Skip to Content

A serious question about Distribution

7 replies [Last post]
HPS74
Offline
Joined: 01/06/2009

I wonder if anyone here has a similar situation or if a distributor may weigh in on this.

As a distributor buys from the publisher/designer direct at a cheaper rate than wholesale, the whole premise is that they sell on at wholesale to retailers, and make margins in the middle....right?

So, this guy I know.....has a distributor buying at their rate, then selling on their own online store at retail price.

BUT....less than the publishers advertised price on their own site.

What are your thoughts?

radioactivemouse
radioactivemouse's picture
Offline
Joined: 07/08/2013
distribution

HPS74 wrote:
I wonder if anyone here has a similar situation or if a distributor may weigh in on this.

As a distributor buys from the publisher/designer direct at a cheaper rate than wholesale, the whole premise is that they sell on at wholesale to retailers, and make margins in the middle....right?

So, this guy I know.....has a distributor buying at their rate, then selling on their own online store at retail price.

BUT....less than the publishers advertised price on their own site.

What are your thoughts?

Once the distributor has bought from the publisher, then it's over. The publisher has the money. The distributor selling at less than advertised price only affects the store profit.

The store usually sells at advertised retail so that a brick and mortar store can re-up the cost to keep up the store. The difference between the publisher cost and the retail price is the money the store makes.

If the distributor decides to put up a store and not sell at advertised retail, then it's their own profit they are sacrificing. Many times stores will have huge sales to either 1) Free up inventory space for newer product, 2) consider the purchase a loss and just trying to get rid of it or 3) get an edge on the competition because the store has made up the difference in other sales (they basically just want your business).

Hope this explains things.

HPS74
Offline
Joined: 01/06/2009
Kind of...

So....if you publish a game and I say I can/will distribute if you give me WSP less 30%......then just sell at RRP......

Haven't I just gotten a better deal than the retailers paying WSP?

radioactivemouse
radioactivemouse's picture
Offline
Joined: 07/08/2013
HPS74 wrote:So....if you

HPS74 wrote:
So....if you publish a game and I say I can/will distribute if you give me WSP less 30%......then just sell at RRP......

Haven't I just gotten a better deal than the retailers paying WSP?

Essentially yes.

Here's a breakdown example:

Game is made through a publisher. Publisher goes through mass production or produces itself and the cost is, say $20.00 to make, including labor fees, profit, and royalties.

The publisher sells to a distributor at $22.00 (to give some profit to the publisher, but not always). The distributor then slightly marks up the cost so that they can make some profit off of distribution. Since distributors only use large warehouses, the cost to keep them there is minimal. They don't have to make the game, they only have to store it temporarily.

Stores then buy from the distributors, because it's easy for the stores to buy bulk from one place instead of having to contact all of the publishers, make deals with them, and securing a deal. Stores then bump up the price to, say $30.00 so that the stores can make profit and keep the brick and mortar stores open.

But what you've described in the first post is really what Amazon is doing. They are both a distributor AND a seller through online stores. Yes, they get a better deal, yes they get more profit, and yes they can lower the price so they can get the edge on the competition without sacrificing too much profit.

HPS74
Offline
Joined: 01/06/2009
Reverse pricing

I see your point and am aware of that.....the issue here is your trust / agreement with the distributor.

Amazon is a bad example because they carry weight and channels beyond the norm an indie designer would dream to sign up with.

Distribution is in fact reversed from what you set as WSP. You say it cost $20....they say they want 30% less because they will bulk onsell and make profits in between the $16 - $20 price mark.

If they buy from you at $16 and then advertise on their own site at $19.....while you advertise at $20.....that is the question?

Swiftshadow
Swiftshadow's picture
Offline
Joined: 04/02/2013
First you figure out all of

First you figure out all of your costs, manufacturing, freight, shipping, and a bit of profit. That is your cost. You now have to calculate the Manufacturer Suggested Retail Price (MSRP) taking into account certain common percentages.
The numbers I usually see is 40% MSRP distributor, 50%MSRP retailer.

So using the $20 example being "your" costs, you can say the MSRP is $60. In this example the distributor buys for $24 and the retailer buys for $30. They then charge what ever they want.

This is only a simple example and the number and percents are not exact but it should give a simple overview.

HPS74
Offline
Joined: 01/06/2009
Swiftshadow wrote:First you

Swiftshadow wrote:
First you figure out all of your costs, manufacturing, freight, shipping, and a bit of profit. That is your cost. You now have to calculate the Manufacturer Suggested Retail Price (MSRP) taking into account certain common percentages.
The numbers I usually see is 40% MSRP distributor, 50%MSRP retailer.

So using the $20 example being "your" costs, you can say the MSRP is $60. In this example the distributor buys for $24 and the retailer buys for $30. They then charge what ever they want.

This is only a simple example and the number and percents are not exact but it should give a simple overview.

Yes....that's industry standard....but not this issue being raised.

When the distributor sells at retail themselves....they aren't distributing (selling) at wholesale to retailers.....they just take it straight to the consumer.

This is the 'grey' area

Dralius
Dralius's picture
Offline
Joined: 07/26/2008
Some companies have sales

Some companies have sales agreements on how they can be sold most specifically what the minimum end price is. Unless the publisher knows ahead of time that they are selling to a retailer at the 40% that most distributors buy for rather then the 50% retailers are buying for is deceptive and bad business.

Syndicate content


forum | by Dr. Radut