A serious question about Distribution

Once the distributor has bought from the publisher, then it's over. The publisher has the money. The distributor selling at less than advertised price only affects the store profit.

The store usually sells at advertised retail so that a brick and mortar store can re-up the cost to keep up the store. The difference between the publisher cost and the retail price is the money the store makes.

If the distributor decides to put up a store and not sell at advertised retail, then it's their own profit they are sacrificing. Many times stores will have huge sales to either 1) Free up inventory space for newer product, 2) consider the purchase a loss and just trying to get rid of it or 3) get an edge on the competition because the store has made up the difference in other sales (they basically just want your business).

Hope this explains things.

Essentially yes.

Here's a breakdown example:

Game is made through a publisher. Publisher goes through mass production or produces itself and the cost is, say $20.00 to make, including labor fees, profit, and royalties.

The publisher sells to a distributor at $22.00 (to give some profit to the publisher, but not always). The distributor then slightly marks up the cost so that they can make some profit off of distribution. Since distributors only use large warehouses, the cost to keep them there is minimal. They don't have to make the game, they only have to store it temporarily.

Stores then buy from the distributors, because it's easy for the stores to buy bulk from one place instead of having to contact all of the publishers, make deals with them, and securing a deal. Stores then bump up the price to, say $30.00 so that the stores can make profit and keep the brick and mortar stores open.

But what you've described in the first post is really what Amazon is doing. They are both a distributor AND a seller through online stores. Yes, they get a better deal, yes they get more profit, and yes they can lower the price so they can get the edge on the competition without sacrificing too much profit.

First you figure out all of your costs, manufacturing, freight, shipping, and a bit of profit. That is your cost. You now have to calculate the Manufacturer Suggested Retail Price (MSRP) taking into account certain common percentages.
The numbers I usually see is 40% MSRP distributor, 50%MSRP retailer.

So using the $20 example being "your" costs, you can say the MSRP is $60. In this example the distributor buys for $24 and the retailer buys for $30. They then charge what ever they want.

This is only a simple example and the number and percents are not exact but it should give a simple overview.

Some companies have sales agreements on how they can be sold most specifically what the minimum end price is. Unless the publisher knows ahead of time that they are selling to a retailer at the 40% that most distributors buy for rather then the 50% retailers are buying for is deceptive and bad business.