Fulfillment Houses
JustinB:
Has anyone else whose regular fulfillment house sells to Alliance Distributors gotten an e-mail from Alliance offering to act as a fulfillment house for you?
Is Alliance trying to break into the fulfillment market now so that they can... what, take an extra cut off the top before the distributor discount?
This seems pretty strange to me. I may see what their terms are, though. If they don't take an extra cut from Alliance-distributed games, that would be a quick way to bump up profits.
iago:
Wish I could help; I'm deliberately not in distribution at all.
Ron Edwards:
Hi Justin,
I got the email too, from Gabe Gillig, assistant to Danny O'Neill. You're right, it's a little weird ... as far as I can tell, it's a separate discount (i.e. "cut"). The benefit seems to be that this entity would, allegedly, handle orders from anyone else as well as Alliance's own orders.
However, I am skeptical. Can it be relied upon to handle orders from a rival distributor which serves overlapping stores? Would it serve stores which use Alliance but which would prefer to work straight from fulfillment alone?
The potential for abusive, distributor-centric decisions is extremely high, as the mutual benefits of total profits per title may outweighed by the Alliance-only benefits of competitive practices. Especially since the profit margins of my games, for instance, are relatively low.
I'll be talking to the guy today and follow up on these and similar questions. At present, the deal looks suspiciously similar to one "offered for discussion" here at the Forge by Sean Patrick Fannon a couple-three years ago. I use quotes in that sentence because discussion was clearly not what he wanted.
Best, Ron
Ron Edwards:
OK, it's a lot better than I thought. Those questions remain, but given that Danny O'Neill is the point man, I'm a little more confident that this is an offer worth considering. Maybe not a good fit for everyone (I'm kind of a multi-basketer by preference, for instance), but maybe for more than I'd thought.
I've known Danny as a fellow publisher for a long time, and he's always run his own company, Hammerdog Games, including a line of independent OGL products. My take, for whatever it's worth, is that he's worked hard to make this current deal into a viable offer for independent publishers.
After a conversation with Gabriel, here's how it works:
You send a bunch of books to Alliance. What happens to them financially then splits into two, depending on who is ordering.
1. Retailers who are already Alliance clients get them through Alliance distro. The discount is increased by 5% to (roughly) 65%. So for a copy of Sorcerer (MSRP $20), I get $7. These retailers do not have the option to participate in 2(iii) below.
2. Retailers without an Alliance account, other distributors, and on-line customers are all served through the fulfillment house alone and the Alliance discount does not apply. The fulfillment cut is composed of a 19-cent/item packing fee and shipping fee (less 10%), i.e., that's what you pay. What you make depends on how much each of those guys is charged.
i) I charge $20 for an on-line purchase of Sorcerer, so out of that, Alliance gets 19 cents, and also bills me 90% of the shipping fee. Which is a pretty good margin for me, actually.
ii) For an order by ACD or some other distributor, who for sake of argument also uses the 60% discount, I get the $7, less 19 cents and 90% of shipping - basically the same as if ACD just got it from me direct. (Their logic is apparently that if I'm gonna be dealing with ACD anyway, at least this way Alliance gets a little taste. It also seems a way to look almost directly into the accounts of competitors.)
iii) I forgot to ask how prices for a non-Alliance retailer are determined, but let's say it's 50% discount (I'd prefer that over the standard retailer-40% for incentive reasons). So I'd get $10 less 19 cents and 90% of shipping.
Boy, I hope I got that right. The part I'm not totally confident about is whether I described the shipping right, but perhaps Danny or Gabriel will check me.
Anyway, that's how it plays out, and for better or worse, IPR, Key 20, and the other fulfillment houses are going to have to consider this offer as a competitor.
When it's good, bad, better, or worse for a given independent publisher is going to be a highly individualized issue. I'm interested in any discussion of the variables that lead one way or another, in terms of volume or price-point or relative proportions of on-line vs. store sales.
Oh! And boy, how Lulu publishing might fit into it, I have no idea. I guess the publisher would have to choose whether his or her website sell-button takes the customer to Alliance or to Lulu.
All thoughts are welcome. This is an interesting development.
Best, Ron
Wingnut:
Ron,
I definitely recommend that ANY publisher talks to a bulk of distributors about who they should go with and each of their personal experiences with the fulfillment houses.
I can tell you from my experience that anyone going with Key20, Studio2, PSI or myself (Impressions) will have a very level playing field in the distribution marketplace. ACD used to do fulfillment and found that once they started fulfilling for game companies, the other distributors were not happy getting orders from a competitor, thus, giving ACD sales information. I have heard similar concerns from others about Alliance's fulfillment services...The good side here though is that they are the biggest piece of the pie and you rarely will have to worry about your product not being available for shipping.
In the end, each one of us do different things, and it is all about what each company wants. For example, Impressions DOES NOT get a booth at conventions to sell like a retailer...Key20 and Studio2 do that. Impressions has GameBuyer and www.FreeRPGDay.com - lots of access to retailers. PSI has major access to the book trade. Again, it all depends on what a publisher wants.
There is enough business for all of us.
Best,
Aldo Ghiozzi
Owner
Impressions Advertising & Marketing
aldo@impressionsadv.net
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