Hacker News new | past | comments | ask | show | jobs | submit login

Good analysis.

One comment though - if the intention is to get the game onto the shelf in retail stores, there's not enough margin in it at the current cost/pricing.

A store is going to require most (or all) of that margin - in most "dice game" type stores, if you want to put a product on the shelf at $20, you're going to need to sell it to the store for somewhere around $14 or they're not going to be interested.

Seems to me that at least an investigation into whether getting a run of 3,000 or 30,000 sets made up (and outsourcing the 80 or 800hrs of packaging work) would be a worthwhile exercise rather than being premature optimisation.

Most retail outlets in my experience would want to purchase the $20 retail item for $8, giving them a 60% margin. Source - 20 years of doing this.

I'm making a product, and selling mostly online.

I was shocked (in the newbies do) to find out about the sort of gross margins retailers want. From where we are now, it seems like the only way we could reach that is through economies of scale that we are uncertain would pay off. Chicken meets egg once again?

In the market we're in (musical instruments/audio) the retailers with stores are going away, sales have moved online.

I'm not sure yet but I think the margins for online retailers could be less?

Look at how much money online retailers make, after their costs their profit margins are mostly single digit meaning they don't have a lot of room to cut costs. Also if retailers can wring profits out of you they will, online or offline.

Just me being cynical, but this fact is what is wrong with the entire world. Everyone wants to make things as cheap as possible, and then sell them as expensive as possible.

Every single thing in our lives is driven by this dynamic and it is a cancer.

What is the way out of this that keeps people happy and doesn't destroy us?

I think your view of reality is a little distorted. No offense intended.

Would you be willing to pay $10 for a gallon of gas? Probably not. However, if you were open to paying this much the entire gasoline supply chain would not have to worry as much about their costs. It's action-reaction. Supply and demand.

Put a different way: If government somehow mandated tomorrow that on Monday gasoline will be $10 per gallon, gas company CEO's would be able to relax and not have to optimize their cost structure for some time.

Of course, this does not happen. People shop at Walmart and price shop online. In most businesses with decent competition it is actually very hard to make money without extreme attention to cost optimization. Popular liberal lore is that CEOs optimize cost because they are greedy. That is almost indescribably ridiculous. You optimize costs because if you don't, you die.

You should go through the exercise on Excel to see the effects. Pretend to start a business that will sell five items picked at random from Amazon.

The conditions are simple:

  - You mortgage your house and invest $200K in this 
    new business.
  - You have to compete with Amazon.  
  - You have to pay yourself a reasonable salary.  
  - You have to hire some people (you can't do everything).  
  - You have to pay rent, utilities, marketing costs,
    accounting, insurance, taxes, etc.  
  - You have to grow gross profits 25% per year or more.
  - You also have to pay-off your $200K loan in, say, 
    five years.
Do that on paper and tell me what you learn. Post all your numbers online for us to see and verify.

Now do it in real life and realize it is TEN to ONE-HUNDRED times harder.

Then come to HN and read posts from people who firmly believe business is driven by greed. What would you say to them to have them understand?

Right. Most who have never started and run a business have less than zero clue as to the realities and basic math one must face. They can opine all they want, yet the reality is that they simply don't have a good frame of reference. All they see is the price at the pump. And they always want to pay less.

EDIT: Layout and punctuation. Typed earlier today on an iPad, which is just horrible for entering and editing text. There are times when vim makes so much sense...

On the contrary, I think this dynamic (combined with strong human rights) is a great blessing to humanity. In a market economy, 'as expensively as possible' tends to mean 'not very expensively', and 'make things as cheap as possible' means 'make your processes more efficient'. And efficiency is the reason why we can have nice things.

While I dont take issue with your optimism and logic, I think it is flawed and naive, even if only due to the following:

Go to a grocery store; Safeway or whole foods. Note the prices for items based on their qty/weight/etc.

Now go to a restaurant wholesale style place (not a costco, which is an illusion of savings).

A place like "cash and carry" (there is one in oakland) where the small scale restaurateurs purchase goods for sale and markup to Joe Consumer.

Look at the price difference and what you, even as a non-wholesale-licensed-individual can purchase.

Now, the price you are paying in a place like cash and carry is still a profitable amount for both cash and carry AND the upstream providers to them (distributors, farmers, whomever) - but the prices are far less than a Safeway...

So, while I think that the statement you made is true, to a point, I think that we need a revolution in what industries gouge and which don't.

Food prices are being designed to kill. (I'd love to go into detail but it just hit midnight and I have a GOT episode to rewatch)

Supermarkets have absolutely tiny net profits, usually just a couple of percent. They have substantially greater labour costs than a wholesaler. They have higher rents, because their stores are less densely stocked and in more convenient (and more expensive) locations. They have high shrinkage on many products, losing >30% of their fresh produce and bakery goods to spoilage and a significant proportion of product to theft and employee fraud.

Food is cheap to buy from a cash-and-carry because it's cheap to sell. It's sold straight off the pallet, in an out-of-town warehouse with dirt cheap rent. Average SKU value is much higher, massively reducing labour costs. Shrinkage is tiny, because of the high turnover of perishable goods and the greater security possible in a warehouse store. Cash-and-carry wholesalers still have very tight margins, but they have much lower costs than supermarkets.

Food retail is ruthlessly competitive on price, because there are so few other points of differentiation. The idea that there's a malevolent conspiracy in food pricing is utterly farcical to anyone with even a rudimentary understanding of the food supply chain.

Food is a very bad example for you to pick to make your point. Margins are slim, because basically everybody can get in on this game quite easily. If you think you can supply a better product at a better price, or if you think there is demand for a better product at a higher price, why don't you go for it? I'll tell you: because if you'd start doing the math, you'd find out that no, it can't really be done at a much better price/quality ration. And the amount of offerings is already so big, consumers have total choice over their cost vs quality preferences.

Price overhangs like you describe exist for a reason. Either the competition has some advantage that lets them price cheaper than Safeway, or they're subsidizing prices temporarily to gain market share. I'd be curious as to which industries you think are ripe for revolution due to price gouging.

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact