Selling through your website, working with resellers or assigning a territory to a distributor creates different business models. These choices affect your margins, stock requirements, customer relationships and the resources needed to grow sales.
An effective distribution network lets customers buy in suitable conditions while leaving each participant a viable return. The best route combines market access, service quality and actual profitability. It is not automatically the shortest route or the one with the most outlets.
Here is how to compare the options, calculate their contribution and build a network suited to a Swiss SME. The figures in the examples are fictional and exclude VAT.
At a glance
- Compare routes by customer access, contribution, service and cash flow.
- An intermediary can make growth more profitable by performing useful functions.
- Test partners and define responsibilities before expanding the network.
Channels, routes and networks: what is the difference?
These terms are sometimes used interchangeably. For decisions, use a practical distinction: a channel is a way of selling, the distribution route describes the stages between producer and customer, and the network brings together the parties involved.
| Concept | Practical meaning | Example |
|---|---|---|
| Channel | Commercial way for customers to access your offer | Own shop, online store, specialist reseller |
| Distribution route | Sequence of parties between producer and final buyer | Manufacturer, wholesaler, retailer, consumer |
| Network | Organised group of partners and outlets | Twelve retailers and two regional distributors |
| Logistics | Storage, transport and returns arrangements | Warehouse, carrier and repair centre |
A carrier is not necessarily a commercial intermediary: it may deliver a product you sold directly. Conversely, a reseller remains a commercial intermediary even if you ship the goods yourself to the end customer.
To classify a route, ask who sells to whom, who invoices and who takes on the commercial obligations. Distance travelled and the number of parcels do not determine its commercial length.
Direct sales, one intermediary or several?
Direct distribution
You sell to the end customer without an intermediary reseller. This could mean your own shop, online store, employed salesperson or a sale made directly after a demonstration.
You have greater control over presentation, the relationship and the price of your own sale. In return, you fund acquisition, customer assistance, invoicing, service and often returns. Not paying a reseller margin does not make these functions disappear. Include them in your customer acquisition and retention calculations.
A short distribution route
One commercial intermediary sells your offer to the final customer. For example, you supply a specialist shop that buys your products for resale.
The partner provides customers, a sales outlet and possibly advice. Its margin must be sufficient to perform that role. Check that it actively promotes your offer: being listed does not mean being sold.
A long distribution route
Several intermediaries are involved, such as a distributor or wholesaler followed by retailers. This can open up a fragmented market, distant regions or a large number of outlets.
It generally reduces your direct access to end buyers and shares value among more participants. It may nevertheless be economically better than a direct operation your SME cannot afford to build.
Marketplaces and platforms
A platform may act as an intermediary, a technical service provider or a buyer and reseller. Its name alone does not determine the distribution model. Examine the contract, the displayed seller’s identity and the invoicing arrangements.
Also consider commissions, logistics fees, access to data, returns rules and suspension conditions. A platform can provide an audience while creating substantial commercial dependence.
What should each partner do?
Start by defining the function you need. Are you looking for orders, local stock, installations, support or access to buyers you cannot reach yourself?
| Partner | Main function | What to check |
|---|---|---|
| Reseller | Buys and resells to its customers | Ability to present the offer and deliver agreed service |
| Wholesaler | Consolidates purchases and supplies other sellers | Stock turnover, volumes, coverage and payment terms |
| Distributor | Develops a market within an agreed scope | Sales team, stock, support and reporting |
| Commercial agent | Negotiates or facilitates business for the principal | Authority to act, commission and contractual framework |
| Business introducer | Makes introductions within an agreed arrangement | What qualifies as an introduction and what triggers payment |
| Integrator or installer | Assembles, deploys or installs a solution | Skills, liability and quality of delivery |
These labels do not by themselves establish rights and duties. The agreement and actual activities matter. In Switzerland, an agency contract can involve specific rules on remuneration, termination and compensation for clientele where the legal conditions are met.
In services, a network may include referral partners, service resellers or subcontractors. Always distinguish the party contracting with the customer from the party doing the work. This determines who handles complaints and answers for the promised service.
Choose the level of distribution coverage
Intensive distribution
You seek a presence in many relevant outlets. This approach suits products for which availability matters and substantial specialist assistance is unnecessary.
It requires supply capacity, a clear range and volume monitoring. Adding outlets without sufficient stock turnover can tie up inventory, increase returns and distract the team from productive partners.
Selective distribution
You choose partners using defined criteria: technical expertise, demonstration facilities, service quality or presentation. This can suit products requiring advice or a particular sales environment.
The criteria must match the distribution need. Their application and restrictions placed on partners require assessment under applicable competition law. Brand positioning does not automatically justify every restriction.
Exclusive distribution
You grant a partner reserved rights within an agreed scope. Exclusivity can encourage investment, but makes you dependent on its performance and ability to cover the market.
Before granting a large territory, specify duration, targets, expected resources, exceptions and review conditions. Poorly defined exclusivity can block sales without the partner actually developing the market.
Compare channels using six criteria
Start with your target customers’ behaviour. Where do they look for solutions? Do they need to see or try the product, have it installed or compare brands? A convenient channel for you may lack credibility or accessibility for the buyer.
Assess each option using the same framework.
| Criterion | Questions to ask |
|---|---|
| Target customer access | Does the channel actually reach the buyers you want? |
| Economics | What contribution remains after all channel-specific costs? |
| Service | Who advises, delivers, installs, trains and handles returns? |
| Control | Who decides presentation, offers and customer relationships? |
| Cash flow | Who finances stock, payment terms and unsold goods? |
| Dependence | What happens if the partner or platform stops operating? |
Add your offer’s specific requirements: fragility, shelf life, demonstrations, customisation, spare parts or purchase frequency. An SME selling technical equipment should not build its network like a small accessories brand.
In Switzerland, consider language regions and support capacity. A partner able to sell in German but unable to provide the promised support solves only part of the problem.
Worked example: direct sales or a reseller?
A business manufactures a product with a variable production cost of CHF 40. The selling price to the end customer is CHF 100 excluding VAT. It compares its online shop with a retailer network.
| Per-unit item | Direct sales | Sale to a reseller |
|---|---|---|
| Manufacturer’s revenue | CHF 100 | CHF 65 |
| Variable production cost | CHF 40 | CHF 40 |
| Variable acquisition or partner support | CHF 18 | CHF 3 |
| Preparation and transport paid by the manufacturer | CHF 8 | CHF 2 |
| Payment, support and allowance for returns | CHF 5 | CHF 2 |
| Unit contribution before channel fixed costs | CHF 29 | CHF 18 |
The manufacturer retains CHF 29 through direct sales and CHF 18 through the reseller. That does not immediately make direct sales preferable. If the direct channel requires CHF 4,000 in monthly fixed costs and the network CHF 1,500, their break-even volumes differ.
Direct sales must reach at least 138 units per month to cover their own fixed costs: 4,000 ÷ 29. The network needs at least 84: 1,500 ÷ 18. This assumes constant unit contributions and separate treatment of company-wide fixed costs.
At 150 units, direct sales leave CHF 350 after their own fixed costs. A network selling 300 units leaves CHF 3,900 after its own. Accessible volume, production capacity and management effort therefore change the conclusion.
Do not confuse margin with markup
A reseller buying at CHF 65 and selling at CHF 100 has a gross margin of CHF 35. That is 35% of the selling price but a markup of approximately 53.8% on the purchase price. The percentages use different bases.
This margin must still cover the reseller’s staff, premises, promotion, losses and service costs. Build a coherent policy from your product or service cost and specify the services each participant provides.
Measure the cash requirement
A partner may order more while paying later. If you produce and pay suppliers before collecting revenue, network growth can consume cash.
Compare payment schedules, required stock, deposits and contractual returns. A large order is not an immediate cash receipt. Include the financing requirement in the channel launch plan and your cash flow budget.
Select and test a distributor
Assess observable evidence: customers served, dedicated team, represented brands, actual coverage, storage capacity and relevant references. A large catalogue does not prove the partner will spend time on your offer.
Ask how it plans to make the first sales. Who are the initial prospects? Who will demonstrate the product? What opening stock is needed? What manufacturer support does it expect? Concrete answers reveal commitment better than a very high volume promise.
Run a pilot
Limit the initial scope to a region, product range or period. Set objectives and resources before starting: training, demonstration units, joint visits, orders and market feedback.
A pilot must also test quality: order errors, installation, satisfaction, returns and payment times. Sales from the manufacturer to the distributor are insufficient. If goods remain in the partner’s stock, the network is not yet working with end customers.
Distinguish sales into the network, often called sell-in, from sales to end customers, or sell-out. This distinction helps avoid confusing stocked shelves with lasting demand.
If the distributor will serve a foreign market, include the checks in our article on international expansion for Swiss SMEs before committing to the network.
Put a clear commercial agreement in place
The agreement should reflect each party’s actual responsibilities. Pay particular attention where it involves exclusivity, significant investment or an overseas market.
- Products, territory and customers covered.
- Commercial role and any authority to represent the business.
- Orders, delivery, transfer of risk and payment.
- Stock, forecasts, agreed minimums and unsold goods.
- Marketing, brand use and training.
- Warranty, support, repairs, returns and potential recalls.
- Shared data, confidentiality and sales reporting.
- Duration, review, termination and ongoing business.
Do not assume a contract can freely impose resale prices or prohibit every sale outside a territory. Competition law regulates vertical agreements. International distribution also requires assessment of the destination market’s rules and the law governing the contract.
The price you charge the distributor and the price it charges its customers are separate decisions. Build consistency through the offer, commercial terms and functions performed, supported by valid contractual provisions.
Manage several channels without creating conflict
A multichannel strategy can combine your website, shops and distributors. It becomes difficult when roles and terms are unclear.
A partner may lose trust if your website continually offers an identical product at a price that makes its business unviable. Conversely, a price difference may reflect a genuinely different service: installation, advice, customisation or delivery time.
Clarify product ranges, included services, incoming enquiries and the handling of existing customers. Do not promise a seamless experience across channels if your organisation cannot coordinate stock, orders and support.
A focused, useful dashboard
Track contribution by channel, stock turnover, end-customer sales where available, overdue payments, returns and revenue concentration. Include time spent managing the network.
A distributor generating a large share of sales may be valuable. Make that concentration visible and factor it into decisions about continuity, skills retained internally and realistic commercial alternatives.
Build a network your business can support
Choose a main channel, calculate its economics and test its ability to serve the right customers. Expand on the basis of observed results: final demand, contribution, quality and cash requirements.
Distribution is an organisational choice as much as a sales decision. A strong network is more than a collection of partner logos. Its participants need sufficiently clear responsibilities, resources and interests to sell your offer sustainably.
Frequently asked questions
What is the difference between short and direct distribution?
Direct distribution has no reseller between the business and end customer. A short route generally has one commercial intermediary. Using an external carrier does not by itself turn a direct sale into an indirect one.
Does selling online always mean selling directly?
No. Your own online shop can be a direct channel. A marketplace may be an intermediary or a buyer and reseller, depending on its model and contract. Check who the legal seller is, who invoices and who answers to the customer.
What margin should a distributor receive?
There is no universal percentage. Remuneration should reflect functions, volumes, risks, stock and service. Compare your net contribution with the partner’s economics and always specify the base used for any percentage.
Should you grant exclusivity?
Exclusivity can support a partner’s investment, but should correspond to clear resources and commitments. Define its scope, duration and review conditions, and have the relevant clauses checked against applicable law.
Can you combine resellers with direct sales?
Yes. Organise offers, services and customer management so each channel has a clear role. Allocate shared costs appropriately so no channel appears artificially more profitable.
Sources and references
Romain Prieur is a Swiss certified public accountant and the founder of Entreprendre.ch. With more than ten years of experience in auditing and supporting businesses in Switzerland, he advises entrepreneurs on company formation, accounting and taxation.
