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Cost to sale ratio

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Sun, 10/16/2005 - 10:26
Axe
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Joined: 12/31/1969

For a small run (I'm thinking around 1000 units) what would be a typical cost to shelf price ratio? For example. If each game costs me $5.00 to have manufactured (and assume I got an average deal from a Chinese manufacturer) how much could I expect to sell it for to a retailer; and how much of a mark up would they be likely to make.

For instance: My cost $5.00 (acting as the wholesaler), I sell to retailer for $10.00 they sell it for $20.00. That would be a 4 to 1 ratio, with me making a 100% profit. Would this be a realistic scenario.

Thanks in advance!

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Sun, 10/16/2005 - 15:08
#1
Hegemon
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Joined: 12/31/1969
Cost to sale ratio

As a "vanilla" exercise, this isn't a bad assumption. However, it seems your $5.00 cost is really only covering the direct costs of manufacturing the the games. There are a number of indirect costs with any operation you'll want to factor in to determine your "true" cost.

For example, advertising (plus telephone calls or website domain hosting fees to land the order), storing or warehousing your goods, the cost of acquiring shipping cartons and then actually shipping them out, the need to deal with returns or damaged goods, office supplies (got to print those invoices up), insurance (if any) and taxes. Typically, to cover these items, an item is priced at 7 (or more) times the direct manufacturing cost.

If you're going to run your game biz out of a spare bedroom, then many of the above don't apply - but I suspect you still won't get a 100% return on your money.

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Sun, 10/16/2005 - 16:08
#2
Axe
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Cost to sale ratio

No, I wouldn't consider running a business like this out of my house. I'm thinking more along the lines of using some existing space I have or better yet a storage unit (if that kind of thing will work) with an AC unit and dehumid running 24/7.

Oh, and what do you mean by: "Typically, to cover these items, an item is priced at 7 (or more) times the direct manufacturing cost."

Could you give me an example in numbers.

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Sun, 10/16/2005 - 18:17
#3
braincog
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Joined: 12/31/1969
Cost to sale ratio

I wouldn't suggest you approach pricing by focusing too much on your costs. The cost to you to produce the game is entirely irrelevant to the retailer and end customer. They will base their evaluation of your game's value based on the price of simillar games they might buy. Determine an appropriate price for your game based on the competition. Once you've done that, THEN you should think about your costs and whether you can make a decent profit given that a retailer will expect to pay ~50% MSRP and a distributor would expect to pay ~40%.

Of course, don't forget shipping, marketing, etc. when you think about your costs.

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Sun, 10/16/2005 - 20:47
#4
Hegemon
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Cost to sale ratio

Quote:
Oh, and what do you mean by: "Typically, to cover these items, an item is priced at 7 (or more) times the direct manufacturing cost."

Well, you simply take the direct manufacturing cost ($5.00 in your case and mulitply by 7 (or more) to come up with a suggested retail of $35.00 (or more - depending on your multiple). Let's say you take Braincog's advice and do some product comparisons and determine that your game really won't sell for more than $20.00 retail.

So dividing by 7 you want to get that your manufacturing cost under $3.00 if at all possible. Since you've expressed that you're not going to run a high overhead shop, or perhaps you expect a keen mail order business, maybe you can divide by 6 instead and accept a direct manufacturing cost of $3.33 or less for a $20.00 retail item.

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Sun, 10/16/2005 - 22:44
#5
Axe
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Cost to sale ratio

Well, I see what you mean. After pricing out my unit cost for production (box, board, cards, dice, shipping) I'm looking at a cost over 5$. But, that is a relatively small run and I don't expect to make a profit any time soon. The 20$ figure was the average retail price for similar products in my catagory.

It seems the profit on a board game is much smaller then you find on other kinds of products, and the risks are great (a high upfront cost). From the above example, it is hard to see how the production of a niche board game with smaller yearly sales (say 5,000 units) would be worth it. Esp. if you use a broker who takes 40% of your cut. Production is a high risk gamble.

Thanks so much for the advice. ;-)

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Mon, 10/17/2005 - 09:59
#6
Stainer
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Joined: 12/31/1969
Cost to sale ratio

I think card games are the way to go. You have a lower manufacturing cost and they use much less storage and shelf space. If you can't afford to do a board game, convert it into a card game.

Rob

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Mon, 10/17/2005 - 10:45
#7
Axe
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Joined: 12/31/1969
Cost to sale ratio

Are card games going to stay in existance though? I mean, it seems like they never really broke into the saturday night family sitting around the table crowd (like Risk, Monopoly, Triv. P, etc.) they seem to be played peer to peer (between kids, between adults but not mixed). Plus, do girls except card game format. I've only seen boys playing these kinds of games (but that could be do to the heavy focus on fantasy or poker and few and far between).

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Mon, 10/17/2005 - 12:34
#8
Stainer
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Cost to sale ratio

If you're talking about CCG's and Poker, then yes you're right. They aren't really family focused. But why count them out on such a simple premise? Simply make a family card game. From the top of my head I can't come up with a family card game. Ok, now I can - Rook.

Never the Less, the card game industry is lacking.

Rob

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Mon, 10/17/2005 - 19:14
#9
jkopena
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Joined: 12/31/1969
Cost to sale ratio

Actually, it's pretty easy to think of non-poker-deck card games with major family presence. Rook's a good one, as someone said. Uno's another.

It's also worth pointing out that there's a difference between how much money card games pull in, and how many card games flop/aren't huge successes. As far as I can tell, most game shops in Philadelphia are basically surviving on their card sales right now. That's mostly their CCGs, but the contained games also move much more briskly than the board games do.

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