Board Game Designers Forum

Short Version:
Getting carried by a wholesaler can be challenging and there's a lot of time-consuming paperwork involved. Consider setting up an account with a fulfillment house. It cuts into your profit margin, but the services of a good fulfillment house can be worth it.

Long Version:
Before I start: Note that I am not a publisher of tangible games. I did start and run a retail game store for 4+ years, so I'm not 100% clueless. That said...

You're wondering how you're going to get the games you make into the hands of paying customers. Whether you work with wholesalers depends on how you want to sell your games. Typically, wholesalers are part of a multi-tier distribution system that looks like this:

Publisher >>> Wholesaler >>> Retailer >>> Customer

In this model, retailers buy their inventory from one or more wholesalers, who buy their inventory from many publishers (of which you are one). It's tremendously important to note that a typical wholesaler makes their money off of just the top-selling product lines (Wizards of the Coast, White Wolf, what-have-you). They don't make money off of products from small publishers like you and me. In fact, the labor it takes to inventory our products, coupled with the space our product takes in their warehouse, often means that carrying our products *costs* the wholesaler money. Wholesalers carry product from smaller publishers as a way of distinguishing themselves from other wholesalers. This ties back to the retailer...

Remember I said that, "retailers buy their inventory from one or more wholesalers." Retailers like to keep the process of ordering as simple as possible. If you (as a retailer) can place just one order with one wholesaler and get all the inventory you need, that's really nice. When I ran a store, I had one primary wholesaler and one back-up if my primary was out of stock on something I needed. There were a few others for specialty products, but I didn't order from them often and it was inconvenient to do so. This is why you're not likely to succeed if your plan is to sell directly to retailers across the country. Ignoring the logistical nightmare you'd be getting yourself into, you'd find that retailers just wouldn't be interested in having yet another account to manage with yet another product supplier. This is the crux of the role – the service – that wholesalers provide in the publisher >>> wholesaler >>> retailer >>> customer chain.

Jumping back to wholesale costs of carrying small publisher inventory... Because it (often) costs a wholesaler money to carry products from a small publisher, it can be very challenging for you (as a small publisher) to get a wholesaler to agree to buy and carry your game. The fewer games you have, the harder it is. That's (partially) what industry trade shows (like GAMA's GTS) are for. You (as a publisher) want to convince wholesalers that your game is so awesome that retailers and customers will be clamoring for it (Some people call this "push" marketing.). You also want to convince retailers that your game is so awesome that customers will be clamoring for it – that they will lose business to other retailers if they do not stock your game (This push marketing will (ideally) result in retailers going to their wholesalers right there at the show to place orders for your game. That is a very powerful way to convince wholesalers to carry your game – especially if the retailer who's placing an order or your game is a big account. I've heard that kind of pressure called "pull" marketing.). This is also why it's useful to go to shows that are open to the public. It builds your credibility in the eyes of the retailers and wholesalers, and it pushes marketing to the consumers, which generates pull marketing with retailers (consumer asks retailer for the game), which generates pull marketing with the wholesalers (retailer asks wholesaler for the game), which (hopefully) results in wholesalers placing orders with you.

Getting a wholesaler to carry your products can be difficult. And once you do get one to carry your products, you have to deal with shipping, negotiate payment terms, and all sorts of other stuff. Since I haven't engaged in selling products to wholesalers, I can't offer any real insight into this. However, I'd like to mention that there's another way to get in the chain - Fulfillment Houses. They fit in the chain like this:

Publisher >>> Fulfillment House >>> Wholesaler >>> Retailer >>> Customer

A typical fulfillment house provides some or all of the following services:
* Warehousing: They keep the stuff you've published.
* Inventory: They keep track of how much stock you have in their warehouse.
* Shipping: They ship orders to wholesalers.
* Invoicing: They invoice wholesalers for what's been sold to them.

The idea is that you publish a product and have that product sent to your fulfillment house. The fulfillment house handles all the physical stuff, described above, leaving you free (or at least free-er) to focus on marketing your existing games, publishing more games, and developing new games. As you can imagine, these services will cost you. However, they're also tremendously useful. How much help you want determines how much you'll have to pay the fulfillment house. The fulfillment house may also offer other services, such as advertising, promotion, and sales of your product at conventions and through a catalog they produce and distribute to wholesalers (and possibly retailers).

My understanding is that wholesalers find fulfillment houses appealing because it enables them (the wholesaler) to place one order with one entity (the fulfillment house) and get a smattering of goods from many different publishers that they (the wholesaler) would otherwise not want to deal with on an individual basis. In some ways, it's like the retailer's motive for only dealing with one or two wholesalers.

Dealing with a dependable fulfillment house benefits wholesalers in other ways too, but I've gone on far longer than I meant to (I do actually have things to do this morning!). I expect that other forum members can provide additional insight. I hope everything goes well for you!

That was pretty awesome. Perhaps it should be under a How-To heading or something similar. It's good reading for everyone with a passing interest, I think.

Wikipedia: http://en.wikipedia.org/wiki/Fulfillment_house
"How to select a fulfillment house": http://www.wilsonweb.com/wmt6/fulfill-house.htm
Results of a simple Google search: http://www.google.com/search?aq=f&sourceid=chrome&ie=UTF-8&q=fulfillment...
Studio 2 - the fulfillment house that two friends of mine are using to get distribution for Shard, their RPG: http://studio2publishing.com/home/modules/sections/index.php?op=viewarti...

Interesting commentaries, however no real discussion of how the financials work. Who gets paid and when for instance. Does the Fullfillment house pay the cost to manufacturer, or does the manufacturer have to wait until the wholesaler pays (which in my experience can be upwards of three plus months, then three more months for the fulfillment house, etc).

Given the talk of hidden fees, manufacturer absorbing some costs, and shrinkage issues and the like is seems the manufacturer is lucky to get 10% of the suggested retail price of a unit. Fine for large producers. Death nell for small companies. Add in the costs of going to trade shows, and the expectation that most games sell less then a thousand copies then it all seems more like a lose-lose money pit situation to bother with.

I am more interested in how many manufacturers are having luck selling directly to consumers, and cut out all the BS in between.

when you say manufacturer, are you talking about 'us--' the designer/owner?

Yes as in us the small game producer/manufacturer.

That answers a lot of questions, but also brings up a whole new set of questions. Here is one of the many still floating around in my head. If you publish your own games, and you sell these games over the internet from your website, how do you distribute the game to the buyer?

Edit: The fullfillment house will take care of everything apparently!

The underlying financials are pretty straightforward.

Manufacturers produce the game at 20% of retail. Then, they sell it to distributors at approx. 40% of wholesale (PSI asks 38%, which is probably worth it to get into the book trade). Retailers buy it for 50-57% of retail from the wholesaler and sell it to you and me at 100%.

Hidden costs: At every level, you need to figure out who pays freight. As a mfr, you will definitely pay freight to get your game from the printer/assembler to your warehouse. Distributors offer free freight for orders over $350 to $400. Mfrs usually offer free freight to distributors at a certain level as well. That one is subject to a bit more variation though, so I can't tell you at what qty or price level mfrs typically offer free freight.

As for selling direct without the above BS - It works if a) you are big or b) you don't expect much. Mass market sales are almost all direct to Target, TRU, etc. Amazon, however, will often use a fulfillment house. For most publishers though, retail sales are important, but not the only avenue. The Gamers (now owned by MMP) tried to go direct-to-consumer only. It didn't work well. When they went back into channel, they had to unshrinkwrap all their games and put a sell sheet on the box bottoms they'd left blank. I'm not sure of any game company that is doing direct-to-consumer only by choice.

The best direct-to-consumer program I've seen is GMT's P500, but GMT is also well established in regular distribution. It's just too vital an avenue to not deal with it. I get emails from Alliance Distribution every day soliciting one product or another. Preorders, short notices, restocks - sales efforts that you probably couldn't/wouldn't do on your own. And I read them, as I'm sure others do.

In short, the channel ain't so bad! It mostly works. :)

Thanks for the good information on this thread. It sounds like regular distribution is a good way to go, if you can convince a distributor to pick up your game, which is apparently a challenge for start-up companies.

Another question I have is: I understand the ratios above, but there's an unconstrained variable - how do you set a retail price, on which all those other numbers are based? Obviously, you can just pick a number based on knowledge of the marketplace (what similar games cost), or you could pick something based on your production costs, but is there a better way (or an industry standard) to tell what the retail price should be? Your choice of price affects not only your eventual income but also the willingness of distributors and shops to pick up your game, but there seems to be not too much to go on to pick one.

Thanks,
Dave

Dave

An MSRP of 5 or 6 times the cost of production is common but there is no easy answer for this. Different business models may allow you to get by with less.

It’s going to be a matter of what your expenses are; wages, warehousing, overhead, advertising, etc… Vs. what the market will allow.

For example the production of one of my games is being held up because the publisher is trying to find a cheaper way to produce it. The difference in MSRP would only be $5 but they feel that extra $5 will be detrimental to sales so we wait for yet another quote to come in to see if it can be done just a little bit cheaper.

I would do a comparison of you game components and audience with others on the market to get a base line and then see if your expenses make it feasible.

The old rule was "double double" - double your production cost to get your wholesale. Double it again to get retail. That, however, puts you at about 25% for production, which is a little high these days. For a short run (1000 games or less) game this will still result in a fairly high retail price.

BTW, Dralius is right about fighting for that last $1. $1 production = $5 at retail and $5 is a HUGE difference at retail on any game below $50.