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In response to a friend's post about retail pricing and the indie attitude, I decided to lay out my costs and profits for ORX over the last four quarters, and some exploratory number-crunching and business-musing. Rather than retype it all here, you can find the details in a post on my LiveJournal (http://greyorm.livejournal.com/136593.html).

What really jumped out at me was the actual effect of retail sales when I crunched the numbers. Yes, I sold more potential books-to-readers via retail -- no guarantees those books actually sold thereafter to a reader or player -- but I made almost nothing doing it. I am spending money/sacrificing profits to try and use retail exposure as a promotional device and hoping it works.

Retail ends up being a HUGE gamble for the indie publisher: make almost nothing on what are effectively promotional copies and hope they stir up enough interest and sales to make retail profitable from either financial or fan-base stance. Yet how often does that actually happen? Especially given we know doing about 100 sales is going to be the average complete life-cycle of an indie product? (Meaning total profits if you sell retail, and depending on your expenses, MIGHT come out to gas money and-a-bag-of-chips.)

From what I can see, trying to enter the current retail market and leverage the three-tier distro model is actually a losing proposition for most indie publishers, with only highly successful games (like Burning Wheel, Dogs in the Vineyard, and similar) being able to effectively use it to create meaningful/profitable sales and everyone else dumping a lot of extra money out to have copies of their game(s) basically sit on a shelf somewhere.

So here's the question, or a question: what's up with the indie publisher drive to enter the retail market over the last few years?

I did not study your numbers in detail but here's what immediately jumps out at me.

If you are not making money in retail than you are either underpricing your book or paying too much per unit.

Having bought Orx, $20 seems like a reasonable price point to me so let's examine your per unit cost...whoa...

$6.96 per book!!! that's CRAZY.  You'll never make money selling through retail with a cost structure that out of whack.

When I look closer, I see why your cost structure is so high...you printed 60 copies.  Pricing at 60 copies sucks ass.  If you only want to take the risk of printing <100 copies at a time...forgo retail altogether...or accept that you'll barely recover cost on those sales.

Here's my rule of thumb.

Start with your cost, double it.  That is the amount of money you need to put in your pocket with every book in order to break even on your printing costs with 1/2 your sales (with a hot title you can triple it and cover your cost even quicker).  Then divide by the money you get to keep (as a %) after the discount and paying IPR.  That is the price you'll have to sell your book at to make retail attractive.

At a $7 cost you need to pocket $14 of every sale.  If you figure you pocket 40% of cover (after discount, IPR, and miscellanious stuff like shipping) you'd need to sell your book for $35.  I'm betting you'd expect that Orx would not sell priced at $35.

So lets reverse the calculation.  If you're selling it for $20 then you'll pocket $8 of every sale, meaning you have to get your per unit cost down to $4.

Recommendation.  Immediately go to any of a number of print quote services, put in the details of your book and ask them for pricing for 100, 250, 500, and 750 units.  Going through those quotes, find out how many units you'd have to order to get your unit cost down to $4.  I'd guess that will be somewhere around 250 units give or take 50.

If you're willing to foot the bill for that many books and you figure you can sell 1/2 of them in the amount of time you want to get your money back, then go that route and you'll make money just fine in retail.  If that's too much of an investment or you don't think you can sell that many, then I'd not try retail sales.

I agree. The printing price is too high compared to the MSRP the product is being sold at. Either the cost to print needs to come down or the the MSRP needs to be raised.

Who did you print the book through. Looks like we could do that same book for just a tad over $4.00 a unit. Though that doesn't count shipping.

Also, if you are looking for retail exposure, we would be happy to include your book in the GOB Retail Group's Retail Program. That's where we POD print the title as needed to inventory in store and fill orders. On that program you would make 30-35% (depending if you are doing your other printing with us or not) on each sale made. Under our retail program we pay for the products sold under the product so on a $20 product your cut would be either $6 or $70. Heck, even our wholesale program would net you $4.00 a book sold.

More details here:
http://www.guildofblades.com/pod.php

Both programs are in their infancy though and still being set up. For instance, we're still populating our e-commerce store and our B&M store won't be open until late Sep. We're still building the IT infrastructure for our wholesale and master distribution programs so we don't expect to actually "launch" those until we open the B&M store either. But we're working on signing up publishers now so everything will be in place by then. Grant, for the retail exposure it'll just be one B&M store initially, so its not exactly a market wide solution. Just trying to play our small part.

Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com

All stuff I know, Ralph, but thanks for posting the pricing formula, hopefully that will help others trying to price well. Unfortunately, none of it really answers my question or speaks to the issue I queried about, except as a supporting argument to it.

Indie publishers, at least the folks who aren't at the top of the indie food chain or don't have a whole lot of money set aside to begin with, can't afford to print 500 or 1000 copies to bring the printing costs down and profits up. I can afford a print run of 30. Through Lulu it's about $200. That's what I can afford. I think I'm pretty average as far as indie-interested publishers go. Looking just at Lulu (and yes I'm aware I could find lower costs by shopping around):

To print 100, the cost is $567.54 with shipping. That's a $5.68 per book cost.
To print 250, the cost is $1,241.83 with shipping. That's a $4.97 per book cost.
To print 500, the cost is $2,289.31 with shipping. That's a $4.58 per book cost.
To print 1000, the cost is $4,382.86 with shipping. That's a $4.38 per book cost.

(There are additional discounts for bulk rates, but those require specific quote requests so I'm not factoring them here, especially as it isn't germane to the point I'm making.)

Now, I don't know about you, but I don't have $500, $1200, $2000, or $4000 dollars to spend on printing a game. I just don't. And if you look at the economic realities, most lower and middle-class families (who are the majority of the population and I suspect the majority of indie-interested publishers) don't even have a spare $500 for emergencies, let alone to toss into a publishing venture.

Unless I've slipped into an alternate reality, the point of the indie movement was so that you didn't HAVE to lay out large sums of cash up front, raid your savings, or take out a business loan just to publish your game. Thus the point of my analyzing the cost/payout of retail channels for ORX and then point to it was to show that I can make a decent amount of money even at costs of $7 a book if I'm selling direct (I can pay for the print run and make some profit). But NEVER via retail. It won't happen unless I charge something ridiculous like $35 for my book. I wouldn't pay that for my own book, so obviously I wouldn't ask a customer to.

Clearly the retail channel is not the channel for indie publishers: the majority will lose out. Hence my question, why the push towards retail by indie publishers when it doesn't pay off or pay out for the majority, and simply can't pay off because of the nature of the three-tier system? And why do we push Lulu or point to them regularly for indie publishers when Lulu's pricing is apparently so crazy-horrid?

All of which sparks another question (and I'm not accusing you of this, Ralph): I'm also beginning to wonder if many of the successful indie publishers today are simply out-of-touch with the common indie publisher, so much so that their advice and experiences are wholly non-applicable to us. "Print 500 books! Print 1000 books!" etc. is becoming fairly common, and commonly useless, advice.

It's to the point that listening to some successful indies is like listening to a traditional printer, touting the glorious system and ignoring its flaws or holes that don't affect them or anyone who has to deal with them. I know situational blindness, especially when one throws success into the picture, is a pretty common thing: it's why we tell all sorts of stories about poor people becoming wealthy and successful, ignoring that statistically they're the significant exception, and the almost complete majority who try for the gold ring never make it regardless of how many things they do "right".

(We also like to talk about how "anyone" can make it, especially if they do X, Y, and Z, and then blame anyone who fails to make it for failing to make it, instead of the system, regardless of the statistics or if the individual did X, Y, and Z. We do love our cherished myths about how the world works and how we deserve what we have, and why others don't.)

So I'm standing here pointing to this gaping piece of illogic and inviting everyone to examine it and question the direction and perhaps subconscious of the movement.

ADDENDUM: Heya Ryan. You posted after I penned my reply to Ralph. I have to run out and deal with cell-phone issues and etc. right now, but I'll try to respond to you as soon as I get the chance. Give me until tomorrow, ok? Thanks!

I think there are a couple of reasons to point to Lulu:

1. They deal with extremely small print runs, where some of the other publishing houses who do PoD have a set-up cost, which you need to print more copies to make it worthwhile.

2. They are dirt simple and easy to use.

3. An outgrowth of #1, and some of the sensibilities, you can sell books through Lulu, direct, exclusively. If your book sells for $20, and it costs $7 to print one copy (and only one copy), then you'd still make $10.4 per copy sold via Lulu. Which is very solid.

I'm not sure I really agree with you on what's affordable.  Oh don't get me wrong...I completely accept that you can't afford more than $200 TODAY.  That's cool.  Open a business savings account, put the $200 there and start by selling your game as a PDF.

As the PDF orders roll in use the proceeds to pay yourself back for your sunk costs (art, layout, whatever).  Anything beyond that add to your business savings account.

Eventually, you'll find, "hey I have another $100 in my budget I can put towards printing costs".  Add it to the savings account.  You might be 6 months into your PDF sales at this point and fast at work on another game.

You may wind up publishing that other game as a PDF even before you print the first game.  Fine, repay your sunk costs as before, put the proceeds into your savings account, along with another $50-$200 you scrounged from your budget over the course of the next 6 months.

At some point you'll have accumulated enough cash in the business savings account to pay for your print run.  Since you'll be able to do 300, 400, 500, 750 copies you'll get a hella better cost.  Balance the reduced unit price for higher quantities against your sales expectations.  Having 1 year of PDF sales, reviews, discussions, and accompanying buzz should give you a pretty good idea on whether your game is saleable in quantity as a book...especially if you've spent the last year doing solid support and on-line marketing.  You may find that its your second game that has the most sales potential and decide to print that one instead.

Either way, put all of your sales proceeds back into that savings account.  Plan to pay your taxes from that account.  Once you've sold half your copies (likely well before 1/2 if you have substantial direct sales as well as retail) you'll have enough in that account to pay yourself back for the money you scrounged out of the budget.  Everything else that hits that account is pure money you would never have had before.  By the time you sell out of your first print run, even if you paid yourself back (instead of keeping it "invested") you'll be able to pay for your next print run of that or another game purely out of the profits of your sales.

Your publishing effort will be free from the limitations of real life budgetary concerns and completely self supporting.

Honestly, limiting yourself to just 30-60 copies at a time because that's all you can afford IMO is just plain bad business.  If you can't afford to "go-in" to a level that has the potential to be profitable...then hold off, delay until you can.  Stick with PDFs, keep designing, keep marketing, and wait until you a) can afford a more sizeable print run and b) have a game you've developed that you think can support one.  

To do otherwise is to pretty much doom yourself to perpetual frustration and unprofitability.  Its basically the death-by-1000-cuts version of the guys who go print 10,000 copies destined for mulching.


To return to your specific question of "what's up with the drive to enter retail"...its beau coup dollars if you do it right.  I can double the number of books I sell by adding retail distribution to the channel.  Doubling the number of sales means I can double my print run size and still break even in the same amount of time.  Doubling my print run size means I can cut $2 per book out of my variable costs.  

Consider:
Print and sell 250 books at $20/book (keeping 85%) with a cost of $4/book means I make $13/book for a total of $3250 revenue on an investment of $1000 or a return of 225% (not including sunk costs)

Print and sell 500 books at $20/book; (250 keeping 85% and 250 keeping only 40%) with a cost of $2/book means I make $15/book on my direct sales and $6/book on my retailer sales for a total of $5250 revenue on an investment of $1000 or a return of 425%

Since the retailer sales are happening simultaneously with and not cannibalizing my direct sales...I make a bunch more money in the same amount of time.

Lot's of people complain about the cut retailers take...but man, those extra sales even at low profitability can really slash your variable costs a tremendous amount.  But to capture that you have to be able to operate at the level of 500-1000 copy print runs.  My first print run with uni was 100 copies, my second was 500 copies, my third 750.  The cost of the third run was paid entirely with profits from the second.  6 years in I'm almost out of stock selling 200-300 copies per year.

Yes, I realize that I'm in a pretty good place financially where I can write a check for a $1000 print run without needing to even plan for it in the budget.  And I realize that many game publishers aren't.

So what.  Wait till you are.  There's no law that says you have to go to print with whatever you can scrape together today.  Start with a PDF, save the profits, add where you can from the budget and print when you CAN afford a $1000 print run.  

I guess my advice is 1) do it in a manner that is sensibly profitable, 2) if you can't afford that now, wait till you can and build and promote in the meantime, 3) if you don't want to wait...accept that you're essentially then operating as a vanity press barely able to cover costs, or 4) just forgo money altogether and publish for free.

Its not illogical and its not useless advice.  Its really really simple.  And its not at all out of touch with the common indie publisher.  Anyone can afford to print 1000 units (if you think you have a game that will sell that many)...eventually.  Its only the impatient who think that its beyond their budget.  So yes...STAY OUT OF RETAIL...until you've accumulated enough capital to get your cost structure down where going into retail is profitable.  

If you can sell 100-200 copies per year, you can make good money in the retail channel.  If you can't sell that many copies per year...then its really not worth the bother.

I don't mean to come across as unsympathetic, but there is a difference between operating as a business and operating as a vanity press.  Operating as a business requires seed money.  Not the $250,000 in seed money I've heard a certain optimistic independent publisher raised through venture capital for their hard cover heartbreaker...but geeze...having $1000 to start a small business is not exactly asking for Donald Trump levels of investment.  

If you don't have that much today, then arrange your business model to build you to that point, and when you get there THEN go do the print run and retail thing.  Or...choose instead to operate as a vanity press and just look to break even.  Or...just publish for free.


Oh, and Lulu prices are great for selling 1-2 copies at a time.  They're ass for any higher quantities.  "lower costs by shopping around" doesn't even cover it.  Shop around and be flexible with your deadlines and you can cut those prices at the 500+ tiers in HALF.  Lulu is a good option IMO for 2 and only 2 types of game publishers.  1) Those who are really PDF publishers but want to make an option available for those folks who really really really want to own a hardcopy.  2) people who only expect to sell 50 books ever and half of those will be to friends and family.

Jesus Christ, Ralph, that's fantastic.

Hi Ralph!

Great analysis, but you make an assumption that I am not sure it's true: "Since the retailer sales are happening simultaneously with and not cannibalizing my direct sales...".  Do you have some data that support this assumption?

I am not talking as a game publisher (I never published anything) but as someone who brought Universalis in a retail outlet. Why? For the discount. I orderered it from a comic shop (the time it was solicited in the game section of the previews catalog) where I had a 15% discount on cover price and no postal expenses. Ordering it direct from IPR would have cost me much more.

Living in Europe, my situation about prices is probably different from the one people living in the USA have: postal expenses is a very big part of the price for a indie rpg here (compounded by import taxes), so the very best deal (and the one I opt to usually) it's the pdf edition. If you offer a cheap pdf solution this should counter the lure of a "no-postal-expenses retail copy at a discount", but if there isn't a pdf,  and I still want to buy a game, ordering it retail is usually the cheapest solution.

By the other hand, if I can't buy it retail, it could be that ordering directly from IPR would cost so much to make me rethink about buying the game, and wait for a pdf in the future, so in that sense maybe yes, it would not cannibalize a direct sale that would not exist...

Well, sure, I expect there are examples of that.  But, aside from the expected spikes (initial release, Cons, etc) my direct sales have in no way declined relative to my retailer sales.  In fact, as IPR ramped up their retailer presence this year, my retailer sales spiked so much that I'm running out of stock about 6 months earlier than expected.

Lulu was good when I started selling Play Unsafe, because I had no idea whether I'd sell 3 copies or 300. Putting it on Lulu let me test the market without too much investment.

Next time, though, I'll do a print run.

Graham

>>Well, sure, I expect there are examples of that.  But, aside from the expected spikes (initial release, Cons, etc) my direct sales have in no way declined relative to my retailer sales.  In fact, as IPR ramped up their retailer presence this year, my retailer sales spiked so much that I'm running out of stock about 6 months earlier than expected.<<

I have fairly interesting evidence that suggests that mail order sales and retailer sales not only don't canibalize each other much at all, they feed upon each other to help drive sales upwards.

Since we cut out distributors we've been able to track exactly where our products were going. Both to mail order customers and to retailers. We've tracked the zip codes of orders and order volume and found where one is strong the other usual is as well. And that makes sense. If I sell some copies of a game by mail order to people in a specific area then there are people in that area possibly playing our games. Those people have to play with someone so they are playing with "other" gamers in the area, some of which decide they would like to have those games for themselves or other games that we sell. Some of those consumers simply prefer to buy from their local retailer. Inversely, the folks buying from us at the retail stores also have to play with people and some of those folks will go on to buy from us via mail order. So retailer sales seem to increase our mail order volume and mail order volumes seem to increase our retailer sales. That, of course, can only work where the product is equally available through both venues.

Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com

Good point Graham...use 3) safe test bed alternative to pdfs.

Hello,

I've looked over this thread carefully from its starting post, and I think that Raven's main question has not been met. I'll try to fill in the gap. This is not to say other posts haven't been worthwhile, and the whole topic certainly can stand a good airing.

The issue, as I see it, is how to get books into retail on a modest budget, without entering into enormous print runs.

That's an important question, because although it's true that by printing many books at once, per- book print cost drops, it's also true that books you cannot move are a pure loss, no matter how cheap they were to make. This is the failure-hole that many, many companies fell into about fifteen years ago. Lured by the blandishments of printers or other publishers to print 10,000 copies "for cheap!", they did so, and were stuck with 9,500 books after their first push into the stores. That's not savings. That's not cleverness. That's not strategy. It's failure.

Today, given the internet and a variety of other things like POD, that outcome is less likely. But the basic concept is still there: one should not print more copies of a game than one can reasonably expect to sell in a given time-cycle (for most people, that cycle is one tax year, but circumstances differ). For retail sales, one needs to think especially clearly in those terms, because if you cannot move those books out of the warehouse or your basement, they are unsold inventory, which is considered an asset for tax purposes, also known as Oh Shit I Pay More Taxes.

Sorcerer and Universalis operate at this level: hundreds of books sold per year, with single print runs running into the thousands or at least thousand-plus. Not all games do. If I am reading Raven's posts right, he is not asking "Gee, how do I get to be such a big boy too?" He is asking quite rightly, given that his game is not selling at that level, but that it does seem to have a nice draw for orders in retail, how to get some books printed that will make him some money.

One valid answer that's shown up on this thread is "Lulu serves you well for internet single-customer sales, but is not cost-effective for print runs, short or not." The people who've posted this in various forms may think they have answered Raven well, but in my judgment as moderator, it needs to be stated here again outside of other advisory context. I agree with that answer but it's not the entire one; it only concerns what not to do.

The answers that concern higher print runs for purposes of lower cost-per-book are, I think, not useful for Raven's needs at all. He is not talking about large print runs. He's talking about short runs: 100 or 200 or so. And this is very reasonable because that's what he's comfortable expecting to sell.

The complete answer as I see it is about choosing the right POD company. As I've written about extensively previously, the term POD is not necessarily literal. These days it merely refers to fully digital technology for printing, and includes print runs of physical books as well as literal "print on demand" (i.e. print only when a customer orders). This is how I print all of my books except for the Sorcerer ones.

Costs for such printing are not bad at all; a print run of 100 books the size of Orx may run as low as $3 per book at a company like Publishers Graphics, considering any number of up-and-down details of a given time of year. Raven, I think some of your points need to be assessed in terms of real costs with real companies, with Lulu out of the picture entirely. At a few places in the thread your posts have a "there's no way, I'm screwed, it's impossible" quality, and the facts are otherwise. And not because I'm saying "print 2000 books, it's cheap!" I realize that this is not what you are looking for. It's because a lot of companies simply offer a better deal. There are a number of threads in this forum about the best tactics to use when finding the costs and choosing a printer.

Raven, let me know - have I aimed this post toward your needs?

I have one other question for you. At one point, you refer to some kind of "push toward retail" in the independent publishing community. I have no idea what you are talking about with that. The vast majority of sales and marketing for independent games remains at the direct-sales level, at most through companies like IPR which work on commission. Can you clarify what you mean by that?

It's an important point because your whole topic begins with the observation that your book has an apparent opportunity to do well for you in retail if you can keep printing costs down. Looking over the thread as a whole, you seem to be demanding a justification for utilizing the retail channel yet also having already provided such a justification yourself. So it's confusing.

Best, Ron

A practical thought, by the way: if one is short of cash and therefore limited in publishing options, one might partner up with somebody with excess capital and balance the operation that way. If one is worried of losing control of the property or getting trapped by debt, perhaps the loan might be arranged from a friend or interested hobbyist (cultural micro-patronage, kinda) with very few strings attached apart from paying back when and if the project collects profits. Alternatively, collect pre-orders, ransom, patronage or something of the sort, which all amount to the same thing.

The above is probably obvious, but I do think that it's somewhat disgenuine to represent lack of capital as a total, absolute and all-encompassing phenomenon that controls your every decision. Not wanting to take monetary risks is fine, but that's a choice that reflects on available options, and it's your choice. Complaining that a culture as whole (indie rpg culture, in this case) is swinging away from that choice... well, perhaps we should discuss the ethics of financial risk and debt, if that's getting your goat. Or if lack of capital is your only problem here, where's your investor sheet? Regardless, I don't really feel that ability to invest $200 in printed stock really distances me from the average indie publisher - rather likely it's the opposite, not being able to put that money into a project you've already spent hundreds of hours designing seems to me to necessarily be the minority position. At least we usually don't have folks asking about raising capital on the Publishing forum here, which we might if capital was a common bottleneck.

(In case there's somebody out there for whom capital is a bottleneck, let's discuss that at some point. After Gencon, preferably.)

I'm wary of my response contributing to thread-drift, so if this is tangential to Raven's point, i apologize.

Quote from: Eero Tuovinen on July 20, 2008, 09:24:42 PM
A practical thought, by the way: if one is short of cash and therefore limited in publishing options, one might partner up with somebody with excess capital and balance the operation that way. If one is worried of losing control of the property or getting trapped by debt, perhaps the loan might be arranged from a friend or interested hobbyist (cultural micro-patronage, kinda) with very few strings attached apart from paying back when and if the project collects profits. Alternatively, collect pre-orders, ransom, patronage or something of the sort, which all amount to the same thing.

I would be extremely surprised if the above model was generally applicable.  As an independent publisher, you can either borrow money as an individual, or borrow money as a business, or get start-up investment.  Each of these has serious problems with the stated setup.

First, borrowing money as an individual doesn't avoid any of the problems -- you are committing more money than you have.  If you are absolutely sure you will sell all your books, that's fine.  But you can't be, so it leaves you in the precarious position of being in significant debt.  Which doesn't seem to be what Raven wants.

Second, you could borrow money as a business.  This insulates you from the financial risk (assuming you have the right class of business), but puts your company at financial risk.  And you need to find a bank or friend who will give a loan to a small, untested business in a sector with a high rate of failure and a vanishing small chance of massive financial success.  This is scary for the lender, and honestly scary for the business owner as well.

Third, you could find start-up investment, selling part of your company for some seed capital.  But honestly, most people that do that invest in companies that, although their success rate is about 10%, have a decent chance of a massive financial upside -- on the order of a return-on-investment of 1000% or more.  Indie RPGs just don't have that possibility.  You won't in general find any stranger that will do this.  Plus, the paperwork, due-diligence, etc required for this means that most people won't consider it for less than $50k to $100k, which is too much for an Indie RPG.

So all of these options fall back on the idea that you have a friend who:
1. can spare $2k-$10k
2. doesn't mind investing in a high-risk, low-reward opportunity
3. is comfortable with a complete loss of investment, and
4. is cool enough that failure won't sour the friendship.

I think this is an unusual set of circumstances, and likely not applicable to Raven.

James

No, I don't have friends who can spare $10 000 dollars for a lark, either. Seems pretty rare, that.

But then, that's not what we're discussing here at all, is it?

i think Ron had it right in that "justification" for the low margin "retailer" based sales is sought after. Or if not "sought" per se, there is an interest is seeing other folks explain why they pursue them.

Ok, the "average" GOB game has a gross margin of about 75% or a markup or about 400%. This is "always" based on the wholesale price of the product, pegging wholesale discounts at 60%. So in other words, if we have a product with an MSRP of $10, our wholesale is thusly $4 and our "average" manufacturing cost $1. Based on that model, we make just a tad bit over 4 times as much money on every unit sold direct to a consumer as opposed to the same unit being sold via wholesale. If another company has a weaker gross margin on an item then the disparity between the profitability of direct sales vs wholesale sales will only be larger.

So as you can see, based on our cost structure it is naturally advantageous to sell direct whenever possible. After analyzing those numbers pretty hard about 4 years ago, we shifted from being a company that first and foremost sold product through the 3 tier system to a company that focused on having a strong and far reaching web presence and selling direct. And that's a model that is perhaps perfectly well suited to many independent companies. If a company is small or perhaps part time, then the people running it have to give an honest appraisal of the time they have to commit to their company. Selling direct, maintaining a strong web presence, doing internet market, packing and shipping items all takes some time and effort. Likewise, managing a distribution system, be it the 3 tier system Key20, IPR, Impressions or direct sales to distributors or retailers, also takes time to manage. And it takes time to effectively communicate with your partners in that distribution system. That's why we cut out the distribution tier back in 2004. We realized the time to manage product flow through that system wasn't justified based on the return it was providing. Every company, big or small, needs to evaluate each potential sales channel it might use to sell its product through and decide if they have the time and resources to commit to making that system work. If you honestly don't have the time, then trying to spread your time over a number of sales channels that is larger than you have time to manage, in all likelihood, will lead to a failure to effectively capitalize on any of them.

So decide if you have time to market to consumers and market to distributors or retailers at the same time. If you realistically don't, then perhaps its not even in your best interest to do both.

Ok, that being said, as I posted earlier, I have a growing set of data that makes a compelling case that direct sales and retailer sales both working together over the same area drives that sales upwards through both venues. Its simply an issue of product awareness and saturation of word of mouth exposure to the target audience. We you have both sales channels delivery product, you increase the chance of hitting a sort of critical mass that drives more total interest in the product that either sales channel could achieve independently. So if a small company has the time to effectively market to both consumers and retailers and can manage both channels well enough to help drive sales through both and through the same geographic areas, then I believe there is a real benefit. If you can manage both channels to that degree then you really need to pick a "primary" channel to focus most or all of your efforts at. For most small companies I believe that should likely be direct sales. Participation or use of any other sales channels for which you don't have the time or resources to manage directly should ONLY be used if they can effectively be used on auto pilot. Time you spend dickering with them is time not spent garnering presence and sales through the primary channel.

Now, regarding money. Yeah, I believe a publisher only making a Buck and some change on a $20 MSRP item when sold through retail or wholesale channels has got to change some things. Its a simple issue of return on your investment. Its just not high enough. I would first try to figure out how to bring down my cost of goods sold (ala, how to make my item cheaper). And no, I don't mean by printing more than is sensible either.

Which leads me to something else to think about. If your cost of goods sold is too high in relation to the income you can potential make, then the product is either priced too low or the product should change formats. In other words, if the production cost is too high, but it is believed that based on the format of the product that a higher MSRP would lead to non sales, then the only options are to figure out how to product the exact same thing cheaper or figure out how to "change the thing" itself so that it has a completely different ratio of cost of production vs retail pricing ceiling. Not all small publishers have to produce products in a format of or in the image of what the big name publishers are publishing. The Guild's first game product was a little 20 pages B&W miniatures game rules, photo copied, and it was produced cheaply and sold cheaply. Given we had a total of $100 to start our company on and POD printing in all its formats hadn't been born yet, it was what we could make work with what we had. My point isn't that THAT format of production should emulated, but rather, if you have limited funds, perhaps your first product should be published in a format that is smaller and more easily and cheaply produced. If you have a big 200 page book maybe you should figure out how to make that into two books instead and start by publishing one and then add the other a bit later. Or you can take a smaller book from 8.5" x 11" format down to a digest format. Back when we were working with finite budgets we had a whole series of "board games" that had B&W "maps" instead of "boards" which were printed onto simple colored card stocks accompanied by rules, charts, etc and packaged into big old zip baggies. They were, frankly, pretty plain jane and certainly didn't shelf well at retail. But they sold. They sold because the "games" had a target audience and the price was right given the production values. If your game or game concept has a target audience, regardless of appearance, it'll make sales. And if it doesn't, no amount of fancy lamination, hard case bindings, board backings or other cosmetic drappings will save it from having poor sales.

So I always suggest you produce within your budgets. And produce to turn a healthy profit on all of your sales. Start small if you must and only tackle the types of distribution and sales channels you have time to effectively manage. As your sales grow so too will your experience and your budgets.

Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com

James: I don't think it's particularly unrealistic at all. But, then again, we aren't talking about 2,000-10,000 here. We're talking, maybe, $400 cost for the entire printrun plus shipping and sundries (for 100 copies, less for fifty). Given that Raven already has $200, that means finding someone who can loan him $200 to match his own $200. That's not unreasonable and, frankly, I've done it before when I didn't have the cash on hand to reprint Polaris.

Raven, if I were in your shoes, and I'm not, I'd be cutting off all my sales into retail immediately and then pricing out 50 copy print runs both at national "POD" places and at local print shops (just look in the yellow pages under "printing.") Remember to deduct the cost of shipping from a local place. You should be able to find someone who can do a 50 copy run inside your price range. If it ends up $50-100 outside of your price range, or there's a really good cut-off at 100, I'd look to borrow money from someone in the community who understands the risks and rewards.

Lulu is a terrible deal except for honest-to-goodness, customer direct, one at a time POD.

yrs--
--Ben

Quote from: Ron Edwards on July 20, 2008, 08:30:44 PMThe answers that concern higher print runs for purposes of lower cost-per-book are, I think, not useful for Raven's needs at all. He is not talking about large print runs. He's talking about short runs: 100 or 200 or so. And this is very reasonable because that's what he's comfortable expecting to sell.

Yes, Ron, and thanks. I realize this was not their intent, but portions of a few of the answers felt very dismissive--and again I realize they were not intended to be, so no harm, no foul--with the essential answer being "print more or get out of publishing" or "come on, everyone has that kind of money". Which made them unhelpful because, yes, I'm talking about print runs of 100 (or less) because I know that's precisely what the market will bear based on sales figures so far. My print runs are based on a realistic, sales/interest-grounded assessment, so I needed advice that speaks to that, not to larger runs or more sales.

QuoteAt a few places in the thread your posts have a "there's no way, I'm screwed, it's impossible" quality, and the facts are otherwise. And not because I'm saying "print 2000 books, it's cheap!" I realize that this is not what you are looking for. It's because a lot of companies simply offer a better deal. There are a number of threads in this forum about the best tactics to use when finding the costs and choosing a printer.

I tried to avoid coming across that way, and I did note "if we are talking about Lulu" and based those figures and follow-up on that. Clearly, I wouldn't be in anywhere near the same situation if I were printing for $3 or $4 per book, even with IPR's retail discount. And also because those retail sales came as a huge surprise to me.

You and I discussed this, Ron, but for everyone else: the reason I am talking about Lulu is because that's who I went with for my initial runs, as the initial run was a test to gauge the market demand, and especially because I had no clue my retail sales would be anywhere near where they've ended up. I'm boggled, honestly, that I've sold that volume to storefronts, as I banked on only a few retail sales with a majority of direct sales, not the other way 'round as it has developed.

Had it been mostly direct sales, there would be no problem because that's what I priced for.

QuoteI have one other question for you. At one point, you refer to some kind of "push toward retail" in the independent publishing community. I have no idea what you are talking about with that. The vast majority of sales and marketing for independent games remains at the direct-sales level, at most through companies like IPR which work on commission. Can you clarify what you mean by that?

This may just be a skewed perception, but there seems to be a certain, subtle attitude of "needing to sell retail". That is: considering all sales and marketing from a retail perspective regarding business practices and decisions, as retail being THE goal, with the idea of retail having a vague "next-step up" feeling to it, rather than an "additional channel you might consider" optional quality. An idea/attitude existing memetically in the some parts of the community as something that should and must be done, rather than something in a separate realm. Which, to me, especially when advice is given that caters to that idea, seems to create as strong an impression of "what to do" as the old "print 10,000 copies so it's cheaper" meme, to bad effect.

As I said, that may be my own skewed impressions at work. But I will note I am also not the only one to make that observation, as a few individuals inside and outside the indie community have made similar commentary over the past six months, so I can't simply discount it outright.

Whether you agree or not, does that clarify the meaning of my statement?

QuoteIt's an important point because your whole topic begins with the observation that your book has an apparent opportunity to do well for you in retail if you can keep printing costs down. Looking over the thread as a whole, you seem to be demanding a justification for utilizing the retail channel yet also having already provided such a justification yourself. So it's confusing.

Ahh. I see.

My points about retail are also being refined as we discuss this, because, SURPRISE, I'm in retail for some odd reason and I suddenly have a reason to consider it and its effects on my profit margins. I do have to wonder why I'm in retail, and indeed why any general indie publisher would sell retail, given the costs compared to their profits -- you'll always make more per item selling direct unless your retail volume is going to (or has proven itself to) outstrip your direct sales.

From an analysis purely based on total expected lifetime sales for an average indie product, selling retail over the product lifespan is going to impact profit. That is, if you expect to sell 300 copies of your game/product over the next 3-4 years total, then every retail sale you make costs you the difference between the profit from a direct sale and the profit from a retail sale.

Example: if you expect to sell 300 books total that earn you $10 each, you could expect to make $3000. If you sell 100 of those retail for only $3 profit each, you only gain $2700 profit over the product's expected lifetime, 'losing' $300 in the retail conversion (which would be the equivalent of failing to sell 30 of those 300 books). This is where my x5.7 calculation comes in: unless you can expect to make that many (or more) retail sales over direct sales, why lower the lifetime product profit for volume?

(Note: I'm not saying doing so is wrong, but it's a question that should be asked by a publisher, if volume matters more than profit or vice versa, and by how much.)

However, I note Ryan stated above his experience was that the two markets should be considered separate and their sales do not impact one another in such a manner, so my concerns in this respect may be completely unfounded.

Thus the observation that retail is a good market for my book holds true if the retail sales hold steady, but then I would need to bring the costs down to make such a venture actually profitable. But not having realized there would be a retail demand, I was left re-examining my financial figures and my business strategy, wondering what I'm doing in retail right now, how much a difference in profit existed between my retail sales and my direct sales, and how to handle retail and differences given I don't expect to sell more than 100-200 copies, and especially how many other small volume indie publishers (or publications) are doing the same or have made the same mistake and haven't crunched the numbers on their retail sales because they also didn't expect them.

Nitpicks, it'd be $2,300, minus $700.

It's not the same as not selling 70 books, since this is profit, and failing to sell 70 books you'd also not earn back their costs (beyond the profit not earned).

Quoteportions of a few of the answers felt very dismissive--and again I realize they were not intended to be, so no harm, no foul--with the essential answer being "print more or get out of publishing" or "come on, everyone has that kind of money".

See, that kind of misrepresentation really chaffs my ass.

The essential answer was "print more or get of RETAIL", which I think is pretty irrefutable if you actually are looking to make money.

the other option presented was "Here's a way you can get the kind of money needed to print more if you don't have it now and think your game can support the additional sales".

It rather irks me when I give solid advice that is then dismissed as being dismissive just because its not the advice you wanted to hear.

If you can find a POD printer who will give you fantastic pricing on run sizes of 50 that is cheap enough to make Retail profitable, by all means please post the details, I'm sure there are dozens of publishers who'd love to know about them.  But while I'm certain you can find printers cheaper than Lulu, I'm skeptical you can find one cheap enough to make Retail profitable at that run size.

Everybody's ass seems to be getting chaffed. There are too many reactions to reactions going on in this thread.

I am giving moderator's notice that what someone feels about what you say is not to be taken as important, and that what you feel about what they say is better kept to yourself. Again, I've looked over the thread carefully and decided that this is in fact a problem, so I am not going to stand for any debate about it. Leave your egos at the door now, please.

Raven, regarding "the drive to retail," I suggest leaving it be. This thread's about making important decisions and not about some zeitgeist or vibe or anything similar. To repeat my point about it, you have hard numbers that suggest some attention to the retail channel would be good for you, and that is all anyone needs to concern themselves with in this thread.

Best, Ron

Fair enough, I can see how a discussion of that issue might just become empty wanking or social theorizing, so consider it dropped.

But I've been talking with you, Fred, and others about this over the past few days and realizing that the retail situation is hitting me from my blind-side and leaving me reeling in shock, trying to figure out how those numbers relate to my sales strategy. So let me try to clearly retarget the thread:
-I, surprisingly and unexpectedly, have decent retail sales.
-I have a very limited budget to fund my publishing.

The sales are good, but making no profit with them is bad. For what I think are obvious reasons, I need to be able to continue to tap those retail sales in order to grow volume and market* (or at least maintain the current momentum) rather than abandon them. But I need to do so within my budget and at a profit given the expected lifetime sales of the product**.

That, then, is what the thread is about: what options are available to me that accomplish those goals with those restrictions? Should the retail sales be abandoned despite their volume (and the possible benefits of retail) for direct sales only at greater profit but possibly a much longer payout period? Though understanding that's a decision for me to make and not a question for anyone else to answer, rather: what have the experiences of other publishers been regarding the above possible benefits of retail versus profit on low-volume products and the rate of direct sales and profit on the same?

Make sense? Do I need to clarify any of those goals or questions?

* ** I don't have enough data right now and need to gather more, so after discussing this with Fred, I'm going to sell at least two more quarters to see how the retail sales play out: if they pick up, drop off, hold steady, or drive more direct sales. Then I'll look at changing my overall sales strategy.

Hi Raven,

My opinion would be, you should not drop the retail sales channel presently. However, that opinion is based on a couple assumptions.

1) You are able to find a short run or POD printer that can bring your total cost down, thus enabling you to get a bit more profit from those sales. Even just going from a buck to three bucks or so on the profit on those sales could become a substantial operational difference in your cash flow.

2) Your current retail distribution method (IPR?) isn't costing you time or additional marketing capital to garner the sales you are currently achieving. Meaning you aren't dumping your limited marketing resources to fuel these sales through this channel and you are able to POD print your inventory in fairly lean printing, striving to keep a leaner inventory on hand for those sales and turning around more micro print runs. Thus not tying up any more of your limited capital than is necessary to keep product flowing through that channel.

3) You have a very limited budget, so if your retail sales can nearly be run on auto-pilot with regards to your ongoing time commitment and the capital you keep tied up there in the form of inventory isn't overly restricting your cash flow and hence your ability to push forward with the other things you wish to accomplish with your company, then the retail sales you are getting is serving, partially, as your marketing channel. Its getting your game out there. And since its "getting it out there", but hardly on a broad basis, it means your retail coverage will be spotty at best or your product will remain a darn hard thing to find in most stores. This means any interest the retail sales drive on the consumer level now have the opportunity to spread to increased interest in other gamers later and if the product is then unavailable to those new fans of your game local at the time they take an interest in it, then this can help drive your direct sales stronger. Very likely driving direct sales that wouldn't be attained through your other direct marketing efforts.

Since your capital is limited, the solution of "printing in more volume" to drive the price down just isn't going to be an option. That means you need trim the fat in order to increase profitability on those sales. Find either a cheaper place or a cheaper format in which to print the product. And look for ways to streamline your time involvement in the day to day ongoings of your retail sales channel. Its providing you some value, but not a great deal of profitability. So you don't want to focus your time there. Let is run itself. If you are selling through IPR, Key20 or whomever else, that's why you are letting them have a cut of the action. So you can focus on other ways to generate sales and make money. Most likely your direct sales.

Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com

Hi Raven,

I'm still a little confused, because several people have all provided the same advice to your question, since the beginning of the thread.

1. Find a POD printer who does short runs (say 100 books) at a reasonable price. How those books are stored, handled, and shipped to distributors is another question, but it seems as if you already have done that to some extent, in which case, do what you've been doing with these new books.

2. Stay with Lulu for one-customer direct on-line sales.

If these haven't been clear to you until this point, then let's forget all about why it wasn't clear or who could have said what in a different way.

Do you have any concerns that make this advice not useful? Is there any "how to" that remains?

Best, Ron

  Ok here is an idea I have had for when I start publishing (eventually). Get together with two or more publishers of games similar though different enough that they don't step on one another’s toes, and organize them into a special edition book. Organize a decent size print run to say gen con where you will all be and then break the books down start signing each copy then divide them up based on who put what percentage of money in. Now if you do this right each of you is in retail but with completely different stores who now get a taste of other indie publishers. This will let you put what you can afford to into the game getting back a better amount and having the added value of other publishers.
  With this money you can then start getting your own print runs going, or even keep pulling off an annual joint publishing venture, say maybe 1,000 a year every gen con make sure to get your pre-orders before their gone! Any way that’s just an idea for what its worth I think it could work out well for you.

Regards, Seth

Quote from: Ron Edwards on July 23, 2008, 11:28:45 AMI'm still a little confused, because several people have all provided the same advice to your question, since the beginning of the thread...Do you have any concerns that make this advice not useful? Is there any "how to" that remains?

It's just a clear thread re-direction: I realize some of the questions I just asked have been answered already, and I am inviting additional comments/suggestions on the situation/plan of action/etc if anyone has them, and I do plan on following up on the advice that has been posted. If no one else has comments on those things, let's focus on the last question instead: what have the experiences of other publishers been regarding the above possible benefits of retail versus profit on low-volume products and the rate of direct sales and profit on the same?

That is, you have a low-volume product and you've sold retail. What were the profits like in comparison to direct sales? Was it worthwhile in terms of profit or volume, or eventual profit (ie: what was the turn-around like for recouping print costs)? What retailers were the best promoters of your product?

Or, you have a low-volume product and you didn't sell retail. Why not? What kept you out? Did you try it and decide it wasn't worth it? How long did you try it for before the data was enough to convince you it was not worthwhile? What made it not worthwhile?

I know Ryan has provided some thoughts and GOB's experiences regarding that (thanks!) and I'm looking for other viewpoints/experiences with the situation as well. Basically, I'm trying to get a handle on what I'm finding myself in based on the experiences of other publishers in similar situations, rather than leaping in completely blind wearing only a decent guess when I don't have to.

Quote from: Thunder_God on July 21, 2008, 02:56:56 PMNitpicks, it'd be $2,300, minus $700.

And THAT is why I should not attempt to perform mathematical manipulations at 2am. Thanks, Guy.

Quote from: Seth M. Bashwinger on July 23, 2008, 08:13:40 PMGet together with two or more publishers of games similar though different enough that they don't step on one another's toes, and organize them into a special edition book. Organize a decent size print run to say gen con where you will all be and then break the books down start signing each copy then divide them up based on who put what percentage of money in.

Seth, thanks for the suggestion, but I'm a bit leery of the "games digest" idea. I've seen it proposed and tried a number of times, but I don't recall off the top of my head any successful examples. I do recall a couple of non-successful examples, especially when monetary issues and costs/payback percentages/book-keeping started coming into the picture (which I've seen kill such projects dead all by themselves). But I fully admit I'm not all-knowing and I'd like to hear from any group who has successfully utilized such a model for selling their games?

  Well I would say for protecting your reputation you would want to carefully pick an already established though moderately successful line. You could then determine formatting issues, and create say 20-30 additional pages of special extras between you both. You then determine a price break in book cost that you want to reach and how much money you both have to put forward. Say for an example (actual numbers aside) each book costs $1 your getting a 1,000 book print run and you can front $250 for the entire deal. When the books all get sent to the single location you have both decided to meet at you divide the books up 250 for you and the difference to your partner(s). You can then go about signing each copy with one another to make it extra special for the customer, or have say 100 books signed and numbered by both of you in gold ink and auctioned.
  This would eliminate your worry as far as splitting up profits per book sold and such as your each just walking away with a pile of books. This will allow you to get some seed money (as the books can be sold at a mark up) which you will walk away with more of (from the lower margins) on top of the fact that your getting 750 books worth of marketing on your partners end. Who knows in the end it may become a very popular thing with both your clients and an annual thing might be made of it say that simple 1,000 print run each year to keep the anticipation and desire to quickly buy up.

  Overall if your don’t want to use a method that would slowly build momentum, some sort of joint venture may be best.

Regards, Seth