This Would Make My Life Better If You Could All Understand This. Thank You.

(NOTE: Based on time elapsed since the posting of this entry, the BS-o-meter calculates this is 8.442% likely to be something that Ferrett now regrets.)

Back when I worked for Borders, Microsoft somehow convinced us that a bookstore should sell Windows 98.  This was a disaster.
Why?  Not because it didn’t sell well.  No, it was our top seller, at $89.99 a pop.  We sold thousands of units! Judged in terms of “How much money people were giving us,” we were maxing out!  We had $20k a week coming in the door!  We were right, right?
Wrong. Judged by “how much profit we made,” we were losing our goddamned shirts.
Why were we going broke, even though thousands of bucks were coming in over the cash register?  Because each copy of Windows 98 cost us $85.  That’s right; though you were paying us $90 apiece, we had to turn around and pay $85 to our distributor.  We were lucky to buy a coffee and a muffin off of each sale. And we couldn’t price it higher, because it was the hottest software in existence and if we tried to sell it for $100, we’d look like overpriced jerks.
In fact, it got worse.  Because maybe we technically made $5 off of each copy, but realistically we’d had to pay for overnight shipping to have Windows 98 on the day that everyone else had it, or we’d look like chumps.  So out of that $5 a unit, put in the cost it took to FedEx it to the stores overnight.
And then think about what happens when one asshole steals a copy of Windows 98.  We still had to pay the $85 for that copy… and to do that, we’d have to sell another seventeen units just to break even.  Assuming someone else didn’t steal a copy.  Which, you know, they would.
So on the books, we had $20k a week coming in.  In real life, we were actually losing money.  We should have looked like overpriced jerks… Or just not sold Windows 98 in the first place.  But boy, we sure looked like the heroes of the store until you actually checked under the hood and discovered that selling one $29.99 Tom Clancy novel was worth four $89.99 copies of Windows 98.  (Interestingly enough, and nobody ever noticed this, the “Linux Distro” CDs were $29.99, and we made an astonishing $24 on each sale.  Maybe that sounds exorbitant, but it’s how we made a profit despite this Windows 98 fiasco.)
This is what I want you to comprehend, my friends: the amount you pay to purchase an item has zero to do with how much money the people are making off of you.  I hear all these idiots blathering away at how “rich” Amanda Palmer is, now that she’s got $1.2 million in Kickstarter funds and a best-selling album.  And she’s already written about how little she may be making off of this after all her other expenses are paid for.  But even if she hadn’t, you same idiots would be yammering away how “rich” Borders was from selling thousands of copies of Windows 98.
Yeah.  We got a lot of your money.  But we had other people to pay with that cash, and most of it didn’t go to us.
Please stop treating the world as though the person you gave your cash to had no bills to pay afterwards.  They might be making a ton of cash just because you gave them $500.  Or they might be handing 90% of that off to their suppliers.  You can’t tell unless you know the business well.
Okay?  Okay.

2 Comments

  1. mesmera
    Oct 24, 2012

    Amanda Palmer is, however, recruiting local musicians to play with her on her tour stops but is paying them essentially in pizza and hugs, which is not right or fair whatever way you look at it.

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