Selling digital products in the real world

getting requests from brick & mortor stores to carry our product

[axgrindr]

We have a line of digital products for sale on our site that are available as download only or shipped on a CD. The products are selling really well.
Every couple of months I get an inquiry from someone wanting to buy our product wholesale to sell in their brick & mortor gift shop or museum store.
I'm not sure what to tell them. We do have a high end robotic CD duplictor/printer so in theory we could burn large batches of our products. But I'm not sure how to proceed from there.

-How much to charge? (our product is $14.95 USD to the end user)

-Would the CDs need a UPC bar code?

-I guess I would have to package it up in a nice jewel case with artwork and liner notes (big hassle)

-Is it worth doing or should I just tell them no and move onto my other projects?

I'd appreciate any advice or experiences you may have had in a situation like this.

[flyerguy]

I've started and ended my own CD Duplication company, so I can tell you even with a $20,000, 100-CD at a time, full color thermal printing robot, it's still a very hard business to manage.

Not only is it really heavy on the 'widget factory' business skills, it's also very heavy on attention to detail. Running a production line is hard enough, running a production line with fragile little jewel cases, paper inserts that have to be printed / cut / folded / perforated properly is much harder.

For the printing aspect, we were lucky to find a local printer who had a very good laser jet, somewhere in the range of $140,000, and arranged short-run digital print jobs through him at a reasonable cost. He also had contacts with a local bindery/printhouse that had some really big old slicing machines to slice out the shape of the inserts.

You will also need some significant floor space if you go into any kind of volume, the materials eat it up.

That being said, if it's just a small operation as a compliment to your existing business, you should try some test runs and see how it goes time/effort-wise and also if your retailers are happy with the product.

The other option is to go to the yellow pages and find a local duplicator/replicator. It could boil down to a lot of monkey work that distracts you from your main business, leaving it to someone else might be a better option.

[victor]

Standard gift trade markup is at least 100%

If the item retails at 14.95, a guide price for selling to the giftshop would be 7.50 for a minumum order of (say) 50.

They might beat you down on volumes and/or returns policy etc. But they wouldn't pay more than that. It wouldn't be ecconomic for them

[bullshido]

You may also need to worry about trade terms.

Remember to do a search on the prospective buyer.

[axgrindr]

Thanks for the reality check flyerguy. The real world sounds like a nasty place. I think I'll pass on the wholesale deals.

[DryFire]

At $7.50 wholesale you might have a hard time making it worth your while. But if you can combine multiple product sets onto one CD to get the price up a little and then outsource the production of the CDs it could be a good thing for you. Whatever you do don’t burn your own CDs. It will eat up all your time. Besides there are tons of companies out there that can make and package CDs for you for much less than you can do it for yourself. Go to Google type in “CD duplication” and you will come up with thousands of companies that could make the CDs for you.

[flyerguy]

On the contrary if you are set up correctly you can produce CD-ROM's with 4 color thermal print on the disc, double-sided full color inserts in standard jewel case, and still make a profit at $2.50 / unit.

CD supplies are dirt cheap, you just find a buddy down the street with a warehouse that gets palettes of blank CD's direct from Taiwan.

I don't want to knock the business idea or scare anyone out of it, it can definitely be fun if you are serious about doing small-run orders for the general public, you get all kinds of interesting people coming in. Definitely a much more appealing start-up then a Ink Jet Refill joint or such..

[DryFire]

I guess it depends how much you value your time. If you burn your own CDs you won’t have much time to spend on the website side of your business. But even so, companies who replicate CDs can do it for you for well under $2.50 (typically well below what you could it for in house). They typically have much lower costs because they purchase in much larger volumes than you could ever hope for. They also have already invested in the fixed costs required (equipment, etc.) So anything above their variable costs is profitable for them. It is also a relatively completive industry with lots of companies to choose from, which also helps drive down prices. Burning your own CDs is kind of like making your own paper instead of just going to Office Depot and buying it.

[Sierra_Dad]

I do sell a digital product. No store has asked me to carry it yet. But I have wondered what to do if they did.

When the product is mature enough ( it isn't now), I've wondered if it would be worth it at some point to go with an on demand service like kunaki. Then you would be prepared if someone asks and if you want to approach a store to see if they will carry your products.

And 50% does sound like the margin they would want. Online distributors like Handango want 40% or more, after all. This could be worth it if it is a true bulk order, and it expands your "brand awareness".

[axgrindr]

The kunaki thing sounds almost doable. You could get the product set up with them and do a small test printing, then use these as samples to send to prospective buyers. Then request larger batches if any orders materialize. Might be worth considering. Seems like we might need to raise the price a bit to cover $2.00 per CD cost as opposed to our current $0.85 cost for printing/burning.

[DryFire]

Don't just look at kunaki. There are thousands of companies out there that do exactly what they do. Some will have better rates... some will likely even be in the same city as where you live (unless you live in a small town). If you do a little looking you will find a company that will work well for what you need. I also agree with the idea of doing some test marketing with a few stores to see what happens. You won't be out a whole lot and it could turn into a good thing for you.

[Beagle]

...it expands your "brand awareness".

Strictly from a customer POV, I think this deserves some attention. I'm involved in the user forum for some software that's available only as a download and only from the company's own site. I think it's a great little program and would love to see more people use it, but if the company doesn't make it more available I don't think the market for it will take off - not so much because people won't buy it as because people don't know about it.