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Guide · 5 min read

Distributor or direct to retail: which a small D2C brand should pick

, founder of Mira · 2 September 2026

In brief

I would not sign a DB, the distributor who buys your stock and bills the stores, until one city reorders without being chased. Work twenty to forty independents yourself first, watch what leaves the counter, then appoint one DB for that city alone. The DB takes 3 to 8 per cent on packaged goods, on top of the 15 to 30 the store wants on MRP.

The order to decide in

Almost every founder who asks me this is asking a year early. A DB prices your terms off demand you can prove.

  1. Prove offtake in twenty to forty independents. A DB respects one number: offtake, what the shopper takes off the counter. A store counts only once it reorders unprompted. Openings are in the WhatsApp guide.
  2. Appoint one DB when restocking one city eats your week. A distributor ringing you first says his bag has a gap, nothing more.
  3. Keep the counters you opened. Name them as direct accounts. Sign a plain territory grant and you hand over the margin and the feedback at once, and the feedback costs more.
  4. Put the credit period on the invoice. Credit agreed on a call becomes whatever the buyer remembers, which is always longer.
  5. One DB per territory, with a way out. Two in one city undercut each other into the same stores, then ask you to fund the gap. Take the area back if he misses the lifting commitment.

What each route costs you

I price backwards from the counter, because the owner sets your margin off the two labels beside you.

A general trade counter carrying packaged food commonly keeps 15 to 30 per cent of MRP, and a chemist or beauty counter will ask a skincare line for as much as 45. The DB's cut is smaller and steadier: roughly 3 to 8 per cent on packaged goods, 8 to 14 in confectionery, 15 to 20 on branded cosmetics. A super stockist above that, the state-level buffer, adds 5 to 7. Those bands come from Indian distributor guides, and one printed price pays all of them.

Printed MRP
₹100.00
You bill the distributor
₹84.00
Distributor bills the store
₹90.30 keeps ₹6.30
Store earns per pack
₹9.70 under 10 per cent

Illustrative figures for a biscuit pack.

The counter keeps ₹9.70 where it wants ₹15, so it will not take the line. I would move the grammage before the price. Your own numbers go in the margin calculator.

Go direct, keep both cuts, and pay in fuel and evenings instead.

Alok Kapoor Advisory put it flatly in 2026: "Distributors are not your sales team, they'll move your cartons, not your consumer." The same firm, on squeezing the channel: "I've seen brands with superior products fail in India because they squeezed their channel." Pankaj Agarwal of Just Organik told Indian Retailer in 2018 that "The margin expectations in the distribution network is the biggest retail challenge." Forbes India in 2026: offline expansion "brings distributor margins, returns, longer credit cycles, and logistics costs".

I would fear the credit cycle first. Bill in March, collect in May, and the next batch never gets made.

What a distributor expects from you

A DB buys your stock with its own money, and every term below prices that risk. Indian distributor guides quote all five as his normal opening.

Territory exclusivity
Your only DB inside a defined area. I grant districts, never a state.
A monthly lifting commitment
Set it high to look serious and you fund it with schemes all year. I commit to the cartons moving today.
Credit, commonly 14 to 21 days
Counted from invoice. Give a week more and your capital sits in somebody else's godown.
Schemes at launch
A temporary 2 to 5 per cent, or free units with a case, usually 10+1. Put the end date in the same line, or it becomes your price.
An ROI they judge you against
They weigh your stock against every other brand in the bag and push a slow line last.

Where each route fails

Direct

  • You do the collecting, and two stores carrying outstanding are two I stop supplying.
  • Near-expiry stock comes back to you, and a slow store is a write-off.
  • Tier-two towns and cold chain stay out of reach.

A distributor

  • Your line sits in a bag with forty others, and the TSI walking the beat pushes whatever earns most.
  • Three cuts come off one printed price, so founders lift MRP until nobody buys.
  • You see primary sales only, and when it ends you have no line to those counters.

The trade knows the Legal Metrology (Packaged Commodities) Rules 2011 better than you do.

Selling above the printed MRP is illegal under Rule 18(2). Selling below it is allowed, so a store may discount and so may you. Nobody may alter the printed price, which rules out stickering over an old MRP when your costs move. MRP includes all taxes, and penalties escalate from ₹25,000 upward for repeat offences.

Under the GST 2.0 rates effective from 22 September 2025, packaged snacks, biscuits, chocolate and instant coffee sit at 5 per cent, and skincare under HSN 3304 at 18. Tea, matcha and flavoured preparations vary by composition and packing, so confirm your own classification with a CA. None of this is legal advice. The tax sits inside MRP, so a rate change lands on your printed price.

Give a GST bill from day one. A DB asks for it before anything else. The law does not make you register until a pure goods business crosses ₹40 lakh of turnover, and ten states set the line lower: CBIC notification 10/2019. No DB signs a brand without a GSTIN, so register before the turnover forces you.

Can you do both?

Yes, if you draw the boundary before you sign. Keep the city you work yourself, give the DB what you cannot reach, and name every direct account in the agreement. Run both quietly and you lose the DB.