Channel Pricing Waterfall
Visualize the 'Take Rate' of different sales channels. Calculate the required list price to maintain your Net Margin across Amazon, DTC, and Wholesale.
Unit Economics
Required Price Waterfall
Sets the price based on your most expensive channel to protect margin everywhere.
The Cost Stack
Where does the money go?
The Purple Block (Profit)
This is your target. Notice how on Wholesale, the 'Discount' block eats huge space, but you save on Marketing and Fees.
The Amazon Tax
On the Amazon bar, Fees + Marketing often equal or exceed the Cost of the product itself.
MSRP Strategy
Pick the highest 'Total Price' from these bars as your public MSRP to ensure safety across all channels.
Execution Steps
Enter your product 'Unit Cost' (COGS).
Set your 'Target Net Margin' (the profit you want to keep).
Configure fees for each channel (Platform %, Fixed Fees, Shipping, Marketing).
The chart calculates the 'Required List Price' to achieve that margin on each channel.
Pro Strategy
- Don't price for your cheapest channel (DTC). Price for your most expensive one (Retail/Amazon) so you have room to absorb their fees.
- Wholesale usually requires a 50% discount off MSRP. Ensure your cost structure allows for this.
- Amazon FBA fees are 'Fixed' per unit size, plus a % commission. Make sure you account for both.
Core Concepts
Channel Conflict
When your wholesale partners get undercut by your direct-to-consumer price. To avoid this, you usually set one MSRP based on the most expensive channel (often Retail or Amazon) and accept higher margins on DTC.
Take Rate
The total percentage of revenue consumed by the channel (Fees + Ads + Shipping). For Amazon, this can often exceed 40-50%.
Net Margin
Profit after ALL variable costs (COGS + Platform Fees + Shipping + Marketing Attribution). Gross margin isn't enough.
What is Channel Pricing Waterfall?
A Price Waterfall Chart visualizes the cumulative effect of costs and deductions on profitability. By stacking Cost, Fees, Shipping, Marketing, and Discounts, this tool calculates the 'Bottom Up' price required to hit a specific profit target.
Best For
- • Launching on a new channel (e.g., expanding to Wholesale).
- • Auditing profitability of Amazon FBA.
- • Setting a universal MSRP that works for all partners.
Limitations
- • Assumes linear marketing costs (constant CPA).
- • Does not account for returns/refund rates.
- • Simplified tax handling.
Alternative Methods
Break-Even Analysis
Calculating volume needed rather than price needed.
Competitor Snapshot
Pricing based on the market rather than your costs.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
DTC Brand going Retail
Brand sold online for $50. Retailers wanted 50% margin ($25 wholesale). Cost was $20.
Analysis showed selling at $25 wholesale left only $5 profit (20% gross margin), insufficient to cover operations.
Amazon Aggregator
Acquired brand was losing money on Amazon despite high sales.
Waterfall showed Ad Spend + FBA Fees were 60% of revenue.