The retail store makes its margin based on the spread between wholesale and retail price. They mark it up. Typically, 50%.
Entitlements sit on top of that. They are usually broken out between logistics, damage, marketing support, liability, referral, platform, etc..They average around 15%, but it depends on category.
Amazon.com calls it a “referral fee” for marketplace sellers. No physical store there. This is strictly a fee you pay to access their customers. Same as Apple. It’s the fee you pay to access their customer base, with credit card and billing info, and have them handle the transaction and associated liability.
It’s pretty clear you have zero understanding of retail business logistics.
Most wholesalers don't get charged entitlements by the stores. Damaged items are not entitlements, they're straight contractual issues and especially with foodstuffs, wholesale contracts may specify that up to a % of goods may arrive damaged and in unsaleable condition.
Marketing support is negotiated by brands seeking premium shelf space, or end-of-aisle placements or in-store marketing.
Liability is not an entitlement. Ever. It's something you work out between legal departments if you get sued under product liability laws.
My sources? My clients include about a dozen clothing retailers, 20ish restaurant chains, 3 big box stores, and a number of smaller grocery chains.
It's pretty clear you have zero understanding of retail business logistics and you should consider revising your comments to reflect that.
EDIT: After reading your other comments, it's pretty clear that you think that a manufacturer, i.e., Alpha Cola, sells to a Walmart shopper and pays Walmart for this opportunity. That's not how retail works. Walmart pays Alpha for a bunch of soda, and as part of this Alpha may negotiate an offset (what you've been calling an entitlement) for marketing support like in-store displays and premium shelf space alongside Code.
BUT BUT BUT in many situations, this is actually reversed: for example, for beer and convenience stores, the store agrees to give the beer premium space and in-store displays and may even agree to cover the costs. And in my example above, Coke usually wouldn't pay a store anything for marketing support--instead, the store would agree to provide unpaid marketing support to Coke for the privilege of carrying Coke's products. The store then uses Coke as a loss-leader to get people into the store.
“EDIT: After reading your other comments, it's pretty clear that you think that a product maker, i.e., Alpha Cola, sells to a Walmart shopper and pays Walmart for this opportunity. That's not how retail works. Walmart pays Alpha for a bunch of soda, and as part of this Alpha may negotiate an offset (what you've been calling an entitlement) for marketing support like in-store displays and premium shelf space alongside Code.”
It depends. With Walmart specifically It depends if it’s owned, dsv, or platform. Sometimes a manufacturer (that’s what we call them, not “product makers”) does sell to a Walmart shopper and pay Walmart for the opportunity. That’s what the Walmart Marketplace is. Same as the Amazon Marketplace. Even DSV contracts are now changing, as e-commerce retailers will have you ship items from your warehouse in their box with their tape.
Walmart literally calls these either entitlements or allowances, it depends where (and when) you signed a contract with them.
You went way overboard into incivility in your comments in this thread. In fact, although I'm sure you didn't mean to be, you were repeatedly a jerk. That's sad, because you obviously know some things.
We ban accounts that do that. Would you please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here? That means being scrupulously respectful others, no matter how ignorant they are or you feel they are. If you know more, the thing to do is not to put down those who know less, but to explain some of what you know, so we can all learn.
I'm looking at a recent contract that was signed by a large national brand and a large national retailer right now and literally none of what you said is in there.
You keep using the wrong terms for standardized language (for example, you keep referring to breakage as "liability" even though both have very different meanings and keep referring to a number of very different things as "entitlements"), so I'm pretty certain I also have a better exposure to the legal and practical underpinnings of the retail market than you do.
> Entitlements sit on top of that. They are usually broken out between logistics, damage, marketing support, liability, referral, platform, etc.
"Entitlements" are just a component of overall margins. Breaking them out separately doesn't win you anything because the store brand still needs to pay its pro rata share of the cost to cover those things.
> Amazon.com calls it a “referral fee” for marketplace sellers. No physical store there. These is strictly a fee you pay to access their customers.
Yet notice that their fees are typically something like 13% rather than 30%, and they're still dealing in physical goods and then have to contend with the sellers who send an empty box rather than a product etc.
> The Apple fee also drops to 15% after a year. It’s 30% for the first year because of the amount of fraud and chargebacks
You're referring to subscriptions, but at that point it's still outrageously high precisely because they no longer have to worry about that stuff and it's only a matter of transaction processing for which a 15% fee is still completely unreasonable.
> Do you have an actual point you are trying to articulate, or is it just trolling?
My point is that Apple is charging monopoly rents, which they can because they have a monopoly on iOS app distribution.
> Spotify pays 15% after a year, not 30% forever.
Spotify is a subscription service. All the non-subscription app developers are still paying 30% and 15% is still unreasonably high for a subscription service.
Moreover, for subscription services it's 15% after a year per subscriber, not after a year of the service existing. Every time they get a new customer it's back to 30% again. It's practically designed to suppress the growth of a competitor by siphoning off revenue as they're expanding. Even worse if they have a non-trivial churn rate.
> 15% isn't unreasonable at all. Many industries, from physical goods to digital subscriptions, work on a similar fee schedule.
15% is completely unreasonable for a service where all you need them to do is charge the customer's credit card once per subscription period.
> For example, you pay 15% forever for selling physical books, no matter how few chargebacks you get.
Because they're still physical goods, which are more expensive to handle in multiple ways.
> The rates for digital goods are often higher. For example, Amazon takes 30-65% for Kindle sales.
Amazon has the same kind of dominant position for Kindle books as Apple has for iOS apps, so the only thing you're really proving there is my point.
> Spotify can use Stripe if they want (and they do), at the lower rate.
Not from within their app.
> First you thought the rate was higher than it was.
You were the one talking about paper cups and Walmart. Paper cups aren't a subscription service, and they charge 30% for actual apps, without expiration.
> Then you thought that rate was unreasonable when compared to physical goods and it wasn't.
It continues to be unreasonable when compared to physical goods.
You chose an example (paper cups) where you know the percentage of the value that goes to the retailer is high, because the product is very inexpensive to produce and so it has a high ratio of retailing costs to production costs. Even so, the retailers have real competition, so even Walmart has overall net margins of only around 3%, because all that stuff the money you're talking about is paying for, actually gets paid for. It's real cost. And they're the successful ones -- there is a name for what happened to the others:
By comparison, digital distribution has trivial retailing costs. The cost of developing and operating a payment processing and digital distribution system amortized over each app purchase is negligible. It's basically 0%. Apple's net margins are almost the entire amount. About the only thing they really feel is the bite from that other monopoly, the credit card processors, and at their size even that is probably down around 2%. 15% is unreasonable. 30% is scandalous.
> 15% is too much… because it's possible to get that service somewhere cheaper, which they do, and that's how most customers pay?
15% is too much because it's possible to get that service somewhere cheaper and they purposely interfere with you doing that so that you are more likely to pay them the monopoly rents, to the point of an outright prohibition when your product is the app itself, at which point they still want 30%.
The retail store makes its margin based on the spread between wholesale and retail price. They mark it up. Typically, 50%.
Entitlements sit on top of that. They are usually broken out between logistics, damage, marketing support, liability, referral, platform, etc..They average around 15%, but it depends on category.
Amazon.com calls it a “referral fee” for marketplace sellers. No physical store there. This is strictly a fee you pay to access their customers. Same as Apple. It’s the fee you pay to access their customer base, with credit card and billing info, and have them handle the transaction and associated liability.
It’s pretty clear you have zero understanding of retail business logistics.