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Retailer's Stance on PDF Deals
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<blockquote data-quote="Gareman" data-source="post: 4751480" data-attributes="member: 4918"><p><strong>About the Distributors</strong></p><p></p><p>There is a lot of anger directed at the game distributors. Here's how RPGs generally get to the game stores:</p><p></p><p><strong>Wizards of the Coast.</strong> The only "major" direct to retailer company will ship books directly to the store with a 50% margin for the retailer. Wizards makes 50%, and the retailer makes 50%. 50% is generally what retailers need to survive in a brick and mortar location. The actual "profit" on game sales is about 5-8% (most stores do about $250,000/year in sales, so do the math). Nobody but the landlord is getting rich.</p><p></p><p><strong>Distributors</strong>. Distributors have traditionally been the "gatekeeper" of the game industry. They decide what game will get "picked up" and sold to retailers. Retailers are pretty much out of the loop here, although we reguarly request distributors to carry an item. If a distributor wants to carry a role-playing game, they'll take 10% for their efforts. 40% will go to the publisher and the other 50% (it's shrinking) goes to the retailer. This isn't a bad deal for the publisher, provided they get paid on time (they don't), everything arrives in one piece and they don't have damages (they do), and the distributor re-stocks regularly (they apparently don't). The publisher also pays for the shipping, which is probably another 10% of the value of their goods. But what if the gatekeeper says they don't want your product? You've got a couple options.</p><p></p><p><strong>Consolidator</strong>. There are several companies in the game industry that will collect all the publishers that the distributors denied and bundle them up in a more managable package for the distributors. For example, a distributor might not want a lot of a product, maybe a dozen copies of an RPG book, making it not worth their while. However, if a consolidator can bundle that with ten other companies with a dozen product, we're talking something more cost effective. The consolidator, however, is not a charity, and it demands about a 33% or so cut of the profits. So we have 50% for the retailer, 10% fo the distributor, 33% for the consolidator, and a measly 7% or so for the publisher. That's pretty crummy for the publisher, but it's that, or sell direct. In other words, the gatekeeper says the product isn't worth their time, but the publisher wants to get it through the tiers to the game stores and into the hands of happy customers. Some of the known entities that use a consolidator include Goodman Games and Pinnacle.</p><p></p><p><strong>So why not go direct to the retailer? </strong>It's clear you can make a 100% margin by going direct to the consumer, but that's difficult, and many publishers already do that online and at conventions and need additional revenue streams. It's difficult to go direct to the reatailer because of the difficulties in bookkeeping and shipping. For example, my store carries books from 30 different RPG publishers. If I had to manage invoices and receiving directly, it would be overwhelming and I would cut it down to about 10 companies. The smallest guys, likely the ones using the consolidators, would get hurt. Likewise, small publishers, many of whom have day jobs, don't want to manage invoices and individual shipping for 1000 game stores. Granted, it may actually be cost effective if you're paying a consolidator, but there must be a better solution, right?</p><p></p><p>The answer here, the publishers will tell you, is not PDF sales. Those are "different" products sold for a different purpose and experience. Retailers are highly suspicious of this argument (I agree with the publishers). Posts here tell a muddled story.</p></blockquote><p></p>
[QUOTE="Gareman, post: 4751480, member: 4918"] [b]About the Distributors[/b] There is a lot of anger directed at the game distributors. Here's how RPGs generally get to the game stores: [B]Wizards of the Coast.[/B] The only "major" direct to retailer company will ship books directly to the store with a 50% margin for the retailer. Wizards makes 50%, and the retailer makes 50%. 50% is generally what retailers need to survive in a brick and mortar location. The actual "profit" on game sales is about 5-8% (most stores do about $250,000/year in sales, so do the math). Nobody but the landlord is getting rich. [B]Distributors[/B]. Distributors have traditionally been the "gatekeeper" of the game industry. They decide what game will get "picked up" and sold to retailers. Retailers are pretty much out of the loop here, although we reguarly request distributors to carry an item. If a distributor wants to carry a role-playing game, they'll take 10% for their efforts. 40% will go to the publisher and the other 50% (it's shrinking) goes to the retailer. This isn't a bad deal for the publisher, provided they get paid on time (they don't), everything arrives in one piece and they don't have damages (they do), and the distributor re-stocks regularly (they apparently don't). The publisher also pays for the shipping, which is probably another 10% of the value of their goods. But what if the gatekeeper says they don't want your product? You've got a couple options. [B]Consolidator[/B]. There are several companies in the game industry that will collect all the publishers that the distributors denied and bundle them up in a more managable package for the distributors. For example, a distributor might not want a lot of a product, maybe a dozen copies of an RPG book, making it not worth their while. However, if a consolidator can bundle that with ten other companies with a dozen product, we're talking something more cost effective. The consolidator, however, is not a charity, and it demands about a 33% or so cut of the profits. So we have 50% for the retailer, 10% fo the distributor, 33% for the consolidator, and a measly 7% or so for the publisher. That's pretty crummy for the publisher, but it's that, or sell direct. In other words, the gatekeeper says the product isn't worth their time, but the publisher wants to get it through the tiers to the game stores and into the hands of happy customers. Some of the known entities that use a consolidator include Goodman Games and Pinnacle. [B]So why not go direct to the retailer? [/B]It's clear you can make a 100% margin by going direct to the consumer, but that's difficult, and many publishers already do that online and at conventions and need additional revenue streams. It's difficult to go direct to the reatailer because of the difficulties in bookkeeping and shipping. For example, my store carries books from 30 different RPG publishers. If I had to manage invoices and receiving directly, it would be overwhelming and I would cut it down to about 10 companies. The smallest guys, likely the ones using the consolidators, would get hurt. Likewise, small publishers, many of whom have day jobs, don't want to manage invoices and individual shipping for 1000 game stores. Granted, it may actually be cost effective if you're paying a consolidator, but there must be a better solution, right? The answer here, the publishers will tell you, is not PDF sales. Those are "different" products sold for a different purpose and experience. Retailers are highly suspicious of this argument (I agree with the publishers). Posts here tell a muddled story. [/QUOTE]
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