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But in the brick & mortar scenario, the negotiation happens on more of a level playing field. Both parties have a reasonable alternative if an agreement isn't r

But in the brick & mortar scenario, the negotiation happens on more of a level playing field. Both parties have a reasonable alternative if an agreement isn't reached -- the manufacturer can find another retailer, and the retailer can find another supplier. In this case there's no such competitive market. Granted, 30% would be low for retail, but surely digital marketplaces would charge less if competition was allowed. To get a sense of what pricing would look like in a competitive market, we can look at Steam, Epic, etc. for app distribution, or Stripe, Braintree, etc. for in-app purchases.

dylan604 6y ago
Ever tried to negotiate to get your product sold on a shelf? It is very much not a level playing field. WalMart is infamous for beating sellers down to such a low per unit price with the promise of making it up on quantity. Target, BestBuy, and any other big box retailer only follow WalMart's lead. Then there's the fact that if your product doesn't sell well according to their metrics, you are forced to buy it back from them. Now you're hoping Ross will buy it from you! There are costs of doing business. They can all be negotiated or at least attempted, but at the end of they day you want your product where the consumers are, so you have to ultimately play within their terms. You can make 70% or make 0%.
- dlubarov 6y ago
  No one said retail was easy! Thin margins are just the natural result of competition. Retailers have thin margins too. Walmart's net profit margin was 4.7% in Q2, and that was a major outlier. The playing field might not be completely level, but at least competition exists on both sides.
- RonanTheGrey 6y ago
  There's a saying in economics that "in a perfectly competitive market, nobody is making a profit - because if they are, someone is losing customers". In a perfectly competitive market, everyone lowers prices to the point they can't lower them anymore, and that tends to be the same price for all competitors. In a market where someone is making billions in profit, it's almost de-facto evidence of a lack of competition. Not a priori, obviously, but it gives you a basis for measurement that where you're looking is somewhere on that spectrum. For big box stores, that razor thin margin is exactly what you would expect from a very competitive market and so it's fair to say that it is one. Who else can charge 30% on every sale just because?
  - dylan604 6y ago
    > Who else can charge 30% on every sale just because? Every physical product retailer charges > 30%. This is what I'm suggesting is the confusion point. If an app developer sells an app for $0.99, then the dev gets $0.66 per transaction. If a physical product producer sells something with an MSRP of $0.99, the retailer will be purchasing the item at a wholesale price of closer to 50% of the MSRP (if not a higher percentage) leaving at max $0.50 per item. This shows how much easier the software dev has it.

dylan604 6y ago

Ever tried to negotiate to get your product sold on a shelf? It is very much not a level playing field. WalMart is infamous for beating sellers down to such a low per unit price with the promise of making it up on quantity. Target, BestBuy, and any other big box retailer only follow WalMart's lead. Then there's the fact that if your product doesn't sell well according to their metrics, you are forced to buy it back from them. Now you're hoping Ross will buy it from you! There are costs of doing business. They can all be negotiated or at least attempted, but at the end of they day you want your product where the consumers are, so you have to ultimately play within their terms. You can make 70% or make 0%.

dlubarov 6y ago
No one said retail was easy! Thin margins are just the natural result of competition. Retailers have thin margins too. Walmart's net profit margin was 4.7% in Q2, and that was a major outlier. The playing field might not be completely level, but at least competition exists on both sides.
RonanTheGrey 6y ago
There's a saying in economics that "in a perfectly competitive market, nobody is making a profit - because if they are, someone is losing customers". In a perfectly competitive market, everyone lowers prices to the point they can't lower them anymore, and that tends to be the same price for all competitors. In a market where someone is making billions in profit, it's almost de-facto evidence of a lack of competition. Not a priori, obviously, but it gives you a basis for measurement that where you're looking is somewhere on that spectrum. For big box stores, that razor thin margin is exactly what you would expect from a very competitive market and so it's fair to say that it is one. Who else can charge 30% on every sale just because?
- dylan604 6y ago
  > Who else can charge 30% on every sale just because? Every physical product retailer charges > 30%. This is what I'm suggesting is the confusion point. If an app developer sells an app for $0.99, then the dev gets $0.66 per transaction. If a physical product producer sells something with an MSRP of $0.99, the retailer will be purchasing the item at a wholesale price of closer to 50% of the MSRP (if not a higher percentage) leaving at max $0.50 per item. This shows how much easier the software dev has it.