Why is WotC trying to kill my FLGS?

[Fifth Element]

This is what we are or want to talk about in the thread.

This means that the retail markup is less (as a % of cost) on Magic boosters than RPG books.

 

[xechnao]

This means that the retail markup is less (as a % of cost) on Magic boosters than RPG books.

If that be the case then MtG should probably be way more profitable for Wotc than D&D. Is this true? Or are the costs of production of magic much more higher?

 

[Fifth Element]

If that be the case then MtG should probably be way more profitable for Wotc than D&D. Is this true? Or are the costs of production of magic much more higher?

The percentage of retail markup has nothing to do with profitability for WotC.

In the most basic sense, Profit = Margin x Volume, where Margin is the profit you make on each unit, and Volume is the number of units sold. I expect MtG is profitable to WotC due to Volume, not Margin. I expect the opposite is true for D&D, at least relative to MtG.

My point is, Amazon can only discount based on the retail markup. They can't sell below cost. But if something is normally marked up 50%, Amazon can offer a steeper discount than something normally marked up 20%.

 

[xechnao]

The percentage of retail markup has nothing to do with profitability for WotC.

In the most basic sense, Profit = Margin x Volume, where Margin is the profit you make on each unit, and Volume is the number of units sold. I expect MtG is profitable to WotC due to Volume, not Margin. I expect the opposite is true for D&D, at least relative to MtG.

My point is, Amazon can only discount based on the retail markup. They can't sell below cost. But if something is normally marked up 50%, Amazon can offer a steeper discount than something normally marked up 20%.

Eh? On a fixed price if the percentage of retail markup is relatively low then Wotc profits relatively more on unit sold.

I also guess Wotc sells at a fixed price to retailers. Or is it not the case?

 

[Fifth Element]

Eh? On a fixed price if the percentage of retail markup is relatively low then Wotc profits relatively more on unit sold.

The retail markup does not affect WotC's profit, since they do not sell at retail. Or maybe I don't understand your point?

I also guess Wotc sells at a fixed price to retailers. Or is it not the case?

I expect they give volume discounts, though I have no idea how significant they would be.


I realized I left out a very important part of my profit formula above:

Profit = (Margin x Volume) - Overhead

Overhead being costs that do not vary with the level of production. My first formula is for Gross Profit, not Net Profit.

 

[xechnao]

The retail markup does not affect WotC's profit, since they do not sell at retail. Or maybe I don't understand your point?

Example: a blister sells for 10 to public. If retail markup represents 5 then wotc has got 5 out of it. If 6 then Wotc gets 4.

I expect they give volume discounts, though I have no idea how significant they would be.

If they give volume discounts then Amazon could still sell at lower prices if magic sells more units than D&D. And it is not hard to imagine that magic sells more units than D&D.

 

[Fifth Element]

Example: a blister sells for 10 to public. If retail markup represents 5 then wotc has got 5 out of it. If 6 then Wotc gets 4.

OK, but I'm still not sure what your point is. If Amazon takes the first item and sells it for 8 instead of 10, WotC has still gotten its 5. Amazon just marked it up less.

If they give volume discounts then Amazon could still sell at lower prices if magic sells more units than D&D. And it is not hard to imagine that magic sells more units than D&D.

Yes, but we don't know how the volume discount compares to the retail markup. I expect the markup is a much larger number.

 

[Jack99]

Personally, sometimes I will pay more to support a local business and/or get the better service and sometime I mail order just to get it for as cheap as possible.

QFT and all that. But seriously, be careful. That's how I ended up with my bride....

 

[xechnao]

OK, but I'm still not sure what your point is. If Amazon takes the first item and sells it for 8 instead of 10, WotC has still gotten its 5. Amazon just marked it up less.


Yes, but we don't know how the volume discount compares to the retail markup. I expect the markup is a much larger number.

We know that Amazon sells at same price as small shop retailer. Your explanation was that the retail markup is lower than D&D. And I noted that this probably means Wotc enjoys a higher percentage of profit per unit's price for Mtg than D&D.

Now if Amazon bargains for a lower price due to volume, it can reflect this to lower retail price so to compete with shops. Or Amazon is legaly bound or it does not get a volume bargain or it does not want to stock volume either (perhaps Magic sells mostly very small and very reguraly - something that does not sit well with Amazon's mailing model).

 

[Fifth Element]

We know that Amazon sells at same price as small shop retailer. Your explanation was that the retail markup is lower than D&D. And I noted that this probably means Wotc enjoys a higher percentage of profit per unit's price for Mtg than D&D.

No, that's a leap that we have no information for.

MtG could cost WotC $5 to make, they sell it for $7 (40% profit), and retail is $9 (43% markup). Amazon might be able to afford to discount it to $8 (11% discount).

D&D could cost WotC $15 to make, they sell it for $25 (40% profit), and retail is $40 (60% markup). Amazon might be able to afford to discount it to $30 (25% discount).

Same profit margin but steeper retail discount. We simply don't have enough information to know whether your hypothesis is true.

Retail markup needs to be higher on D&D books due to things like shipping costs, lower sales volume, and the physical space they take up, in comparison to MtG.

It's a complex relationship.