Distributor?

Short Version:
Getting carried by a wholesaler can be challenging and there's a lot of time-consuming paperwork involved. Consider setting up an account with a fulfillment house. It cuts into your profit margin, but the services of a good fulfillment house can be worth it.

Long Version:
Before I start: Note that I am not a publisher of tangible games. I did start and run a retail game store for 4+ years, so I'm not 100% clueless. That said...

You're wondering how you're going to get the games you make into the hands of paying customers. Whether you work with wholesalers depends on how you want to sell your games. Typically, wholesalers are part of a multi-tier distribution system that looks like this:

Publisher >>> Wholesaler >>> Retailer >>> Customer

In this model, retailers buy their inventory from one or more wholesalers, who buy their inventory from many publishers (of which you are one). It's tremendously important to note that a typical wholesaler makes their money off of just the top-selling product lines (Wizards of the Coast, White Wolf, what-have-you). They don't make money off of products from small publishers like you and me. In fact, the labor it takes to inventory our products, coupled with the space our product takes in their warehouse, often means that carrying our products *costs* the wholesaler money. Wholesalers carry product from smaller publishers as a way of distinguishing themselves from other wholesalers. This ties back to the retailer...

Remember I said that, "retailers buy their inventory from one or more wholesalers." Retailers like to keep the process of ordering as simple as possible. If you (as a retailer) can place just one order with one wholesaler and get all the inventory you need, that's really nice. When I ran a store, I had one primary wholesaler and one back-up if my primary was out of stock on something I needed. There were a few others for specialty products, but I didn't order from them often and it was inconvenient to do so. This is why you're not likely to succeed if your plan is to sell directly to retailers across the country. Ignoring the logistical nightmare you'd be getting yourself into, you'd find that retailers just wouldn't be interested in having yet another account to manage with yet another product supplier. This is the crux of the role – the service – that wholesalers provide in the publisher >>> wholesaler >>> retailer >>> customer chain.

Jumping back to wholesale costs of carrying small publisher inventory... Because it (often) costs a wholesaler money to carry products from a small publisher, it can be very challenging for you (as a small publisher) to get a wholesaler to agree to buy and carry your game. The fewer games you have, the harder it is. That's (partially) what industry trade shows (like GAMA's GTS) are for. You (as a publisher) want to convince wholesalers that your game is so awesome that retailers and customers will be clamoring for it (Some people call this "push" marketing.). You also want to convince retailers that your game is so awesome that customers will be clamoring for it – that they will lose business to other retailers if they do not stock your game (This push marketing will (ideally) result in retailers going to their wholesalers right there at the show to place orders for your game. That is a very powerful way to convince wholesalers to carry your game – especially if the retailer who's placing an order or your game is a big account. I've heard that kind of pressure called "pull" marketing.). This is also why it's useful to go to shows that are open to the public. It builds your credibility in the eyes of the retailers and wholesalers, and it pushes marketing to the consumers, which generates pull marketing with retailers (consumer asks retailer for the game), which generates pull marketing with the wholesalers (retailer asks wholesaler for the game), which (hopefully) results in wholesalers placing orders with you.

Getting a wholesaler to carry your products can be difficult. And once you do get one to carry your products, you have to deal with shipping, negotiate payment terms, and all sorts of other stuff. Since I haven't engaged in selling products to wholesalers, I can't offer any real insight into this. However, I'd like to mention that there's another way to get in the chain - Fulfillment Houses. They fit in the chain like this:

Publisher >>> Fulfillment House >>> Wholesaler >>> Retailer >>> Customer

A typical fulfillment house provides some or all of the following services:
* Warehousing: They keep the stuff you've published.
* Inventory: They keep track of how much stock you have in their warehouse.
* Shipping: They ship orders to wholesalers.
* Invoicing: They invoice wholesalers for what's been sold to them.

The idea is that you publish a product and have that product sent to your fulfillment house. The fulfillment house handles all the physical stuff, described above, leaving you free (or at least free-er) to focus on marketing your existing games, publishing more games, and developing new games. As you can imagine, these services will cost you. However, they're also tremendously useful. How much help you want determines how much you'll have to pay the fulfillment house. The fulfillment house may also offer other services, such as advertising, promotion, and sales of your product at conventions and through a catalog they produce and distribute to wholesalers (and possibly retailers).

My understanding is that wholesalers find fulfillment houses appealing because it enables them (the wholesaler) to place one order with one entity (the fulfillment house) and get a smattering of goods from many different publishers that they (the wholesaler) would otherwise not want to deal with on an individual basis. In some ways, it's like the retailer's motive for only dealing with one or two wholesalers.

Dealing with a dependable fulfillment house benefits wholesalers in other ways too, but I've gone on far longer than I meant to (I do actually have things to do this morning!). I expect that other forum members can provide additional insight. I hope everything goes well for you!

Wikipedia: http://en.wikipedia.org/wiki/Fulfillment_house
"How to select a fulfillment house": http://www.wilsonweb.com/wmt6/fulfill-house.htm
Results of a simple Google search: http://www.google.com/search?aq=f&sourceid=chrome&ie=UTF-8&q=fulfillment...
Studio 2 - the fulfillment house that two friends of mine are using to get distribution for Shard, their RPG: http://studio2publishing.com/home/modules/sections/index.php?op=viewarti...

when you say manufacturer, are you talking about 'us--' the designer/owner?

Thanks for the good information on this thread. It sounds like regular distribution is a good way to go, if you can convince a distributor to pick up your game, which is apparently a challenge for start-up companies.

Another question I have is: I understand the ratios above, but there's an unconstrained variable - how do you set a retail price, on which all those other numbers are based? Obviously, you can just pick a number based on knowledge of the marketplace (what similar games cost), or you could pick something based on your production costs, but is there a better way (or an industry standard) to tell what the retail price should be? Your choice of price affects not only your eventual income but also the willingness of distributors and shops to pick up your game, but there seems to be not too much to go on to pick one.

Thanks,
Dave

The old rule was "double double" - double your production cost to get your wholesale. Double it again to get retail. That, however, puts you at about 25% for production, which is a little high these days. For a short run (1000 games or less) game this will still result in a fairly high retail price.

BTW, Dralius is right about fighting for that last $1. $1 production = $5 at retail and $5 is a HUGE difference at retail on any game below $50.

Yes, you would get paid after the fulfillment company sells copies of your game. The warehousing charge is different depending on the fulfillment company - some don't charge anything as long as your game is selling, but if it really slows down they start charging. Some charge warehousing regardless.

A question I have is whether you (as a publisher) can go ahead and set aside some # of copies of the game and keep them locally, or at the fulfillment house, and sell them at full MSRP+shipping online from your web site. You wouldn't want to do sales, since that would compete with retailers. I also think that fulfillment houses generally don't do individual shipping to consumers, so you probably couldn't ask them to ship something someone buys from you - so you'd probably have to keep however many copies you wanted to sell this way. Fulfillment houses just do large shipments to distributors (and some retailers?). But would anyone in the supply chain be annoyed if you did this?

Oops, yes - some fulfillment houses will do small deliveries to individual customers, but the relative cost will be greater. Somebody has to go and sort the single order instead of a large order which equates to a greater expense for the fulfillment house than addressing a pallet delivery.

Retailers are being hit by online sales so any self selling on a website - or through a linked medium like amazon - will hurt retailers.

Its an ethical dilema, do I sustain a profit hit by supporting retailers and not offering direct sales, or do I offer direct sales and hurt retailers by doing so.

Ideally, you want both avenues open to you. The solution that occurs to me is to employ product diversification. Promos and specials are an established part of game design offerings.

Direct sales could feature a "stock offering" while the games sent to retailers could feature extra content that is only available in copies bought from retailers.

By doing this a publisher could offer direct sales while still providing retailers with product exclusivity - if you want the extra content then its only available if you buy from a retailer. So if your game was called "Product Distribution" you would have Product Distribution (stock) and then Product Distribution - cuddly cat edition (the limited tag referencing the added content)

You would simply have to add some more cards, tiles or components to make it attractive and distinct. Naturally , this will raise the cost of producing the retailer copies, but the added production expense would be a small price to pay for access to both sales streams.

If you are new to game production, you probably will not be printing more than 1000 to 2000 games.

Game cases coming in from a printer will usually hold 6 to 10 copies of the game (usually closer to 10). A normal case of games can stack 6 cases high without doing damage to the bottom case.

When the games arrive, you will have a very busy "ship out" day, packing games for personal orders (gotten through your website, kickstarter, etc.) and distributor orders (if you have negotiated to work with any).

Hopefully, after the first day you should be several cases lighter. That being said, storage is often done at your own facility (office, home, etc.).

From then on, any direct sales orders for individuals or case orders for distributors can be done on a day by day bases. With a new company, you will not be shipping hundreds of games per day, so you really don't need to hire anyone extra to package and ship them.

In fact, it is a little jolt of happy success each time an order comes in.
You'll hear the little "cha ching" in your head and feel a well deserved, imaginary pat on your back, each time someone in the world has picked up your game and decided they can't live without it. :)