The same product earns you different money in each channel, because each channel takes its share: the delivery app charges commission, the market charges a stall fee, the shop that stocks you on consignment keeps a percentage and hands back what does not sell. To compare channels, work out the contribution per unit in each one (what you receive, minus the product's variable cost and the channel's own costs), then look at how much it earns you per month and per hour you spend selling there. Which channel is "most profitable" depends on what you are short of: hours or customers.
Why the selling price is no use for comparing
It is tempting to look at where you charge most. On the app you sell at $10.00 and direct at $9.00, so the app looks better. But the app keeps part of that $10.00 before paying you, and you pay for the bag. What matters is what is left after each channel takes its cut.
The tool for this is contribution margin: price minus variable cost. Here you calculate it per channel, adding to the product's variable cost the costs that only exist because you sell that way.
Which costs belong to each channel
Making a bottle costs the same wherever you sell it. What changes is what happens next. Check these costs in every channel:
- Delivery app commission. A percentage of the price. Use the one in your contract; the examples below assume 25%.
- Card fees. If you take cards at the market, that is a percentage too.
- Stall or pitch fee. What you pay for the market day, divided by the units you sold that day.
- Extra packaging. Bags, boxes or seals that only that channel needs.
- The shop's share. In wholesale or consignment, the gap between the shelf price and what they pay you.
- Returns and waste. What comes back out of date or damaged, spread over what did sell.
- Travel. Fuel, parking or fares to deliver, restock or collect payment.
Leave out fixed costs such as kitchen rent or your phone bill. You pay them even if you drop a channel, so they do not change the comparison.
If you charge sales tax, do all of this on prices before tax. The tax is not yours and should not make any channel look better.
Three numbers per channel
- Contribution per unit: what you keep from each sale in that channel.
- Monthly contribution: contribution per unit × units you sell there in a month.
- Contribution per selling hour: monthly contribution ÷ the hours it takes to sell through that channel (answering messages, delivering, standing at the stall, restocking the shop).
Production time stays out of the third number because it is the same in every channel. What changes is the time it costs you to sell.
Worked example: a bottle of hot sauce in four channels
You sell 150 ml bottles of hot sauce. The variable cost of the product (chillies, vinegar, bottle, cap and label) is $2.50 a bottle. You sell through four channels.
Per bottle:
| Channel | What you charge | Channel costs | Product cost | Contribution |
|---|---|---|---|---|
| Direct (Instagram, pickup, transfer) | $9.00 | $0.00 | $2.50 | $6.50 |
| Delivery app | $10.00 | $2.70 | $2.50 | $4.80 |
| Saturday farmers market | $9.00 | $1.50 | $2.50 | $5.00 |
| Deli on consignment | $6.00 | $0.50 | $2.50 | $3.00 |
Where the channel costs come from:
- App: an example commission of 25% on $10.00 = $2.50, plus a $0.20 bag. Total $2.70.
- Market: the stall costs $45.00 a Saturday and you sell 30 bottles. 45.00 ÷ 30 = $1.50 a bottle.
- Consignment: the deli pays you $6.00 per bottle sold. Of every 60 you leave, 10 come back near their date and you write them off. Those 10 cost you 10 × 2.50 = $25.00, spread over the 50 sold: 25.00 ÷ 50 = $0.50 a bottle.
Per bottle, direct sales win easily. Now look at the month.
Per month:
| Channel | Bottles a month | Monthly contribution | Selling hours | Per selling hour |
|---|---|---|---|---|
| Direct | 25 | $162.50 | 5 | $32.50 |
| Delivery app | 30 | $144.00 | 2.5 | $57.60 |
| Market (4 Saturdays) | 120 | $600.00 | 32 | $18.75 |
| Consignment | 50 | $150.00 | 2 | $75.00 |
The hours: each direct order takes 12 minutes between messages and handing it over (25 × 12 = 300 minutes = 5 hours). On the app, 5 minutes per order to pack and hand to the rider (30 × 5 = 150 minutes = 2.5 hours). The market is 8 hours a Saturday, including setup and pack-down (4 × 8 = 32 hours). The deli takes two one-hour visits a month to restock and get paid.
How to read the result
- The market brings in more money than any other channel, and the least per hour. $600.00 a month, but at $18.75 an hour. If you have spare Saturdays and need customers, the market earns its place. If your hours are already full, it is the first channel to look at, either with a higher price or fewer market days.
- The app earns less per bottle than direct sales, and more per hour. $4.80 against $6.50 a bottle, but it barely takes any of your time. If time is what you lack, an order moving from direct to the app costs you less than it seems.
- Consignment is lowest per bottle and depends on returns. If 20 of every 60 came back instead of 10, the write-off per bottle sold would rise to 20 × 2.50 ÷ 40 = $1.25 and contribution would fall to $2.25. The guide to consignment selling shows how to work out how much to leave so it does not all go to waste.
- Direct sales pay best per bottle and take the most time per order. Grouping orders and delivering on one day cuts that time. Preorders and subscriptions do exactly that: close orders in advance, make the exact amount and deliver on one route.
The comparison leads to concrete decisions: raise the price in the weakest channel, set a minimum order, leave less stock at the shop or move customers from one channel to another. None of them comes from looking at the selling price alone.
Common mistakes when comparing channels
- Comparing selling prices instead of contributions. You have seen why that fails.
- Forgetting small costs. The $0.20 bag, the parking to restock, the card fee. Per bottle they look like nothing; over a month they add up.
- Spreading fixed costs across channels. It makes a channel look like it loses money when it is actually helping pay the rent.
- Looking at one month only. Markets have seasons and apps change their terms. Redo the numbers with several months of data before you drop a channel.
To see how each channel fits into the overall plan for the business, the guide to choosing your sales channels goes from start to finish.
Do it with the calculator
Put your recipe into the food cost calculator with the margin you want; it gives you the cost per unit and the price you need with the channel commission included. Do it once per channel and you have the first column of the table above.
Frequently asked questions
Which sales channel is most profitable for a small food business?
There is no single answer. It depends on your product, your price and what you are short of: hours or customers. That is why you work out contribution per unit, per month and per hour for each channel.
Should I include rent or utilities when comparing channels?
No. You pay fixed costs whichever channel you sell through, so they do not change the comparison. Include only the costs that appear or change because you use that channel.
Should I charge different prices in different channels?
You can, for example charging more on a delivery app to cover the commission. What matters is knowing how much you keep per unit in each channel after its costs.
How often should I redo the comparison?
Whenever a commission, stall fee, price or cost changes, and at least every three months using the real sales from that period.