Marketplace vs DTC: When to Sell on Amazon and When to Go Direct

This is the question that keeps eCommerce founders up at night. Should you sell on Amazon? Should you go direct-to-consumer only? Can you do both without one cannibalizing the other?

The answer isn't either/or. It's a strategy question. And the right answer depends on where you are in your business, what your margins look like, and how much you value owning the customer relationship.

Let me lay out the honest tradeoffs, because the internet is full of people who either worship Amazon or demonize it, and neither position is useful.

The Case for Amazon (and Marketplaces)

Amazon processes over 60% of all eCommerce searches in the US. Not Google. Amazon. When people are ready to buy, they start on Amazon.

What Amazon gives you:

• Built-in traffic. You don't need to run ads to get discovered (though ads help). Amazon's search algorithm surfaces your products to millions of active shoppers.
• Trust. Amazon's checkout is the most trusted in eCommerce. Prime members buy without hesitation. That trust transfers to your product.
• Fulfillment. FBA (Fulfilled by Amazon) handles warehousing, packing, shipping, and returns. You send inventory to Amazon and they do the rest.
• Speed. You can list a product and start selling within days. No website to build, no ad accounts to set up, no checkout to optimize.

What Amazon takes from you:

• Your customer data. Amazon doesn't share customer emails, phone numbers, or purchase behavior. The customer belongs to Amazon, not to you.
• Your margins. Between FBA fees, referral fees, and advertising costs, Amazon takes 30-45% of your revenue. That's before COGS.
• Your brand. On Amazon, you're one listing among dozens. Competitors can advertise on your product page. You have limited control over branding and storytelling.
• Your pricing power. Amazon's algorithm favors the lowest price. If a competitor undercuts you, your listing drops in search ranking.

The Case for DTC

DTC means selling directly to your customer through your own website. You own the entire experience.

What DTC gives you:

• Customer data. Every email, every phone number, every purchase history. This data is the foundation of retention marketing, and it's the most valuable asset in your business.
• Higher margins. No marketplace fees. Your only costs are payment processing (2-3%), shipping, and your marketing spend. Net margins on DTC are typically 20-40% higher than Amazon.
• Brand control. Your website tells your story. Your packaging creates an experience. Your email flows build a relationship. None of this exists on Amazon.
• Lifetime value. Because you own the customer data, you can market to them directly. Email, SMS, retargeting — all the channels that drive repeat purchases and increase LTV.

What DTC costs you:

• Traffic. Nobody's going to find your website by accident. You need to drive traffic through paid media, SEO, content marketing, or social — all of which cost money and time.
• Trust building. New DTC brands start with zero trust. You need reviews, testimonials, press mentions, and social proof to convince first-time visitors to buy.
• Operations. You handle (or outsource) fulfillment, customer service, returns, and everything else. There's no Amazon taking care of logistics.
• Tech stack. Website, email platform, ad accounts, analytics, review platform, subscription management — DTC requires a tech stack. It's not complicated, but it's not zero.

The Decision Framework

Here's how we help brands decide. It's not about choosing one or the other — it's about knowing when each channel makes sense.

Sell on Amazon When:

You need volume and validation fast. If you're a new brand testing product-market fit, Amazon lets you validate demand with minimal upfront investment. If the product sells on Amazon, you know there's demand. Then you can invest in building the DTC channel.

Your product is commoditized or price-competitive. If you're selling a product where brand doesn't matter much (phone cases, cables, generic supplements), Amazon is where the buyers are. The search volume on Amazon for these categories dwarfs DTC.

Your margins can absorb Amazon's fees. If you can sell profitably at Amazon's fee structure (30-45% of revenue), the volume makes up for the lower per-unit margin.

You want international reach without setting up local operations. Amazon's global marketplaces (UK, EU, Japan, etc.) let you sell internationally with minimal setup.

Go DTC-First When:

Your brand story matters. If your product's value is tied to the brand — the story, the founder, the mission, the experience — Amazon strips most of that away. DTC lets you tell the story.

Your product has high repeat purchase potential. Subscriptions, consumables, and replenishable products thrive on DTC because you can build retention flows (email, SMS) that drive repeat purchases. On Amazon, the customer might buy from a competitor next time.

Your margins are thin. If your COGS is 40% of retail and Amazon takes another 35%, you're left with 25% to cover everything else. That's not a business. On DTC, you keep that 35%.

You're building for long-term value. If your goal is to build a brand that you could sell for 4-6x revenue, the customer list is the asset. Amazon brands typically sell for 2-3x because the buyer doesn't get the customer data.

Run Both When:

You can differentiate the product offering. Sell your standard products on Amazon and exclusive variants, bundles, or subscription options on DTC. Different products for different channels prevents direct cannibalization.

You have the operational capacity. Running two channels means managing two inventories (or a shared inventory with allocation planning), two marketing strategies, and two customer service approaches. If you're a two-person team, start with one and expand.

Your Amazon channel funds your DTC growth. This is actually a smart strategy. Use Amazon's volume to generate cash flow, then invest that profit into building the DTC channel (website, email, content, SEO). Once DTC is profitable, you can decide how much to invest in Amazon.

How to Run Both Without Cannibalization

The biggest fear of dual-channel brands: Amazon steals my DTC customers, or my DTC pricing undercuts my Amazon listing.

Here's how to prevent both.

Price parity. Keep your DTC price at or above your Amazon price. Why? Because Amazon penalizes sellers whose products are cheaper elsewhere. If your DTC price is lower, Amazon may suppress your listing.

However — and this is the trick — you can offer DTC-exclusive discounts through email, SMS, or loyalty programs. A first-time buyer discount on your DTC site doesn't violate Amazon's pricing policy because it's a promotion, not a base price.

Product differentiation. Sell different SKUs on each channel. Your DTC store gets the premium bundles, limited editions, and subscription options. Amazon gets the standard single-unit products. The customer who wants convenience buys on Amazon. The customer who wants the full experience buys on DTC.

Use Amazon as a discovery channel, DTC as a retention channel. Many customers discover a brand on Amazon, buy once, and then find the brand's DTC site through Google or social media. You can encourage this by including branded inserts in your Amazon packaging: "Want 15% off your next order? Visit [yourbrand.com]."

Note: Amazon restricts inserts that redirect customers away from Amazon. You can't include a coupon code for your website. But you can include your brand URL for "warranty registration" or "care instructions" — which leads them to your website and into your email list.

Separate advertising budgets. Track ROAS on each channel independently. Don't let a good Amazon month mask a bad DTC month or vice versa. Each channel should be independently profitable.

The Numbers: Real Margin Comparison

Let's compare a $50 product sold on Amazon vs. DTC.

| Line Item | Amazon (FBA) | DTC (Shopify) | |---|---|---| | Retail Price | $50.00 | $50.00 | | COGS | -$15.00 | -$15.00 | | Amazon Referral Fee (15%) | -$7.50 | — | | FBA Fee | -$5.50 | — | | Amazon PPC (est.) | -$5.00 | — | | Payment Processing (3%) | — | -$1.50 | | Shipping (3PL) | — | -$4.50 | | Customer Acquisition (est.) | — | -$8.00 | | Net Profit | $17.00 (34%) | $21.00 (42%) |

DTC is more profitable per unit — but only if your customer acquisition cost stays reasonable. If your CAC balloons to $20+, Amazon becomes the better deal on a per-unit basis.

The real DTC advantage shows up in repeat purchases. If that $50 DTC customer buys 4 times (because you have their email and run retention flows), their LTV is $200 at a $21 margin per order = $84 total profit. Amazon? They might buy twice at $17 margin = $34 total profit.

DTC wins on lifetime value. Amazon wins on volume and speed.

The Hybrid Playbook

For brands doing $500K+ in annual revenue, here's the playbook we recommend:

Year 1-2: Launch on both channels. Use Amazon for volume and cash flow. Invest in building the DTC foundation (website, email, content).

Year 2-3: Shift marketing spend toward DTC. Build your email list, launch retention flows, and develop exclusive DTC products. Amazon should still grow but become a smaller percentage of total revenue.

Year 3+: DTC should be 60-70% of revenue, Amazon 30-40%. At this point, your DTC brand is strong enough to stand on its own. Amazon becomes a supplementary channel, not a dependency.

We'll Build Your Channel Strategy

Whether you're starting from scratch or rebalancing an existing Amazon/DTC split, we'll analyze your margins, your customer data, and your growth goals to build a channel strategy that works.

Book a free strategy call.

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Mark Cijo is the founder of GOSH Digital, a full-service eCommerce marketing agency and Klaviyo Gold Partner that has driven $70M+ in revenue for 150+ brands. He doesn't think Amazon is the enemy — he thinks it's a tool. Use it wisely.