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About a week ago, Shadow Kingdom Records announced a new purchasing deal: For an upfront fee, customers receive an automatic discount on every order placed with the label’s webstore until the end of 2013.
The Details:
$50 gives the customer a 20% discount on all orders
$75 gives the customer a 25% discount on all orders
$100 gives the customer a 30% discount on all orders
Anybody who wishes to partake in the deal must pay the fee by 3/31/2013. Share your coupon code, and they cut you off.
It looks like a great deal for the label’s customers and puts some cash in the label’s coffers right now, and as the sayings go, cash is king and money is more valuable today than it is tomorrow. Shadow Kingdom, the label and the webstore, specializes in obscure doom, power, and traditional metal, along with some pre-‘80s rock releases. The webstore does carry a good selection of extreme metal.
The math of the deal, the author’s method for doing the math:
I decided to analyze this deal from both the business’ perspective and from a customer’s perspective. I hunkered down in my mom’s basement, fired up Excel, cracked a 2-liter Jolt and a big bag of Cheetos, and told my mom and her friend to keep it down. If my math’s wrong, blame the Jolt and the Cheetos, but leave my mom out of it.
Here’s how the purchasing math breaks down, assuming a $13 CD or a $20 record, which is roughly the average price of said items in SKR’s webstore:
Discounted CD prices: $10.4, $9.80, and $9.10
Breakeven point at 20%: 20 CDs * $13 = $260 20 CDs * $10.4 + $50 fee = $258
Breakeven point at 25%: 24 CDs * $13 = $312 24 CDs * $9.75 + $75 fee = $309
Breakeven point at 30: 26 CDs * $13 = $338 26 CDs * $9.10 + $100 fee = $336.60
Discounted records: $16, $15, and $14.
Breakeven point at 20%: 13 records * $20 = $260 13 records * 16 + $50 fee = $258
Breakeven point at 25%: 15 records * $20 = $300 15 records * 15 + $75 fee = $300
Breakeven point at 30%: 17 records * $20 = $340 17 records * 14 + $100 fee = $338
Note that SKR carries some very rare items that command prices much higher than $13 and $20, respectively. Throw in some $18 CDs or $30 vinyl records, and the break-even quantities will decrease.
Who should take this deal, probably:
At this point, the reader is probably saying things like, “20 CDs is a lot of CDs,” or “20 CDs is a whole lot of CDs,” or perhaps “20 CDs is a fucking ton of CDs, and I want the author to explain why I’d ever do this deal, and I meant ‘a fucking ton’ in a figurative sense.” The reader is probably also balking at the upfront cost of at least $50, which buys a lot of beer or other things and stuff.
Vinyl record buyers should jump on this deal. $20 might be a common price, but plenty of stuff in the store is much more expensive. People who intend to purchase a lot of t-shirts, which are usually $25 in the store, should take the deal as well. Collectors and compact disc holdouts like me might want to do this as well, as long as they intend to purchase huge quantities of stuff. If you buy 50 CDs or 50 vinyl records at the 20% discount, you would save $80 and $150, respectively, then if you didn’t take the deal. However, that’s a ton of physical copies of music.
What would happen if the author took the deal, definitely:
If the author paid the $50 fee, here is what would happen over the next 9 months, probably:
March
Author: “No Remorse has two new CDs out. High Roller just released another obscure NWOBHM vinyl. I’ll buy those.”
Author: Clicks purchase
April
Author: “Metal on Metal has a new CD out. High Roller just released another obscure NWOBHM vinyl. I’ll buy those. Now that I think about it, I don’t have that other High Roller obscure NWOBHM vinyl yet. Oh, look at that, there’s a Marduk album I don’t have. I was going to buy that at the CM Distro, but since I already spent $50 for the discounted prices, I should buy here instead.”
Author: Adds another 7 CDs and 2 vinyl records to shopping cart, clicks purchase
Author’s credit card: “Fuck you, buddy.”
Author’s girlfriend: “Fuck you, buddy.”
Author’s girlfriend: Breaks up with author
Why this deal will work, maybe:
The people who take the deal will either remember the sunk cost and keep buying at SKR, or they’ll forget or ignore the fee, not buy enough to defray the cost of the fee, and the label will pocket the fee as profit. The label would prefer that people buy more stuff, because a minimum of 20 CDs or 13 vinyl records is a lot of product. However, the label wins benefits either way.
Summarize and conclude it, bro:
With physical media sales falling, Shadow Kingdom is trying to exchange higher profit-per-sale for greater quantity, lower profit-per-sale. Whether or not it works, it’s a good idea and a good tactic for pulling a limited and shrinking customer base away from other retailers and keeping them loyal.
. . .
I couldn’t help myself once you mentioned excel, and had to crunch the numbers further.
Evaluating each plan independently, I think you have the numbers right for the break-even point. To summarize your analysis, if you were going to buy $250, $300, or $333.34 of merch (at undiscounted prices), it would cost you the same amount if you did the 20%, 25%, or 30% plan, respectively. You would be neutral at that price point, and save money over that price point.
But if you consider your actual savings under each plan, for all amounts under $500 you will save more by going with the $50/20% plan than by going to one of the higher plans. For example, if you are going to buy $450 of merch (at undiscounted prices) this year, and you did the 20% plan, you would only pay $410 ($450 – $90 discount + $50 fee). But you would pay $415 if you did the 30% plan ($450 – $135 discount + $100 fee). Over $500, the 30% plan has the best savings. I’m not seeing a situation where the 25% plan is better than the other two.
John, you’re correct about the 25% not being much better than the 20% option. I think most people will opt for the 20%. The 30% option just requires way too much merch to be worth the deal.
OH MY GOD YER RIGHT… 30% of one dollar is less than 30% of one million dollars!
I’d take this deal, but I don’t want richard’s girlfriend to break up with me.
Seriously though, while I like this idea in theory (because I buy a lot of physical music, mostly vinyl) I wouldn’t want to commit to only purchasing from one distro. And, if I did, they’d have to have more inventory than shadow kingdom does.
And I’ve been wondering where she was for the last 3 weeks!
As a customer and fan of the label, I wish them well, but can’t help but arch a skeptical eyebrow, though I’m interested to see how this fares. Does anyone know of a similar sales tactic successfully employed elsewhere?
I can see this attracting a few deep-pocketed collectors dead certain on buying a crate full of new High Roller vinyl, but this is a big purchasing commitment for a niche distro with a relatively specialized stock. Sure, SK carries tons of cool stuff, but I’d be much more likely to subscribe to a more diverse distro with vaster stock, unless other benefits were dangled before me.
For instance, I think the plan would be more enticing if the initial fee included a few Exclusive Members Only! goodies, like, hey look, join today and you get a complimentary SK mug, or a doom patch, or exclusive label sampler, or a free CD from our overstock collecting dust, or exclusive web content, or some other pretty shiny thing–anything to activate the collector’s reptilian brain. Maybe I’m not the target market–though I do get the newsletter–but I’m balking, a moderately regular SK consumer and avid media collector on a tight budget, but I could be swayed to follow my nerdy impulse to get cool stuff and save cash with an attractively assembled VIP members package that includes, say, a premium deluxe SK decoder ring and exclusive web content (well, maybe not the ring, unless it has the SK logo and it glows).
But if it’s just a cold matter of crunching numbers and doing math, with no baubles being dangled, it feels like such a …. commitment.
Chris, I don’t know of a music retailer trying this exact tactic, although it immediately made me think of the Columbia Musichouse/BMG “buy 1 CD, get 11462 CDs free!” deals. Shockingly, Columbia Musichouse is still around, and that makes me feel old.
The VIP package is a really good idea. Also, if a bigger distro like The End or CM did this, it could be a huge hit. I think SKR is just going to vacuum up some U.S. customers from the random faceless Amazon retailers that sometimes stock SKR’s preferred genres of metal.
I thought the same thing re: CM or the End. I might even be tempted with Hell’s Headbangers, which distributes a fairly diverse range of stuff.
I’d still probably pass though. Taking a deal like this one would be like buying records based only on what your local record store happens to have in stock on any given day(without ever doing any special orders). You might pick up that Marduk LP that you only kind of want instead of one of the ten albums released or reissued that month that you’re more excited about but that your record store doesn’t currently have in stock. I can see supporting a physical record store like that–and that’s actually how I used to purchase music, back when there still were local record stores that I wanted to support–but a distro? The beauty of the internet age is that I can get any record I want at any time by just clicking “order.” A 20% discount for a year is not worth radically limiting my options.
Anyway, sorry about the girlfriend thing. Kind of a dick move on my part. I’ll send her back, along with a two liter of Jolt and your Manilla Road LPs.
Holy shit, having never heard of this site and also having been on an 80-sounding heavy metal/NWOBHM/thrash binge the past year, I done near splooged at the home page. I can see myself paying one of the fees.
I get the newsletter also. I think this is more geared towards people who are regular buyers who are going to spend it anyway and don’t have to wait for a sale price. When they announced it, they also announced a regular sale also, so I’m sure there are going to be more regular sales, but I don’t have to wait for a sale now to order in case something goes out of stock, it’s automatically a sale.
I actually bought the $75 coupon which is personalized and saved $39 on my first order. This coupon doesn’t expire until February 28, 2014, so ill easily make my money back and more. By my 2nd order, ill have made the money back and more, my 3rd order will be all savings. It was a no brainer for me, but for a casual customer, it wouldn’t work.