.
The result is a contribution per unit per channel. That is the number that supports the decision, not the headline price.
Then build the volume assumptions. What volume is achievable in each channel, and what investment does it require to get there? A wholesale account with a major retailer gives you volume at a price. Building equivalent ecommerce volume requires time and marketing investment. The payback period on that investment is part of the decision.
Both is often the answer
The wholesale versus ecommerce framing assumes a binary choice. For most product businesses, the answer is both, managed as distinct channels with distinct economics, distinct customer profiles, and distinct operational requirements.
Wholesale provides volume and cashflow. Ecommerce provides margin, data, and customer relationships. The risk of losing a wholesale channel makes diversification essential. The combination, with clear channel economics for each, is more resilient than either alone.
The decision worth modelling is not wholesale or ecommerce, but how much resource to allocate to each channel given the relative economics and the strategic objectives of the business.
Maebh Collins is a Chartered Accountant (FCA, ICAEW) with twenty years of operational experience managing wholesale and ecommerce channels across international markets, including a forced channel pivot driven by Brexit.
Maebh Collins is a Chartered Accountant (FCA, ICAEW), Big 4 trained, with twenty years of experience building and running international businesses. She specialises in finance transformation, ecommerce operations, and digital strategy.