Quick answer
Route to market matters because it changes the COGS target the product must hit.
The same retail price can support very different factory costs depending on whether the product is sold DTC, through a marketplace, or through retail.
Founders and product teams often ask whether the product can sell for a certain RRP. The harder question is whether the product still works once the chosen route to market takes its share. That is where many products become commercially weak without anyone noticing early enough.
The same RRP can support very different COGS
| Route | What you keep | What usually gets missed |
|---|---|---|
| Direct to consumer | Most of the retail price | Site fees, payment charges, warehousing, pick and pack, customer service, returns, and paid acquisition |
| Marketplace | Less than DTC, often more than wholesale | Marketplace commission, promoted listings, fulfilment surcharges, and reduced control over pricing |
| Retailer | The smallest share of the RRP | Wholesale discount, account management, chargebacks, retail-ready packaging, and inbound logistics |
Why hidden costs matter so much
Hidden costs are usually not hidden because they are rare. They are hidden because they sit in different teams or budgets. Operations owns warehousing. Marketing owns customer acquisition. Ecommerce owns hosting and transaction fees. Sales owns retailer terms. The product still has to carry all of it.
A product sold direct might tolerate a higher COGS than the same product sold through retail, even when DTC has more operational burden, simply because wholesale pricing can cut the retained revenue so sharply. The right answer depends on the real cost stack, not on channel mythology.
Questions worth asking before you lock the design
- If this product needs to work through retail, what wholesale price does that imply?
- What level of packaging, fulfilment, and account cost is really required for each route?
- Does the product architecture leave enough room for a sensible COGS at the target route?
- Would a channel shift force a redesign later because the product cost is too high?
Use route-to-market thinking to guide engineering
Route-to-market choice should influence the brief early. If the likely route is retail, the product may need a much more aggressive cost-down strategy, fewer parts, simpler assembly, or a different specification. If the likely route is DTC, the product may be able to carry more value and margin, but only if acquisition and fulfilment do not absorb the gain.