(with a nod to John Berger for those who know the book)
Take a look at these figures for a product made for $9 and sold at retail for $60.
Profit using traditional distributors = $9 (see my post below).
Profit when you sell direct = approximately $40 (allowing for marketing costs, online shop costs and so on).
Which way would you rather go?
Of course, it's not as simple as that. You may well decide to go for a lower retail price when you sell direct - which has its own issues as I'll discuss in my next post.
But in any case the costs of direct sales tend to be high in the early days so when you start, these great-looking profit margins just won't apply. As one friend said to me, "But even the time and effort and expense to go to the post office wipes out all the profit on a 20 buck sale." Yes, and when you are selling two or three things a week, then the overheads - running a professional online shop, storing stock (or the supplies to make stock), doing PR and marketing and, indeed, running to the post office, will kill any profit. In fact, in the early days even the much lower profit from distributed and wholesaled sales may work out better.
But once you are selling, say, two to three things a day, it begins to change and the overhead costs per sale come right down.
It used to be that the only way you could ever really sell enough to make a design product business viable was to use distributors. That's changed. Now the best way is usually to combine direct retail sales, direct wholesale sales and - possibly - distributors too. But that does have its own challenges, particularly when it comes to pricing, branding and visibility. At what point are you competing with your own retail and distribution customers and how can you avoid that becoming a problem? Okay - that's in the next post!