I’m back in Filmmaker Magazine – this time with a grind down to the details article on fulfillment companies:
DIY NUTS AND BOLTS:CHOOSING A FULFILLMENT COMPANY
By Jon Reiss
As you may know I recently released a book, Think Outside the Box Office, a practical guide to distributing and marketing a film in today’s economically challenging marketplace. Because of the similar state of the publishing industry, and because I wanted to get the book out for filmmakers ASAP, I decided to publish and distribute it myself, similar to how I had released my film Bomb It. Due to my compressed publication schedule, however, there was one topic I wasn’t able to fully explore: fulfillment. No, not the joy you get from finishing a film but the mechanism by which you will actually make sure that DVDs from your online store will make it to your eager fans.
I’ve recently set up my own store to sell my films and, of course, the book, and I’ve researched most of the major companies out there. Here is an overview and summary of my findings that should help you if you plan to get into the retail business with your latest film. The related charts are here and here. I will assume that you have also read either my DVD distribution articles for Filmmaker (also available at Filmmakermagazine.com) or the relevant chapters in Think Outside the Box Office.
Elements of the Fulfillment Process
There are five main components to the order fulfillment process, which is how you sell and ship physical consumer products if you don’t have your own brick-and-mortar store.
The Shopping Cart: This is what the customer sees when they place the order. The software behind the cart is what tracks the order, provides you with customer data, contains your affiliate program, allows you to have coupon specials, etc.
Payment Gateway: The payment gateway is the equivalent to a credit card processor at a retail store. For a fee, it takes the credit card information, organizes it and encrypts it for the merchant bank.
Merchant Bank/Account: The merchant account collects the money from the customers’ credit cards or checks and then places that money in your bank account, also for a fee.
Fulfillment Company: This is the company that then takes the paid orders and pulls the items from inventory, puts them into envelopes, addresses them, and gives them to a shipping company or post office and pays for the shipping.
Customer Service: If something goes wrong with an order, somebody must deal with it, and you probably don’t want that to be you.
Full-service fulfillment is what I generally recommend for filmmakers. One company handles every step of the process. Hiring out different companies, while it can be less expensive for high quantities, requires you to coordinate the orders between the shopping cart and fulfillment company.
Basis for Comparison
Setup charges. The total setup charges include shopping cart setup, account setup and basic receiving. All the companies I investigated had basic shopping carts included.
Monthly charges include accounting, reporting, inventory, storage fees, and, in most cases, basic customer service.
For this survey, I compared two items of data: costs per order and costs as a percentage of sales.
Costs per Order: These include Order Processing Fees (OPF) that range from 4 to 20 percent. Also includes order processing, payment gateway and merchant account fees.
Shipping and Handling (SH) Fees. This includes pick, pack, bubble wrap and firstclass postage (although it was unclear how Amazon sent their packages).
Cost as a Percentage of Sales: This figure takes all of the costs, setup, monthly and order charges and then calculates them as a percentage of total sales. It also takes into consideration the disparity of “Pick, Pack and Ship” fees from the different companies. For the article I ran four different sales scenarios for the first two years of sales. The full results are broken down at the Filmmaker Web site.
Top Choice for the No-Frills Filmmaker: NeoFlix. I have had good luck using this company for Bomb It. NeoFlix is a cost-effective one-stop shop for filmmakers who don’t need or want to get too adventurous in their online marketing. While they have an affiliate program (which I used for Bomb It), however, it isn’t as easy to use as the one used by another company, 4th Way. They do have e-mail list management with a nifty Box Office Widget, though, which allows you to collect e-mail addresses, put your trailer in the widget and allows it to be moderately viral. The widget also has a built-in screening “Demand It” function. NeoFlix also has a “Backstage” component in which you can give members or contributors access to exclusive digital content — useful for crowdsourced funding.
NeoFlix has low monthly fees and low setup charges but they take 12 percent of the sale. They have two pricing tiers. Option B is for filmmakers grossing more than $600 a month and it provides monthly accounting. Option A is for the filmmakers selling less and provides quarterly accounting.
In comparing their cost as a percentage of sales they range from 14 percent and drop down to 10 percent of sales. I don’t feel that their slightly higher cost compared to Amazon compensates for the lack of having someone you can talk to directly about your account. NeoFlix can also get you on Amazon and save you the $40 a month merchant account fee. 4th Way will do this as well.
Top Choice For the E-Marketer: 4th Way Fulfillment. I chose 4th Way Fulfillment to be the fulfillment company for Think Outside the Box Office for the following reasons: I wanted to experiment with more robust e-mail marketing strategies, affiliate marketing, e-mail auto responders and ad tracking. 4th Way is the only company that works with a sophisticated enough (though expensive) shopping cart to do all of this.
The pricing structure indicated on the chart at Filmmakermagazine.com and used for this article illustrates a new structure that 4th Way created as an additional option for filmmakers.
4th Way can also set up a phone order line and a dedicated customer service phone number for an additional cost. In addition, 4th Way gives you more control over the shipping and handling options you offer your customers.
The extra services are more expensive. They only start to make financial sense if you are going to sell 2,500 units the first year when their cost of percentage of sales drops to 13 percent. If you sell less than 2,500 units, they become more expensive than most of the other options.
If you are going to pursue a robust e-commerce sale strategy, you should strongly consider using 4th Way. They are the bridge between NeoFlix and a fully segmented approach to fulfillment.
(Disclosure on 4th Way and NeoFlix: The reason I chose them for my work is because I have enjoyed my experience with them, they have paid me and I believe they are the best value for what they offer. Because of my relationship with them, I asked each of these companies to provide discounts as part of the bonus gifts. So that is both a plug and a disclosure.)
Bteakthrough/Transmit. Breakthrough Distribution has recently set up a relationship and new pricing plan using Transit Media, which New Day Films Educational cooperative have used for a number of years. Breakthrough also works with NeoFlix but set up this relationship with Transmit so that filmmakers would have an alternative. Transmit has been around for many years, mainly fulfilling educational sales. Transmit is also based on the east coast, so that might help you with initial freight charges and convenience if you like to be close to your fulfillment house, like I do.
At first glance their 4 percent OPF is very attractive. But when you factor in their higher shipping costs and deduct that difference from their OPF, their cost as a percentage of sales is the same or even potentially higher than NeoFlix and 4th Way (the latter under certain sales scenarios). Their higher S&H makes a lot of sense if you are mostly doing fewer, higher price-per-unit educational sales, which I did not run figures on. For a $200 sale the 4 percent OPF (as opposed to NeoFlix’s 8 percent for a similar high-per-unit sale) is a significant difference.
Now you may think, the S&H is passed onto the consumer, so why do I care? I feel that high S&H is a barrier to sales — think about how you buy products online.
But from my research, Breakthrough/Transmit is a reliable company and makes sense if you have a low volume of sales or have expensive products in your product line.
The Connextion. I found out about these folks from Ted Hope’s Truly Free Film blog. They have an interesting model that could be useful for some filmmakers. I like that they are easy to access, friendly and consider themselves a people company who use the Internet as a tool. They mostly work with bands and a lot of their added features reflect this: an ability to take credit card sales on the road (e.g. for filmmakers at screenings), aggregating to digital sites, manufacture of DVDs and t-shirts. Also their percentage only, everything included, no monthly fee is a simple attractive solution. However if you are doing any sort of volume, they are a bit expensive. Even at high volumes their cost as a percentage of sales is still 20 percent, which, since it’s a flat fee, is much higher than the alternatives above.
Amazon Merchant Account and Fulfillment by Amazon
While fulfillment by Amazon is relatively cheap and seems to be a good alternative, you need to hook up a shopping cart and merchant account of your own to take advantage of those rates. Otherwise you need to set up a merchant account to make your sales on Amazon. Amazon then is your shopping cart, which isn’t necessarily a bad thing considering it is the biggest in the world. In addition, people are used to buying from them and they have their own customer service.
However as far as I know they don’t provide e-commerce marketing solutions that you have control over as you would in a stand-alone shopping cart. Another downside is that they don’t support international shipping; you would need to handle that through Amazon’s international stores. They also do not have someone you can call to deal with your problems — merchant service (you) is all e-mail.
When you factor in the OPF of 15 percent, their cost as a percentage of sales is competitive with NeoFlix and even better than NeoFlix for certain volumes. However I don’t think it is a significant enough difference to give up the various e-commerce solutions that NeoFlix and 4th Way offer, as well as the filmmaker service that both of those outlets provide.
If you like this nuts-and-bolts approach to film distribution and marketing please check out my book Think Outside the Box Office. There are another 350 pages of similar information on every aspect of a film’s release. And check out the extended version of this article and the comparative data charts at Filmmakermagazine.com.