E-commerce: apples-to-apples comparison of marketplace vs DTC profitability and CAC

A Unified Framework to Compare Marketplace and DTC E-commerce Metrics

Comparing the performance of your Direct-to-Consumer (DTC) store against a marketplace like Amazon often feels like an impossible task. One channel provides rich customer data but demands heavy marketing spend, while the other offers massive reach at the cost of high fees and opaque analytics. Pinpointing the all-in customer acquisition cost per channel is a constant struggle when fees, ads, and fulfillment expenses are buried in different reports from Shopify, Amazon Seller Central, and your accounting software like QuickBooks. The real question every founder needs to answer is not which channel generates more revenue, but which is actually more profitable for the business. This unified framework provides a practical way to normalize your metrics, understand true channel profitability, and allocate your marketing budget with confidence, using the tools you already have.

Foundational Understanding: The Goal Is Directional Accuracy, Not Perfection

Before diving into calculations, it is crucial to adopt the right mindset. For an early-stage e-commerce brand, creating a perfectly audited, GAAP-compliant analysis for each sales channel is an unnecessary detour. The time and resources spent chasing accounting perfection are better invested in customer acquisition and product development. Your goal is not accounting perfection, it is directional accuracy. You need a model that is ‘good enough’ to tell you whether your DTC channel is more profitable than Amazon, or vice versa, so you can make smarter decisions about inventory, ad spend, and strategic focus.

The reality for most early-stage startups is more pragmatic. A well-structured spreadsheet is more valuable than a complex analytics tool you do not have time to manage. This framework is designed for founder-led analysis, providing clarity without requiring a dedicated finance team or expensive software. It is about making informed decisions quickly to improve your ecommerce channel performance.

Part 1: Mapping the “Hidden” Costs in Each Channel

To accurately compare marketplace and DTC ecommerce metrics, you must first uncover all the variable costs associated with an order in each channel. These are the expenses that scale directly with each sale, and identifying them is the essential first step for any meaningful sales channel comparison. Methodically listing them out will prevent surprises later on.

Variable Costs on Your DTC Channel (e.g., Shopify)

For your own DTC store, the costs are generally more transparent. The key variable costs to document are:

• Cost of Goods Sold (COGS): This is the direct cost of manufacturing or purchasing the product you sold. This data should be readily available in your inventory system or accounting software like QuickBooks or Xero.
• Transaction Fees: These are the payment processing fees charged by your provider. For instance, DTC transaction fees for Stripe/Shopify Payments are approximately 2.9% + 30¢ per transaction.
• Fulfillment and Shipping: This includes the pick-and-pack fees from your third-party logistics (3PL) provider and the actual cost of postage to ship the order to the customer. These costs can vary based on weight, distance, and shipping speed.

Variable Costs on a Marketplace Channel (e.g., Amazon)

For a marketplace like Amazon, the cost structure is different and often more complex, with fees that can be easily overlooked.

• Cost of Goods Sold (COGS): This remains the same as your DTC channel, representing the fundamental cost of your product.
• Marketplace Referral Fee: This is the commission the marketplace takes on every sale. It is a percentage of the total sale price. As noted in the Amazon Seller Central Fee Schedule, Amazon's Marketplace Referral Fee is often 15%, but varies by product category. This single fee is significantly higher than a standard DTC transaction fee.
• Fulfillment Fees (FBA): If you use Fulfillment by Amazon, you pay per-unit fees for picking, packing, and weight-based handling. These are separate from the referral fee and are detailed within your Amazon Seller Central payment reports. Tools like A2X can be invaluable for reconciling complex Amazon statements.
• Other Fees: Do not forget to account for miscellaneous costs like monthly inventory storage fees, long-term storage fees, or other per-unit charges that marketplaces may apply.

Also be aware of evolving tax reporting requirements such as the 1099‑K threshold in the United States. Gathering all this data into a simple spreadsheet is the essential first step for a true apples-to-apples comparison.

Part 2: Calculating an “All-In” Customer Acquisition Cost (CAC)

Customer Acquisition Cost (CAC) measures how much you spend to acquire a new customer. However, calculating it accurately across channels requires careful attribution, especially when evaluating sales channels with significant differences in data availability. The basic formula is: Total Acquisition Marketing Spend ÷ Number of New Customers Acquired.

DTC Channel CAC

On your DTC channel, calculating CAC is relatively straightforward. You can sum the ad spend from platforms like Meta, TikTok, and Google for a given period and divide it by the number of first-time customers recorded in your e-commerce platform like Shopify. It is very important here to distinguish between marketing for acquisition versus retention. Costs associated with email marketing campaigns or SMS blasts to your existing customer list should be excluded from your acquisition CAC calculation. Including them would incorrectly lower your CAC and provide a misleading picture of your acquisition efficiency.

Marketplace Channel CAC

Calculating Marketplace CAC is more challenging due to limited data. Amazon, for example, does not clearly separate new versus repeat customers in its standard reporting. This makes a true "new customer" CAC nearly impossible to calculate. The practical consequence tends to be that you must use a blended approach. What founders find actually works is to attribute all marketplace-specific advertising spend (like Amazon Sponsored Products) to the total orders generated from those ads. While this is not a ‘pure’ new customer CAC, it serves as a directionally accurate measure of what it costs to drive a sale on that platform. It answers the critical question, “How much did I have to spend on ads here to get this much revenue?” For a deeper methodology, refer to the guide on E-commerce CAC Calculation. This approach helps solve a major pain point: allocating marketing spend confidently when channel performance metrics are not normalized.

Part 3: The Unified View: Contribution Margin per Channel

With all variable costs and a working CAC for each channel mapped out, you can now build a unified view to see which channel is truly more profitable. We do this by calculating two types of Contribution Margin, which together provide a comprehensive look at your ecommerce KPI differences.

Contribution Margin 1 (CM1) per Order: This metric shows your profitability on a single transaction, before accounting for the cost to acquire the customer. It reveals the health of your unit economics.

CM1 = Average Order Value - COGS - All Variable Transaction & Fulfillment Fees

Contribution Margin 2 (CM2) per New Customer: This reveals the immediate profitability of acquiring a new customer. It tells you how much money you make (or lose) on their very first purchase, a vital metric for cash flow management.

CM2 = CM1 from First Order - Blended CAC for that Channel

This CM2 figure is critical for understanding your payback period. A negative CM2 means you are losing money on the first sale and must rely on repeat purchases to become profitable. This is a risky position for any early-stage business that needs to manage its cash carefully.

Let's walk through a synthetic example. Imagine a product with an Average Order Value of $100 on both channels and a COGS of $40. On your DTC store (Shopify), transaction fees might be $3.20 (3.2%) and fulfillment costs are $12. This leaves you with a CM1 of $44.80 per order. On the marketplace (Amazon), a 15% referral fee ($15) and FBA fulfillment costs ($15) reduce your CM1 to just $30.00. Based on this alone, DTC looks far superior.

However, the story changes when we factor in acquisition costs. Suppose your DTC CAC is $25. Your CM2, the immediate profit from that new customer, is $19.80 ($44.80 - $25.00). On the marketplace, lower advertising costs might result in a blended CAC of only $10. Suddenly, the CM2 on the marketplace is $20.00 ($30.00 - $10.00), making it slightly more profitable on the first sale. This is the kind of insight that empowers you to make strategic decisions.

Part 4: A Pragmatic Approach to Lifetime Value (LTV)

Lifetime Value (LTV) projects the total profit a customer will generate over their entire relationship with your brand. While essential for understanding long-term health, measuring LTV differs significantly between channels, forcing a pragmatic approach, especially for marketplaces where customer retention strategies for ecommerce are difficult to implement.

DTC Channel LTV

For your DTC channel, you can calculate LTV with reasonable precision. By analyzing your data in Shopify, you can determine your average customer's repeat purchase rate, their average order value over time, and your CM1 over a set period (e.g., 12 or 24 months). Your DTC repeat purchase rate data is the foundation for this model. This allows you to build a reliable LTV projection and understand the long-term return on your acquisition spend.

Marketplace Channel LTV

For marketplaces, precise LTV calculation is often impossible because you do not own the customer relationship or the underlying data to track an individual's repeat purchases. This is an estimation game. Instead of seeking a perfect number, you should use scenario modeling to establish a range of possibilities:

• Pessimistic Scenario: Assume LTV is equal to the Contribution Margin from the first sale (CM1). This conservative view treats every marketplace sale as a one-time transaction and provides a safe baseline for financial planning.
• Realistic Scenario: Use your DTC repeat purchase data as a heavily discounted proxy. For example, if 30% of your DTC customers repurchase within a year, you might model a 5% to 10% repeat rate for marketplace customers to estimate a potential LTV.

If you sell via marketplaces to UK customers, be mindful of how marketplace VAT rules can affect seller obligations and reporting. You can check GOV.UK guidance for the latest requirements.

The critical distinction here is strategic. A DTC customer is a long-term asset; you have their contact information and can build a direct relationship, fostering loyalty and future sales. A marketplace customer is largely transactional. This difference in strategic value should always be a factor when evaluating overall channel performance.

Practical Takeaways: How to Start Your Analysis Today

Comparing marketplace and DTC performance does not require complex software or a finance degree. It requires a disciplined approach to normalizing your data around profitability. This framework moves the conversation from top-line revenue to bottom-line contribution.

Here is how you can implement this process:

1. Map Your Costs: Open a spreadsheet and list every variable cost for a typical order on each channel. Include everything from COGS and payment fees to fulfillment, shipping, and marketplace commissions.
2. Calculate CM1 per Order: For each channel, subtract all variable costs from your average order value. This gives you a clear, apples-to-apples view of per-transaction profitability and is the first step in evaluating sales channels properly.
3. Estimate a Blended CAC: Sum your acquisition-focused marketing spend for each channel and divide by the new customers (DTC) or total orders (marketplace) it generated. This provides a directionally accurate cost of a sale.
4. Find Your CM2: Subtract your blended CAC from your CM1 to see the immediate profit from acquiring a new customer on each channel. This is one of the most powerful direct to consumer benchmarks for managing cash flow.

By focusing on CM1 and CM2, you can confidently decide where to invest your next dollar of marketing spend and build a more resilient, profitable e-commerce business. This analysis will not be perfect by US GAAP or FRS 102 standards, but it will be invaluable for making the right decisions for your company's growth. For further reading, explore the hub on acquisition and retention metrics.

Frequently Asked Questions

Q: Why can't I just use my accounting software's P&L to compare channels?
A: A standard Profit and Loss statement typically blends all revenue and costs together. It does not isolate the specific variable costs, fees, and acquisition spending for each sales channel, which hides the true profitability and makes it difficult to compare marketplace and DTC ecommerce metrics accurately.

Q: Is a negative Contribution Margin 2 (CM2) always a bad sign?
A: Not necessarily, especially for brands with high-LTV subscription models. However, for most early-stage businesses, a negative CM2 is a significant cash flow risk. It means you are betting on future repeat purchases to become profitable on a customer, which can strain your finances.

Q: How often should I update this channel profitability analysis?
A: A monthly review is ideal for tracking trends in costs, AOV, and CAC. This allows you to make timely adjustments to your marketing spend and inventory allocation. A more in-depth quarterly analysis is recommended to inform major strategic decisions for the upcoming period.

Q: What if I fulfill marketplace orders myself instead of using FBA?
A: If you use a 3PL or self-fulfill for marketplace orders, your calculation changes slightly. You would replace the FBA fees with your actual fulfillment and shipping costs, similar to your DTC channel. However, you must still account for the marketplace's non-negotiable referral fee in your CM1 calculation.