Is selling software via 3rd party retailers (vs. direct) worth it?

[Fender19]

Slightly OT to this forum but - a question for those of you who "moved up" to selling your plugins via retail outlets:

I currently sell all of my audio FX plugins directly to my customers. Is there any advantage to "stepping up" and expanding to retail outlets - or will that just dilute my direct sales?

Most retailers take a 30-40% cut of the gross while the "middle men" - like XChange - take another 5%. So while the volume of sales (and complexity/headaches) may increase going retail, does the net profit? Is it worth it?

Any experience here appreciated!

[DRMR]

Thank you for asking, as I'm also wondering the same.

The cut these retailers take is quite significant and many of them have such limited capabilities on the site (missing operating systems and plugin formats) that it feels like it could greatly misrepresent our products.

[soundmodel]

I have no experience with that matter, but as a scheme it sounds similar to "app stores" in other industries. I am quite sure that someone has setup some "music software developers cooperative" already that sells without middlemen. It's a complicated business, because I think the retailers are also giving something that sells. Mainly the user base and free advertising associated with a trusted retail brand. Also, all the payment systems and possibly license management that can be hard or costly to set up for small developers. Possibly the reasonability of your question depends on the size of the company.

My personal experience is that if it's a good product, then I will buy it wherever I can find it. I've bought plenty of stuff from personal websites.

But notice also that the retailers have nothing to sell, unless you give them products. So such deals have to be win-win. They are not, necessarily.

[Lind0n]

It really depends how much effort you are currently putting into your own web presence and associated email list. If you are getting enough sales that way then maybe not worth it, but if you dont have the time, inclination or skill set for the marketing activities and the endless social media grind to get your stuff known enough to be sold then....

Perhaps... You will def. get good sales *IF* your distributor pushes your product up to the top of their page, but if you are down in the bowels with the rest of the plebian masses then its a poor return I find.

[Richard_Synapse]

So far we have not experienced any issues. Be prepared for zero sales though, especially if you dabble with retailers in some of the emerging markets.

Richard

[hugoderwolf]

Typically through retailers you get access to an audience that can otherwise be difficult to reach. Also exposure, visibility and credibility for your brand. You can ask yourself how much you'd need to spend on ads to get a reach equivalent to e.g. PluginBoutique's mailing list or front page. Some of that reach and visibility will typically spill over to your direct sales channel as well.

When you go through a retailer, you're giving up your cut either for them just passively listing your product (that doesn't really matter as they'll hardly sell anything for you that way), or for them making an active effort to push your product (running sales, doing marketing). A good retailer or distributor will do the latter. To be motivated to do that, they need your product to be unique (yet another distortion thingy is hard for them to sell) and have a good price (a 30% cut on a 30$ product doesn't move their needles).

If you can confidently say you can get the same reach by your own means, at a much lower cost than the cut you'd hand out to retailers, then stay away from anything but direct sales. In all other cases, think of it as sales you'd otherwise simply wouldn't make. 60% of something is much more than 100% of nothing.

[Fender19]

So far we have not experienced any issues.

I have been in contact with 3 different people at XChange Market and none of them have returned my email in over a week. Not a good sign.

This is what I'm afraid of by "going retail" - unsupported web services doing nothing after being set up while siphoning a fee from every sale that passes through it. Meanwhile the developers, who created the products, still provide all the customer service and most of the marketing.

So I'm still curious - in your experience - has it been worth it? Did your net income increase when you "went retail" or are you now just sharing your income with middle men? The assumption is that going retail increases exposure and customer base - but in the internet age is that really true?

[Fender19]

You can ask yourself how much you'd need to spend on ads to get a reach equivalent to e.g. PluginBoutique's mailing list or front page.

...60% of something is much more than 100% of nothing.

Yes, PluginBoutique does a lot of marketing but AFAIK they are an exception. I don't see Guitar Center doing plugin promotions, for example.

Since you brought up PluginBoutique I have often wondered - when they put a $100 plugin on sale for $19 does the developer have to agree to that first? What does the developer net from that after retail fees, XChange fees and bank transfer fees - a buck or two?

Suppose that promotion sells 500 copies. Is selling 500 copies at $2 each better for the developer than supporting 10 direct customers who paid $100 each? How? You now have 50x more customer service issues to possibly handle.

When retailers put products like this "on sale" it undercuts the developer's direct price and, IMO, sets up a downward spiral. So to compensate, the developer raises the MSRP and ends up with $20 plugins listed at $100. Direct sales at that point drop drastically as customers learn they can get it cheaper somewhere else.

IDK - I kinda think the whole retail model - especially with downloadable, available everywhere products - doesn't make sense these days. But maybe I'm wrong and that's why I'm asking here.

[Richard_Synapse]

Suppose that promotion sells 500 copies. Is selling 500 copies at $2 each better for the developer than supporting 10 direct customers who paid $100 each? How? You now have 50x more customer service issues to possibly handle.

Yes exactly. I think we need to separate between traditional retail and discounters though. There is now quite a few websites specialized on just the most crazy promos, and this type of business model is ihmo too different to treat it in the same way.

Richard

[Richard_Synapse]

Typically through retailers you get access to an audience that can otherwise be difficult to reach.

This is ihmo the key point. Even if a website convinces me that a product is completely amazing and I need it, personally I'm hesitant to buy from unknown shops. Now music producers are an amazing bunch and more open minded than me perhaps, but still, this is an issue to think about.

Richard

[Fender19]

Typically through retailers you get access to an audience that can otherwise be difficult to reach.

This is ihmo the key point. Even if a website convinces me that a product is completely amazing and I need it, personally I'm hesitant to buy from unknown shops. Now music producers are an amazing bunch and more open minded than me perhaps, but still, this is an issue to think about.

Richard

Yes, I understand that view as well. Being carried in retail outlets does make a product/developer look more "legitimate" - probably because it takes time and effort to get there.

I also understand "it depends" but in your case has retail distribution been worth it for you?

Going "retail":
Pros - more exposure, possibly more gross sales, legitimacy in the industry
Cons - more accounting, more customer support (more end users + retailers), more fees

How has this balance worked out for you?

[Richard_Synapse]

It is mostly a personal preference. Retailers are unlikely to double or triple your revenue, however they can increase reach and take away some of your responsibilities. FWIW this is one reason why we got into Rack Extensions, where essentially all tasks but development itself are spread to other people. For us such models have been a positive experience, if you prefer full control though it may be a negative.

Richard

[Cyforce]

Suppose that promotion sells 500 copies. Is selling 500 copies at $2 each better for the developer than supporting 10 direct customers who paid $100 each? How? You now have 50x more customer service issues to possibly handle.

Yes exactly. I think we need to separate between traditional retail and discounters though. There is now quite a few websites specialized on just the most crazy promos, and this type of business model is ihmo too different to treat it in the same way.

Richard

And additional key point to that, is also the fact, that by being in a bigger 3rd party online shop (like e.g. PluginBoutique) people will recognize your products just by scrolling through, and so maybe become aware of your products/brands - while otherwise they maybe had never seen or noticed your brand.

[Fender19]

So far we have not experienced any issues.

I have just signed up with XCHANGE and, so far, have had nothing BUT issues. I've sent email to 3 different people I previously communicated with there in the past several weeks with NO REPLY.

Their automated signup email I just receive today looked like this:

Thank you for joining for XCHANGE...

If you need help, please contact us so we can help to walk your through the setup process...

Sincerely
Your Support Team

What "support team"? There is NO CONTACT info in the signature block - just says "Your Support Team". Who am I supposed to contact if I need help?

Are you getting any support from this company or did they set up an automated, fee-collecting website and walk away?

The "red flags" are flying high here. I know I don't HAVE to use them but this is what retailers require. Have you had any contact with XCHANGE personnel recently?

[SampleScience]

The usefulness of using third-party distribution will depend on your business's situation. Let's say that you're making great plugins but they don't find their audience because the press ignores you. Third-party distribution could be a way to get eyeballs on your plugins. Just make sure to arrange sales with the distributors to ensure that he will promote it through its various promotional channels. Otherwise, it would be very close to being useless (IMO).

That said, associating yourself with a popular YouTuber would be much more effective. That's where the money is. AudioThing is doing this with Hainbach. That's where I would focus my effort.