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Game Pricing and Terms?

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darduini
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Joined: 02/24/2011

I am new in the game business and decided to produce and sell my own game. I need to know what are typical pricing expected for customer profits and quantity discounts by retailers, reps, and distributors so I can calculate the retail price for my minimum profit. (Of course, the other variable is the price increase before my next production order.) I expect that retailers want 50% profit, reps and distributors selling to retailers want about 20% profit. But do distributors also sell to reps for another 20% profit in between? I expect that they will pay for shipping and handling separate from profit. I also planned about 3-5% drop in price for quantities for each doubling of quantities after 6 minimum. I also need to know terms on large orders that require a new production run so I don’t need to use my money or borrow it to pay for the most or all of production and shipping. I planned to ask for 50% payment with large orders. I know I’m asking for a lot of info and hope it this not too confusing.

Doug Arduini
darduini@yahoo.com

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Dralius
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Joined: 07/26/2008
In the US

In the US most distributers will pay you 40% of MSRP, liquidators %30. They then turn it around for and sell them for 50% MSRP to retailers.

Terms will vary on who pays shipping and when payment is due.

bluepantherllc
bluepantherllc's picture
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Joined: 07/29/2008
Game Market

Let's say you have an MSRP of $20 and you are going to use the mfr-distributor-game store model (traditional hobby game model).

You are generally going to sell your product to a distributor for $8, who will mark it up 10% or so and sell it to a game store for $10, who will normally sell it at the MSRP of $20. So your potential profit is the difference between your cost of production and $8 - right?

Well, yes and no. When you sell to a distributor, you sell for terms. Payment cycles being what they are in this economy, you will not likely see your money for 60-90 days. And this is measured from the day you ship to the distributor - you've probably spent a few weeks or months getting your game made or making it yourself, laying out time and cash well before you ship. So let's be optimistic and say that it took you 60 days from the time you got quotes and started paying suppliers. So now we're talking about 120-150+ days between when you invest in your game production and you see your return on investment. That's fairly optimistic. And distributors will try to pay you after the game store pays them. And as you likely know, some game stores don't pay. Factor this "bad debt" into your cost of doing business.

A FLGS closed unexpectedly near us a few months back. It was so quick we found out when we pulled in and the store was empty. Don't think we're going to see any money for our product in that store. A few years back when a major distributor closed down, they owed us a non-trivial amount of money. We didn't see any of that either. So it needs to be factored into the cost of doing business.

You mentioned shipping. Distributors tend to want you to ship to them for free. Game stores want free shipping too. And consumers are very sensitive to shipping prices too. Foreign customers must really want your game if you intend to sell it to them direct - if it's $20, they're going to pay at least an extra $10 for you to ship it, then any customs or duties in their own country. Just remember that anything you ship directly to a foreign customer you keep $20, not $8. And that will pay for alot of extra postage. And there are more hobby gamers in Europe than there are in the US.

You may set an amount for distributors - say "order $100 or a case of 12" and shipping is free. But it is very likely you will be paying shipping to your distributor and possibly from your supplier too. So that $8 still has to get split a few ways.

Nowadays, you have options. You can use a consolidator (someone who reps your sales and marketing to distributors/stores and also fulfillment too. There's real value in this service for some folks - you will of course be giving them a piece of your $8. But you'll also likely get into venues that you wouldn't on your own. It's what we do, and if you hook up with the right one, you are now on the radar screen of distributors and retailers globally.

Or you could truly self publish. Last year we made some games for a company that got a booth at Origins and sold out. They got a booth at GenCon and generated 3x the volume in pre-orders. So we got triple the order after GenCon. A major publisher noticed, and I believe they have a publishing deal now.

So good luck - just go in with eyes open.

darduini
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Joined: 02/24/2011
Good Information

Thanks, this is valuable information for me as a new board game manufacturer on the market.

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