The Reseller-Discount-Demand Scenario

12 May 2017

Here is a small thought experiment for makers and sellers of digital files.

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Imagine you sell digital files. This is your job. Your files are deemed to have cultural and aesthetic merit. The files are typically purchased by other people, usually small businesses, to use in their own work.

Your digital files take a long time to make. They are the culmination of many years hard work, made possible by hard-won experience. These working conditions are not specific to you, but the results are.

A few years ago, you took a leap of faith and made a pretty decent website in order to sell your digital files. The website was expensive, and you continue to invest in it. Like most transactions on the internet, anyone with a credit card can purchase your digital files. Thanks to many hours of hard work, testing and implementation, the actual purchasing process on your website is surprisingly easy.

Things have gone well, you’ve sold many digital files to all sorts of folk around the world. You like the direct connection and relationship to your customers — some of whom email you personally to say thanks. Sometimes things go wrong and you spend hours trying to solve it. Regardless, you’ve spent your adult life working very hard making and selling your digital files.

Every now and then, a certain type of person emails you. You’ve never met before in a professional or personal capacity. They are a “software reseller”. The reseller claims to represent a third party interested in purchasing your digital files. However, for whatever reason, this third party cannot purchase directly from your website. They must purchase through this specific reseller.

The reseller wants a discount from the prices clearly listed on your website, usually 20% to 50%. He will then add a markup on-selling to the third party. He will justify this transaction in a number of ways:

  1. He has been doing business like this for many years.

  2. The third party can only purchase through him.

  3. He has put “lots of work” towards “selling [the idea] of your digital files” to the third party.

  4. He claims to have a large customer base, so there may be “many potential future sales”.

Now you have a choice. Will you accept the demand of a discount from the reseller who has invested nothing in the creation, distribution and support of your digital files? You know how many hours they took to make. You know your website works perfectly well to sell the digital files — thousands of sales attest to this. And you know if there is a problem with the digital files you will have to attend to it personally, not the reseller.

A dilemma! You now have to balance your personal ethics against potential income. So what are the possible scenarios?

  1. You discount the listed price. The reseller marks it up on-selling to the third party, making himself a tidy profit for sending about 6 emails. This is a double loss for you, because you’ve discounted your list price and spent much more time dealing with the admin of a manual sale.

  2. You charge the listed price. The reseller marks it up on-selling to the third party, making himself a tidy profit for sending about 6 emails. This works OK for you because you’ve stood firm by your listed price but there is still much more time spent on the admin of a manual sale.

  3. You charge the listed price plus a 50% reseller markup. The reseller marks it up on-selling to the third party, making himself a tidy profit for sending about 6 emails. This works best for you because you’ve charged the listed price and a bit extra to account for the time spent on the admin of a manual sale.

If you opt for (3) — a sensible option for the creator of the digital files — you will incur an immediate response from the reseller. They will say things like:

“This isn’t what my client/boss/colleague was expecting!” A curious response. This implies that both the reseller and the third party know exactly what the listed prices are and some expectation has been set. Perhaps the reseller has promised the third party that they will only pay the listed price? This is unfortunate because it’s the first you have heard of it.

“This is outrageous! How do you expect us to stay in business?” This is a ham-fisted emotional appeal. It is, of course, not your responsibility to support the questionable business model of a stranger who has — only moments before — demanded a discount.

“We won’t stand for this. You are throwing away many potential sales from my large customer base.” This is a thinly-veiled threat. Fortunately it’s an empty threat because only a fool would promise future sales. The digital file market is unpredictable.

“This is fine. Please send us the invoice when you’re ready.” This is a good response, because the reseller has realised that you can set the price as you see fit — including any markup for the extra admin.

Time to decide. Good luck!

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You’ve reached the end of a small thought experiment exploring the very real reseller-discount-demand scenario. As a maker and seller of digital files you have options and choices. There is no right or wrong choice, it’s entirely up to your personal ethical stance.