Direct vs Indirect Sales: How Each Model Works
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Every company that sells something has to answer one question before it answers any other: who actually talks to the buyer and takes the order? If your own employees do, you sell directly. If someone else does, you sell indirectly. Most companies end up doing some of both, and the interesting decisions sit in how they split the work.
This article defines the two models, lists the main motions inside each, and compares them side by side. It then covers the economics at a concept level, how hybrid models come about, and the legal touchpoints that appear the moment a partner resells your product at a price you care about. Route-to-market design, meaning which segments and regions go to which route, is covered in channel strategy. Who counts as a partner is covered in what is a channel partner. Here the focus is the two models themselves.
The Two Models Defined
Direct sales means the seller's own people or systems handle the whole transaction with the end customer. The vendor finds the buyer, makes the offer, negotiates, closes, and usually invoices. The vendor owns the customer relationship from first touch to renewal.
Indirect sales means an independent third party sits between the vendor and the end customer and plays a part in finding, closing or fulfilling the sale. That third party might buy the product and resell it, introduce the buyer for a fee, host the product in a storefront, or build it into something of its own. The vendor still earns revenue, but a partner shares the customer relationship and, usually, a slice of the money.
The line between them is ownership of the sale, not the size of the company or the product. A start-up selling through a website is direct. A global manufacturer selling through wholesalers is indirect. A software company can be both on the same day, in different markets.
One distinction avoids a lot of confusion. Indirect sales is a model, the way revenue reaches you. The channel is the set of partners that carry it. When people say "channel sales" they usually mean indirect sales through resellers and distributors, and the channel sales model article treats that in detail.
Direct Sales Motions
Direct selling isn't one thing. Three motions cover most of it.
- Field sales. Reps meet buyers in person or on extended account plans. It suits large, complex deals with several stakeholders, long cycles and heavy negotiation. It's also the most expensive way to sell, because each rep covers few accounts.
- Inside sales. Reps work by phone, video and email, without travel. They can handle more accounts and shorter cycles than field reps, and many companies use inside teams for mid-sized deals.
- Self-serve and ecommerce. The buyer finds, evaluates and pays through the vendor's own website or app, with no salesperson involved. It scales cheaply, but only works when the product is simple enough to buy unassisted. Many software companies start here and add a sales team on top as deals get larger.
Product-led and sales-led approaches often blend inside one direct model: a free or trial user is nurtured by sales once usage signals show up. That's still direct, because the vendor owns every step.
Indirect Sales Motions
Indirect sales has more variants, because each partner type plays a different role. A one-line view of each, with a link for the detail:
- Resellers buy from you and sell to the end customer, adding their own margin and often their own services. See distributor vs. reseller.
- Distributors buy in bulk, hold stock or contracts, and supply a network of smaller resellers. They add reach and logistics rather than a sales relationship with each end buyer.
- Referral partners introduce buyers and are paid when a deal closes, while the vendor does the selling. Compare them with affiliates and resellers in referral vs. affiliate vs. reseller.
- Marketplaces are storefronts operated by a platform. The buyer purchases through the platform and the vendor is listed there. See software marketplace listings.
- OEM partners embed your product inside theirs and sell it under their own offering. See OEM partnership.
Other roles exist too, such as consultancies that influence a purchase without selling it. The wider cast is mapped in the partner ecosystem article.
Side-by-Side Comparison
The table below sets the two models against the dimensions that usually decide the choice. The statements describe typical tendencies, not guarantees. A well-run partner program can beat a poorly run sales team on almost any line.
| Dimension | Direct sales | Indirect sales |
|---|---|---|
| Control over the sales message | High: your people, your pitch | Lower: partners adapt the story and may sell competing products |
| Margin per sale | You keep the full price | You give up a share, as a discount, commission or fee |
| Cost of sale | Mostly fixed: salaries, tools, management | Mostly variable: paid when a partner closes or sells |
| Reach | Limited by headcount you can hire and manage | Extends to segments and regions where partners already have customers |
| Speed into a new market | Slow: hire, train, build a pipeline | Faster when partners with local relationships already exist |
| Customer data and relationship | Fully yours | Shared, or sometimes held mainly by the partner |
| Brand experience | Consistent and controllable | Varies by partner quality |
| Pricing control | Full | Constrained by law and by partner agreements (see below) |
| Management effort | Managing employees | Managing partners who aren't employees and have other priorities |
Two lines deserve a second look. The first is customer data. A vendor that sells only through partners can end up not knowing who its end customers are, which makes renewals, upsells and product feedback harder. Many programs deal with this through deal registration and contract terms on data sharing. The second is management effort. Partners are independent businesses with their own incentives, which is why topics like partner incentives and channel conflict exist at all.
The Economics at Concept Level
The money question is usually framed badly. People compare "the partner's margin" with "nothing", as if a direct sale were free. It isn't. The honest comparison is between two different cost structures.
Direct sales has a fixed-cost structure. You pay salaries, commissions, recruiting, training, tools and management whether or not deals close. A new territory means a new investment before the first dollar comes back, and the investment is mostly sunk if the territory doesn't work out. In exchange, each sale keeps the full price and the full customer relationship.
Indirect sales has a variable-cost structure. You pay the partner when something sells, in the form of a discount off list price, a commission or a fee. If a partner produces nothing, it costs you little in direct margin. But you pay in other ways: program management, enablement, marketing support, and the time of the people who run the partner relationships.
Seen this way, the decision hinges on a few questions:
- Can you afford to build the capacity yourself? If reaching a segment needs fifty reps and you can fund five, a partner network is the only way to get there at all.
- Does the segment need a person at all? Small, simple purchases may never justify a rep, so the choice is partner, self-serve or nothing.
- How much does the partner add beyond the sale? A partner that also implements, trains and supports the customer is providing value you'd otherwise have to build, which changes how to read its margin.
- How much is control worth? In a category where every interaction shapes the brand or the product is hard to explain, losing control can cost more than the margin saved.
A fair caution on numbers: you'll see claims about what percentage of revenue "should" come from partners or what typical partner margins are. They vary so widely by industry and product type that a single benchmark is rarely useful. Compute your own: the fully loaded cost of a direct rep, the realistic output of that rep, and the effective margin you give a partner for the same revenue, including the cost of running the program. Then compare per segment.
Hybrid Models and Why Companies Move
Most companies don't pick one model forever. A few common patterns:
- Direct for large accounts, indirect for the long tail. Strategic customers get named reps. Smaller customers go to partners or self-serve, where a rep wouldn't pay for itself.
- Direct in home markets, indirect abroad. A partner with local relationships, language and legal standing can open a country faster than a new subsidiary.
- Direct for the product, indirect for services. The vendor sells the license and an implementation partner sells the delivery.
- Direct to the customer, with a partner as the fulfilment or technology layer. The vendor leads the sale and a partner supplies a component or the rollout.
Companies also move between models over time. Common triggers for adding partners include hitting the limit of what the direct team can cover, entering a region where you have no presence, or finding that buyers insist on purchasing through a partner they already trust. Common triggers for pulling work back in-house include a partner that controls the customer and won't share data, a brand problem caused by uneven partner quality, or a segment that has grown large enough to justify its own sales team.
The hard part of any hybrid is the overlap. If a direct rep and a partner both go after the same account, the buyer sees a confusing offer and your own people start competing. The usual fixes are clear rules on who owns which segments or named accounts, registering deals, and compensation that doesn't punish people for passing a deal to the right route. For broader thinking on combining routes, see the multi-channel growth strategy and partner-led growth articles.
Key Facts: Direct vs Indirect Sales
- Direct sales means the vendor's own people or systems sell to the end customer; indirect sales means an independent third party plays a role in finding, closing or fulfilling the sale.
- Direct sales has largely fixed costs (salaries, tools, management); indirect sales has largely variable costs (partner discounts, commissions and fees) plus program costs.
- In the US, the Supreme Court held in 2007 that minimum resale price agreements are judged under the rule of reason, not treated as automatically illegal (Leegin v. PSKS).
- In the EU, a vertical agreement that restricts the buyer's ability to set its sale price loses the block exemption, though a supplier may impose a maximum price or recommend a price (Regulation 2022/720, Article 4(a)).
- The EU exemption for vertical agreements applies only while the supplier's and the buyer's market shares each stay at or below 30% (Regulation 2022/720, Article 3).
Legal Touchpoints When You Sell Through Partners
Once partners resell your product, competition law becomes part of the model, mainly around price. This is a pointer to the issues, not legal advice, and the rules differ by country and change over time, so involve counsel before setting terms.
Resale price maintenance in the US. Resale price maintenance means a supplier setting the price its distributor or reseller charges. For almost a century the Supreme Court treated minimum resale prices as automatically illegal. In 2007, in Leegin Creative Leather Products v. PSKS, the Court overruled that old rule and held that vertical price restraints are judged by the rule of reason, meaning a court weighs the circumstances of the case. The opinion also says the practice has economic dangers and lists factors courts can consider, such as how many manufacturers in an industry use it. So minimum resale prices aren't automatically lawful in the US either, and state law and later cases may add their own limits. Check the current position with a lawyer.
Resale price in the EU. The EU approach is stricter on its face. Under Commission Regulation (EU) 2022/720, vertical agreements generally benefit from an exemption from the ban on anticompetitive agreements. But Article 4(a) removes the benefit from agreements that have as their object restricting the buyer's ability to determine its sale price. The same provision leaves room for a supplier to impose a maximum sale price or to recommend one, provided that neither amounts to a fixed or minimum price through pressure or incentives. Article 3 of the same regulation conditions the exemption on both the supplier and the buyer staying at or below a 30% market share on their relevant markets.
Dual distribution. The EU regulation also addresses the situation central to hybrid models: a supplier that sells both upstream and directly to customers, competing with its own distributors. Recital 12 explains that such "dual distribution" is exempted in the absence of hardcore restrictions, and recital 13 limits the information a supplier and buyer may exchange in that setting to what is directly related to implementing the agreement and necessary to improve production or distribution.
The practical takeaway for the sales side: recommended prices, maximum prices and list prices are normal tools, but pressuring partners toward a floor, or rewarding them for holding one, is where the legal risk starts. Draft the pricing clauses in your partner agreement with that in mind.
How to Choose Between the Models
A simple sequence works for most teams.
- Start from the customer. For each segment, ask how the buyer wants to buy: self-serve, through a salesperson, or through a partner they already use.
- Estimate the cost to serve each segment directly. Include the full cost of reps, managers and tools, not just commission.
- Estimate the cost of the partner route. Include discounts or commissions plus the cost of recruiting, onboarding, enabling and managing partners.
- Weigh what you can't price. Control of the message, ownership of customer data and speed into new markets matter even when they're hard to put in a spreadsheet.
- Start narrow and measure. Pilot a partner route in one segment or region, and compare it with your direct results using the same metrics.
- Write the rules down. Say which route owns which accounts, how overlaps get resolved and how people are paid when a deal crosses routes.
The model isn't a permanent identity. It's a set of decisions you revisit as products, markets and customers change.
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