FLGS Profit Margins
David Artman:
Splitting from a thread in which it was ignored:
Does anyone know what an FLGS expects in terms of per-book-sale profit, on a book-only RPG product?
I am thinking there's a percentage range. I ask because I want to list a book MSRP and individual-sales at a higher price than the price for dealers or if bought in bulk (10+).
Ron Edwards:
Hi Dave,
The percentages wiggle around a bit, but here's the basic idea as it stood through most of the last fifteen years: 40%, 60%, and 100% of cover price through the three tiers.
The Manufacturer Suggested Retail Price (MSRP) is the starting point. The publisher sells the book to the distributor at 40% MSRP. So for one copy of my game Sorcerer, set at $20, I get $8 from the distributor, and I'm done, that's my money for that book. My profits are less printing; say, $8 - $6 makes a profit of $2.
The distributor then sells it to the retailer for 60% MSRP, in my case $12, making a profit for him of $4.
The retailer then sells it to a customer, getting $20, for a profit of $8.
All sorts of things modify this, including various cut-rates on bulk, minor shifts in percentages into the 9's or 7's or 3's, negotiations that concern what's decided for title X as opposed to title Y from a given publisher, and so on. These details move around all the time. Recently, the fulfillment houses often set slightly-unusual standards as a selling-point, usually favoring the retailer over the distributor.
The major issues, though, concern shipping costs, exclusivity, and buy-back. Who pays the shipping at each of the two steps, and when (before or after)? Does the distributor punish either retailer or publisher for using another distributor in tandem? Can the retailer return books that don't sell to the distributor, and/or can the distributor return books that don't sell to the publisher? These are crucial questions which get answered in different ways at different times, and how they get answered really create a sea-change for everyone involved.
I have taken my eyes off these issues for the past two or three years and cannot characterize the situation very well right now. I can say, however, that how those issues are answered, changes the publisher's best-strategy decisions profoundly.
One last point, which is kind of a major elephant in the room: in the U.S., and probably in other places, the MSRP is not obligatory. A retailer really can sell anything in his store for whatever price he wants. Sorcerer's little bar-code says 2000 ($20) on the back, but he can price it in his store at $45, $4.50, $100, $0.50, or any-damn-whatever as he sees fit. So the whole ironclad-feel of starting with the MSRP, as if it were some kind of natural law, is misleading.
Best, Ron
iago:
One thing to keep in mind is that on that $20 book, the $8 the retailer makes isn't just to make a reasonable profit off the $20 book he sold. It's also there -- some might say primarily there -- to cover the costs of all products that have been bought but haven't sold (and maybe won't). So while $8 on $20 sounds hefty (it's like 40%), it's an $8 that gets eaten up very, very fast by the risk factors and other costs associated with running a store. It ain't a cheap enterprise.
Ron Edwards:
That's true. The publisher has his printing cost to deduct from his $8, and the retailer has God-awful costs to deduct from his $8.
In the past, the distributor has been described as the "holder of the debt," especially when they accept buybacks. That's an interesting and debatable topic that I just realized could be a threadjack on my part.
So! Anyway, back to the original question, if anyone knows about the current percentage standards and variations of the three-tier system, especially if they've wiggled away from what I described, please post about them.
Best, Ron
David Artman:
Ah, I should clarify, I see. I am not going three-tier (yet, even if I could). This is probably all-Lulu. I want to offer a softbound and a hardbound option. The MSRP (my price at Lulu) will be X (soft) and X+cost-of-binding (hard)--in other words, a static "up-charge" or "profit" after printing costs, before shipping charges; no premium pricing of the hardbound (a bit of rounding, at most).
So I want to figure out what profit is an amount which allows me to reduce by a percentage that gives the retailer reasonable profit without stripping me of all earnings. From what I read above, it sounds like 60/40 is the way to go:
MSRP = 2 * print cost
Dealer/Bulk = 1.2 * print cost
That works out to a 40% profit for the retailer, before shipping (which ought to vary based on quantity ordered and location, so I can't really factor that... can I?).
Seems like a pretty deep discount, to me--I give 80% of the net profit on an MSRP sale to the dealer. But if that's how it works....
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