70,000 or 49,000: the cost of the chain

How it works for everyone else

A furniture manufacturer, in my sector, has a sales director. The sales director has the agents, each with their own territory. The agent tours the furniture shops in the area and tries to get them to set up a shop-in-shop, often with the display samples paid for by the manufacturer. Then there is the shop, with its own salespeople and fitters, and the end client who walks into the shop. The product goes through every one of these steps, and every step has a cost: the sales management salaries, the agent's commission, the shop's margin.

The sum

The discount the manufacturer gives the retailer, in my sector, is 50%. If the shop is good, 60. Plus 5. Say the list price is 100: the manufacturer keeps 38. With that 38 it has to pay the whole chain, make the product and deliver it. The end client, in the shop, pays the full price, or close to it if the salesperson knocks something off. The shop makes money. The manufacturer, with 38, can't afford the marketing I do: it can't go and photograph the client's villa in Tuscany, because the client belongs to the shop, and the shop won't let it in.

Kitchen at a list price of €70,000, less 30% because we are direct and have no chain draining value: €49,000. The client pays less. I keep more.

Selling direct

Our system is direct: our own showroom, the client comes in through my marketing, buys from me, pays me. In the negotiation the designer says: “It's true your kitchen costs €70,000, but precisely because we are direct, with no chain draining value, your discount is 30%.” Final price €49,000. Compared with the 38 left to anyone who goes through a shop, I keep 49, and I still make almost a third more. The discount isn't advertised: I keep it under wraps until the offer is presented, so it hits the client's rational side at the right moment.

And the client? Even if they shop around the competitors, and they do, they find the same kitchen, in a dealer's showroom, at the full €70,000. If the dealer is feeling generous that morning, they get 5% off. The client comes back to me knowing they are getting a deal because they are buying direct. They checked it for themselves.

The costs that remain

In class people have objected: but the dealer's costs, transport and installation, you still have them. Partly true. I handle transport myself, with the couriers I have the volumes with. Installation I always quote separately, and the client chooses: in Italy almost everyone takes it, in the United States 30%. The difference between the 50-60% I would leave to the shop and the 30% I leave to the client covers everything, and whatever is left over goes on top: into marketing and advertising the brand.

Why the sum applies to everyone

You don't need to make kitchens. Anyone who manufactures and sells through distribution, in any sector, has the same sum: a large share of the price stays with whoever is in the middle, and there is no contact with the client. Whoever builds their own brand and their own distribution turns both around: they keep the margin and they keep the client, with their data, their photos, their testimonial. It is the reason distribution is the step in the method where profit takes off. And the reason why, when I write it on the board, someone in the room copies it down twice.

From my classroom courses and my book Direct from Milano. Figures and examples updated to September 2026.