Insights — Channel Creation & New Revenue Streams — 3 min read
How to Price Products for D2C
Pricing for D2C is not just wholesale plus 50%. It requires a complete understanding of the cost of acquisition, fulfilment, and the 'customer service tax' that comes with selling direct.
In short
To price products for D2C, you must work backwards from a target RRP (Recommended Retail Price) that is consistent with the wider market and your existing B2B partners. You cannot simply add a markup to your manufacturing cost. Your D2C price must cover the Customer Acquisition Cost (CAC), pick-and-pack labour, individual shipping rates (which are higher than pallet rates), payment processing fees, and a provision for returns and customer service time. If the resulting margin is lower than your B2B margin, your pricing — or your D2C model — needs to be re-evaluated.
In the B2B world, pricing is often a simple calculation: cost plus a desired margin, perhaps adjusted for volume or contract length. When a business moves into D2C (Direct to Consumer), that logic breaks. D2C pricing is not just about the product; it's about the entire ecosystem of acquisition, shipping, returns, and support.
Many manufacturers make the mistake of setting their D2C prices too low, thinking they can pass their 'wholesale savings' onto the customer to win sales. This is a strategic error that not only triggers channel conflict but often leaves the business with a net loss after all D2C-specific costs are accounted for.
The 'Invisible' costs of D2C pricing
When you sell B2B, a single invoice might represent £10,000 of stock. When you sell D2C, that same £10,000 might require 200 individual transactions. The administrative and operational load per pound of revenue is significantly higher.
| Cost Element | B2B Reality | D2C Reality |
|---|---|---|
| Acquisition | Relationship-led, low cost per lead | PPC/Social Ads, high cost per sale |
| Fulfilment | Palletised, bulk shipping | Pick/Pack, individual courier rates |
| Payments | Bank transfer (low cost) | Credit card/PayPal (2-3% fee) |
| Returns | Rare, usually due to defects | Frequent, often 'change of mind' |
| Service | Technical, infrequent | High volume, tracking queries, basic help |
Why you should never undercut your retailers
If you sell a product to a distributor for £50, and they sell it for £100, you might be tempted to sell it D2C for £80. This is a mistake. You will instantly alienate your distributor, who can no longer compete. More importantly, you are undervaluing your own brand. By pricing at the full £100 RRP, you protect your partners and give yourself the margin to invest in the marketing required to find the customer in the first place.
Testing price elasticity
One advantage of D2C is the ability to test prices in real-time. Unlike B2B contracts which are hard to change, a D2C site allows you to test whether a £49.99 price point performs significantly better than £54.99. However, these tests should be used to optimise margin, not to start a race to the bottom.
Evans helps businesses model these economics through our Channel Creation Programme. From £1,995 + VAT per month, we work through the 'unit economics' of a D2C sale, ensuring that after the cost of a Google Ads click and a cardboard box, there is still a profit worth having. We often recommend a 'do not build' if the economics don't stack up.
Could your business support another route to revenue?
Evans Channel Creation identifies, validates and builds additional revenue channels from capabilities a business already has — B2B to D2C, D2C to B2B, product to service, recurring revenue or partners — and says so plainly when a channel should not be built. Programme from £1,995 + VAT per month over six months.
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