GLS Startup Law

Introduction

“When your product is ready but your customers can’t reach it, you don’t have a sales problem - you have a channel problem.” – Matt Glynn

Choosing new sales channels is one of the fastest ways to unlock growth. It’s about meeting customers where they already are - stores, apps, marketplaces, partners - while protecting margin and brand. Done well, channels multiply reach and resilience. Done badly, they trigger margin erosion, channel conflict, and compliance headaches.

New Sales Channels – What Are They?

PAA: What is a sales channel?
A sales channel is the route your product takes to reach a paying customer - direct (your site or team), indirect (retailers, distributors), digital (marketplaces, apps), or hybrid/omni-channel.

PAA: Why do startups add new sales channels?
To increase reach, diversify revenue, reduce reliance on a single route-to-market, and improve customer convenience - often at lower CAC than building a single channel to scale.

Common Channel Types (for this Station’s framework):

◼️Direct Sales (own force/online) – Maximum control of pricing, experience, and data.

◼️Retail (physical stores) – Flagship presence or wide retail networks for scale.

◼️Wholesale/Distributors – Rapid reach via intermediaries, with thinner margins.

◼️E-commerce/Marketplaces – Massive audiences with platform fees/rules and brand-control trade-offs.

◼️Subscription/Recurring – Predictable revenue; requires churn discipline and service SLAs.

◼️Franchising/Licensing – Scale through third parties under your brand for fees/royalties.

◼️Partnerships/Alliances/Resellers – VARs, OEM bundling, co-sell agreements.

◼️Hybrid & Omni-Channel – Integrated online/offline journey; increasingly expected.

Why This is Important

This is an important stage of the start-up journey because:

◼️Market reach: New routes unlock fresh audiences quickly.

◼️Revenue diversification: Multiple channels smooth volatility.

◼️Margin strategy: Mix & control: manage take-rates, discounts, commissions.

◼️Customer convenience: Access & choice drive loyalty and repeat buys.

◼️Data advantage: Own the data via direct channels to lower future CAC.

◼️Resilience planning: Channel redundancy protects against shocks.

◼️Brand presence: Everywhere visibility supports trust and pricing power.

PAA: When should a startup add a new channel?
When the core channel is stable (unit economics understood), incremental reach outweighs complexity, and you can protect brand/margins with clear rules of engagement.

PAA: Which sectors benefit most from multi-channel?
Consumer goods, fashion, electronics, SaaS, education, and F&B - any category where buyers shop across multiple touchpoints.

Consequences of Not Addressing This Issue

1. Legal Implications

◼️Unclear reseller/franchise terms trigger disputes and IP leakage.

◼️Platform non-compliance (e-commerce rules, consumer law) leads to takedowns/fines.

◼️Anti-competition or MAP/RPM missteps attract regulator scrutiny.

2. Founder Relationship Issues

◼️Conflicts over pricing, partner selection, and brand control.

◼️Tension between “direct first” vs “partner-led” philosophies.

◼️Disagreements when channel incentives undercut core strategy.

3. Commercial Implications

◼️Margin erosion from stacked fees/discounts/chargebacks.

◼️Channel conflict cannibalises sales and confuses customers.

◼️Over-reliance on a single marketplace risks sudden revenue shocks.

4. Implications

◼️Logistics and service SLAs break under multi-channel complexity.

◼️Inventory visibility gaps cause stock-outs/overselling.

◼️Fragmented data impairs forecasting and attribution.

5. Biz Valuation Issues

◼️Single-channel dependency depresses multiples.

◼️Weak unit economics (after channel costs) spook investors.

◼️Poor partner governance surfaces as red flags in diligence.

PAA: What happens if you ignore channel strategy?
Costs creep up, brand control slips, partners clash, and a sudden platform change or partner failure can crater revenue.

The above lists are indicative issues – the relevance of which will depend on your circumstances…

What You Should Be Doing

“We’ve identified quite a number of potential issues… below are some examples of the types of steps…”

◼️Prove core economics first

Lock pricing, CAC/LTV, and service levels in your primary channel.

◼️Run small pilots per channel

Test a single region/SKU/segment before national or cross-border rollout.

◼️Segment channels by role

Define which channel is for reach, margin, brand theatre, or inventory clearance.

◼️Write clear partner playbooks

Pricing bands, promo rules, content standards, and escalation paths.

◼️Contract for control

Strong distribution/franchise/OEM terms (territory, performance KPIs, IP, termination).

◼️Engineer margin protection

Model all take-rates/fees/returns; set floors and guardrails.

◼️Synchronise ops & data

Unified inventory, order management, and single customer view for attribution.

◼️Govern conflict & cannibalisation

Channel calendars, MAP policies (law-compliant), and differentiated assortments.

◼️Localise compliance

Consumer, privacy, platform, and competition rules per jurisdiction/channel.

◼️Review quarterly

Prune under-performing channels; double-down where unit economics win.

PAA: How do you choose the right new channel?
Start with your buyer’s journey and unit economics: pick the channel your customers prefer that still preserves contribution margin after all fees.

The above suggestions are just a few of the steps you can consider taking. There are many more things that need to be done to ensure the associated risks are effectively and pragmatically dealt with.

Balancing Legal Priorities and The Need to Launch Fast

You don’t need a perfect omni-channel machine on day one. Phase channels in where the ROI is clearest, use pilots to learn cheap, and lock the minimum viable contracts/policies to protect brand and margin while you scale.

PAA: Can this be phased in a startup?
Yes - add one channel at a time, validate economics/compliance, then expand scope or geography.

How These Risks Can Play Out (Case Studies)

Global – Apple’s Hybrid Mastery
Apple blends direct (flagship stores and online) with authorised resellers. Direct channels act as brand theatres and data engines; partners extend reach where Apple won’t build stores. Tight reseller agreements preserve pricing discipline and service standards. The result: premium margins with global availability - a channel strategy as deliberate as the product roadmap.

Southeast Asia – Zalora’s Digital-First Scale
Zalora scaled fashion e-commerce across fragmented SEA markets by betting on mobile, fast logistics, and marketplace presence. Aggressive discounting drove growth but exposed profitability risks - pushing investments in private-label, data-driven merchandising, and better unit economics. Lesson: channels can win reach fast, but margin design must keep pace.

Middle East – Souq → Amazon.ae Transition
Souq built the region’s e-commerce rails, then was acquired and re-platformed as Amazon.ae. The move expanded assortment and Prime-driven traffic but demanded compliance upgrades (VAT, consumer law) and stricter seller policies. Channel evolution delivered reach and trust - with tighter operational and legal discipline.

PAA: What are famous examples of channel strategy in action?
Apple’s integrated retail, Nike’s D2C pivot, and Amazon’s marketplace ecosystem are widely referenced playbooks.

Key Legal Definitions Related to This Issue

◼️Distribution Agreement – Contract governing territory, exclusivity, performance KPIs, IP use, and termination for resellers.

◼️Franchise Agreement – Licence to operate under your brand with fees/royalties and strict operating standards.

◼️Minimum Advertised Price (MAP) – Policy governing advertised pricing (must be competition-law compliant).

◼️Channel Conflict – When routes to market compete or undercut each other, harming margin/brand.

PAA: What is the difference between a distributor and a franchisee?
A distributor resells your products under its own business; a franchisee operates a business under your brand and system, paying fees/royalties and following strict standards.

Final Thoughts

New sales channels can be rocket fuel - or a slow leak. Growth comes from deliberate channel design: clear roles, firm guardrails, disciplined unit economics, and contracts that protect brand and margin. Add channels like product features: test, measure, iterate - and retire what doesn’t perform.