What is the price of a physical product, and why do you need to localize games without words

^{Localized game. There are no words here.}

The economy is a very cool thing that often makes you do weird things . For example, there is a game “7 on 9”, in which there is not a single English word, only numbers. And yet we took up its localization in order to be able to sell almost two times cheaper.

In general, in every field, starting with the sale of iron and ending with cosmetics, there are a huge number of myths about the real price of goods. For example, many people remember the phrase that the cost of Adidas sneakers is 2 bucks, and they add the rest for the logo. Some more do not believe that ordinary taxes in our country are more than 50%, because they are accustomed to 13% of the “advertised” ones.
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I will talk about these myths on the example of the exact pricing of a board game.

We have three types of goods on the market:

• Manufacturer in Russia (domestic games of domestic authors from domestic factories);
• Sale in Russia under license (localization, which are printed with us);
• Import (all foreign and domestic games produced in China).

First, look at the import. Suppose we have some kind of game with a hundred cards, dice, field, rules, box, and a couple more components. It can be produced in Germany (there are a lot of specialized factories and good printing houses), the USA or China. Or somewhere else, but the Germans, the Chinese and the Americans - the most frequent case.

Pricing Chain

The cost price for the circulation of 5.000 pieces of this game will be, say, $ 3 of the alleged enemy, of which $ 1 is for the box, one more for the cards, and the third for everything else. These three bucks easily turn into 5 with a draw of 500 copies and just as easily - into two with a draw of 20,000. At the same time, there are scalable costs (printing tied to offset) and fixed (the cost of the cube with the increase in circulation drops slightly). But for the time being we will assume for simplicity that the game is worth exactly $ 3.

These three dollars do not include deductions for authorship, as well as royalties. Patents, royalties and other things are considered strictly from the wholesale price of the game (because only the manufacturer controls it) and make up no more than 12%. The exception is the world license type Batman, when deductions will be about 14% per name.

Now the manufacturer must assign a wholesale price for the game, which costs 3 bucks. Suppose that they are Germans, and they sell the game to us in Russia. Accordingly, the cost price in Russia will be 1.5 - 1.7 times higher than the production cost minimum (this ratio is determined by customs and logistics) for a large batch. Let's say it turns out five bucks. At the same time, the manufacturer wants to make money on the box, that is, it is already 5 + X, where X is the salary of the manufacturer's personnel, rental of warehouses and profits, and so on. From above, the same deductions from the wholesale price are paid, which are paid to the author or licensee. It turns out (5 + X) /0.9.

Suppose the game is sold in the amount of 10,000 pieces per year. This is the norm for Germany’s mega-competitive market and is cool for Russia. The manufacturer must lay in this number of pieces not only the cost of production, but also the initial development, that is, for example, the payment of the artist, and so on. All this falls into the value with which the customs collects a fee: the multiplier is already non-sick. That is, if we assume that office + staff in Moscow conditionally require 3.000.000 rubles per year, then the cost of one box will be 300 rubles. Plus, the manufacturer will make a profit, it does not work at zero. Total now X is already 13 dollars, if the manufacturer has one project (but usually one company leads 5-10 projects: there are more people, but the costs for the box are reduced).

At this point, the game, which cost only $ 3 at the exit from production, is already worth 15-20. Note that in the interval there was no major distributor, who would have appreciated more. In this case, the game itself is in stock from the manufacturer in Russia, and it still needs to be picked up and taken to the store.

The supplier often gives up only in large quantities, so either distributors take it away (and later sell it to small shops) or retail chains directly. The distributor, in turn, makes an additional markup for his services and sells small wholesalers who make their markup afterwards. The network makes a standard markup from 80% to 300%. This is the most interesting place: most often it is not understood by those who do not know exactly how our economy works.

Our margin is from 80% to 100%, because we are a specialized player in the market. If it were a gift shop, the markup would be from 250% to 300%. That is, the game on the shelf is already worth 30-40 dollars, and the gift shop has 50-60 bucks or more.

Attention, the main question: where does such a sharp price increase come from? The answer is very simple: taxes and network costs. This markup includes the cost of renting stores, staff, marketing (just a couple percent) and other lower costs such as telephony, IT, transport, equipment, and so on. But the main thing - rent and salary. In this case, you can analyze the structure of taxes on the example of wages: few people understand that in order for a person to receive 100 rubles in his hands, the employer must pay about 150 - this is taking into account all deductions:

NDFL - 13%. If a person received 100 rubles in his hands, the employer paid him 100 / 0.87 = 115 rubles. UST for annual salary less than 537 thousand - 30%. That is, 115 * 1.3 = 149.5. If in a year it turns out more - another 10%.

As it was clearly noted in one discussion, if people got their hands on full wages, and then took the money themselves to tax and pension, the Kalashnikov machine would suddenly become a bestseller.

I will note that in other areas the margin varies quite a lot: in the grocery they generally charge around 20% (there are insane speeds and it works), in cosmetics they can well be assessed 300-500% without any special stinging and so on.

Price optimization

Now back to the price of the game. So, it costs us on the shelf for about 30-40 dollars. The cost price is $ 3, on the way there are a couple of small fixed deductions and a bunch of multipliers. Obviously, you can try to optimize all the way (the higher the step in the chain - the less effect) - or work with the price of the publication. If you manage to reduce it to 2.5 dollars, then on the shelf it will be 20-25 dollars, and if up to 2 - 18-20. The difference in one dollar gives the difference in 10 for the buyer in retail.

What can be done? It is necessary to reduce the price of production. So it turns out that optimization of the circulation gives little: most often the manufacturer prints the number of games that allows you not to shrink too much when the circulation increases, and if the game “shoots”, it simply earns a difference. It is quite difficult to remap the price in such a chain, so the manufacturer can only lose on low-selling games and make money on hits. The exception is a few megahit games. For example, "Uno" is sold in Europe almost at every gas station for a couple of euros: here we are talking about a huge draw.

The obvious option to significantly reduce the price is production in Russia, when a logistics and customs multiplier leaves the very beginning (and we have it from 1.5 to 1.7). At the same time, the cost of production in Russia is higher than in China or in Germany, plus the cost of the localization work itself is added (and this is 2-3 months of the team’s work, however, distributed between different projects - not everything is simple there) - but it’s still possible to save about a third of the cost at the time of delivery to the supplier’s warehouse. This is the difference between $ 20 and $ 30 per shelf. It is for this purpose that it is necessary to localize games without a language : localization, among other things, gives the right to manufacture in one's own country, which directly affects the price.

Now the coolest question of the year: why, for example, is a localized game in Russia more expensive by 20-30% than the same in the US? The answer is quite simple: because with a small retail order from Amazon or Ebay, customs duties are not paid. And some get used to the fact that you can buy English games cheaper than Russian. Moreover, if you carry them through customs in bulk for your store, the scenario above with logistics and customs is valid.

And another interesting trick: most often the manufacturer simply does not allow selling the game without localization. Therefore, the same "7 by 9" had no chance to become popular in Russia without localization: it simply would not be on the shelves. For a game to become popular, it must appear in stores across the country. To make it appear in stores, you must have the right to sell it. To have this right, you need localization.

I think by this moment it is already clear about the whole quests to optimize such chains. Once again a couple of examples:

• Cost is multiplied by a bunch of factors. We learned how to make a box for 1 ruble cheaper - reduced the price on the shelf by 10-15 rubles.
• Customs and logistics - the first serious cost. We produce at our place under a license - minus 30% of the price.
• We agreed about the deductions under the license below by 2% - minus 5% to the price on the shelf.

I note that our board game market is considered far from being the most high-marginal: I have met a 1000% mark-up on Chinese production (for example, T-shirts), and even happier cases.

And yes - welcome to the harsh reality.