The challenge for Stern is profit margin and growth....if theres no pressure to increase margins then I'm sure their fine with the status quo since theres little to no risk. For this relatively small boutique market its the perfect business model, but they will always be limited on gross margins. The only way to increase these margins is by increasing the wholesale price to distributors or reducing their overall manufacturing costs.
Quoted from pinmister:You don't know Gary
Yes distributors will occasionally flex the rules. If you get an exception and get a deal-please keep it to yourself. Loose lips sink ships
It’s not having anything to do with who Gary Stern is as a business man. I have to deal with these situations and work with manufactuers on a daily basis with my company.
Across the board all companies want their MAP adhered to, otherwise they don’t implement such a policy with their distribution channels. Across the board all retailers can legally sell a product for below the MAP. And across the board a manufacturer can decide not to do business with people.
I was simply pointing out that telling someone they’re wrong in their understanding of how MAP works was an incorrect assement.
Quoted from Potatoloco:you're vastly underestimating the sheer cost and scale of a direct manufacturer business model. Stern's expertise is manufacturing pinball machines, thus they would rapidly need to become experts in all channels. It is quite possible that going directly to the consumer would actually cause their prices to rise not to fall. A number of issues would have to be addressed.
There are degree programs that educate specifically on such dynamic relationships:
http://id.tamu.edu/undergraduate/prospective-students/what-is-id/
It was a fascinating program, to me at least.
as previously mentioned, manufacturers want to produce, distributors want to sell / service. It's a very beautiful dance when the choreography works w/o some tripping!
Great topic, thanks for starting this discussion. 
In Southern California. There is no way for the consumer to go really look at what is available or try them before you buy them.
To me that seems like a miss. If the market continues to expand a pinball dealership would almost seem a worthwhile step.
If I could walk easily into a showroom and play iron maiden, buy it, arrange delivery.
Etc all in the same place.
I think much more would be sold. This may never actually happen due to profit needed.
I think there is some type of place near me that could do this but it is only pool tables and hats.
I walked in there to ask about pinball, the lady could not speak English very well.
Is there some kind of problem? She asked when i asked her about pinball.
I have never seen another customer in thier store, not 1 single other.
Quoted from Azmodeus:In Southern California. There is no way for the consumer to go really look at what is available or try them before you buy them.
To me that seems like a miss. If the market continues to expand a pinball dealership would almost seem a worthwhile step.
If I could walk easily into a showroom and play iron maiden, buy it, arrange delivery.
Etc all in the same place.
I think much more would be sold. This may never actually happen due to profit needed.
I think there is some type of place near me that could do this but it is only pool tables and hats.
I walked in there to ask about pinball, the lady could not speak English very well.
Is there some kind of problem? She asked when i asked her about pinball.
I have never seen another customer in thier store, not 1 single other.
Probably the wrong time in history for Stern to get into the brick and mortar biz.
I think if Stern or anyone wants to sell more pinballs to the HUO market, they need to get the machines in front of people and let them know they can exist in the home. A distributor would probably do well to get with a Home builder, and put a boatload of games in their model homes with a brochure and business card rack sitting on each one.
These things get sold into homes when people see them in a home... so home shows, model homes, and luxury supplier channels need to be explored. A showroom is one thing, but does it look like a home or just a line of pins against a wall?
Maybe I should try and sell these things, because nobody is looking in all the right places right now to move these machines and I just gave you guys two places to haul a machine to that would probably generate a sale or two.
Think outside the existing box, but dont throw the box out... FFS...
Quoted from Bublehead:I think if Stern or anyone wants to sell more pinballs to the HUO market, they need to get the machines in front of people and let them know they can exist in the home. A distributor would probably do well to get with a Home builder, and put a boatload of games in their model homes with a brochure and business card rack sitting on each one.
These things get sold into homes when people see them in a home... so home shows, model homes, and luxury supplier channels need to be explored. A showroom is one thing, but does it look like a home or just a line of pins against a wall?
Maybe I should try and sell these things, because nobody is looking in all the right places right now to move these machines and I just gave you guys two places to haul a machine to that would probably generate a sale or two.
Think outside the existing box, but dont throw the box out... FFS...
Honestly, that's how I got into it. When I was younger working for the cable company I went into a guys house that had them lined up. Before that it never dawned on me it was a thing to actually own them.
I do agree with the assessment though that brick and mortar isn't the way to go because of the overhead -- unless you could swing it as a secondary side business in another business.
If the distributor model ever dies, there are always plenty of jobs available in the fast food industry.
If there was a pinball store in the strip mall that had a showroom with all the games setup and boxed ready for immediate sale like the gameroom store, I'd be in a hell of a lot of trouble.
Quoted from CrazyLevi:Probably the wrong time in history for Stern to get into the brick and mortar biz.
That's what everyone said about Apple retail stores.....
Quoted from JodyG:Given the market saturation we are seeing in the pinball world lately, I have to wonder if the traditional distributor model is going to eventually go by the wayside in the coming years. I know there are a lot of distributors on this site, and I am not lobbing flaming arrows your way. However, I think market forces are going to cause a change to come sooner or later when it comes to the way pinball machines are sold.
Deeproot has been rumored to be planning to disrupt the marketplace pricing in some way. Lets say they do this, and sell machines for less than Stern Pro pricing. Stern, in an attempt to compete, could severely disrupt the pinball marketplace by going to a direct distribution model. We have recently come to know that wholesale pricing on Stern Pro machines is right around $4,000. Distributors have a MAP price of $5,800 on new machines. That is ~$1800 profit per machine (before overhead). If Stern decided to pull back and distribute on their own, they could split the difference and sell machines for $4,800-$4,900 and decimate the boutique market. That additional $800-$900 per machine over what they are selling at wholesale now could easily cover the services a distributor offers over the 30/60 day warranty period at the volume Stern does business. There will still be room for independent service people to offer the services a distributor offers for an additional fee if they choose.
Distributors have traditionally been a sort of marketing arm of the manufacturer. This was especially true in the time before the internet came around. With the internet offering Twitch and Youtube streams, Pinside, Papa TV, etc, is the distributor still needed by the manufacturer?
Before everyone thinks I am crazy, something very similar to this has already happened several years ago in another couple of disposable income hobbies- HO/N scale Model Railroading and entry level Model Airplanes. Horizon Hobby bought up a couple of the major brands in these subjects, and then created their own in-house distributor network. They pulled their products out of the big traditional distributors like Walthers and Tower Hobbies, and went to their own distribution model to maximize profits previously lost to the middle man. They have a team that hits all the major shows with their display booth full of new products. So far, it has been working for them. So much so that smaller companies have formed since this time, and now are only selling direct to consumer.
What are your thoughts?
so you think stern should warehouse inventory, work out shipping to individuals, be on the hook for unsold games, and continue to make new ones at the same time? LOL Most tings are not sold to endusers right from the factory for a reason. Stern makes them and gets money upfront and get them out the door immediately, it does not matter to stern if they take a year to sell, they were already paid. The only issue for stern is if the distributor stops buying due to having too much inventory. Holding inventory is also a tax burden. as for trains and planes, how many fit in the space on pinball, the costs and space requirements are vastly different for warehousing. When you get to larger scale trains, rideables, or large model aircraft, those are not generally made in the 1000's a few get made as they sell a few more are made.
Quoted from Marvin:so you think stern should warehouse inventory, work out shipping to individuals, be on the hook for unsold games, and continue to make new ones at the same time? LOL Most tings are not sold to endusers right from the factory for a reason. Stern makes them and gets money upfront and get them out the door immediately, it does not matter to stern if they take a year to sell, they were already paid. The only issue for stern is if the distributor stops buying due to having too much inventory. Holding inventory is also a tax burden. as for trains and planes, how many fit in the space on pinball, the costs and space requirements are vastly different for warehousing. When you get to larger scale trains, rideables, or large model aircraft, those are not generally made in the 1000's a few get made as they sell a few more are made.
Actually for the last few years most games are shipped directly from stern either as they are built or because a distributor has not bought them. So they are storing some games even if it's a small amount. Most distributors keep a very small number of games in stock. Out of the last 6 sterns I have bought only 1 came from directly from the distributor. The other 5 were shipped directly from stern.
Quoted from JodyG:Nic Parks of The Pinball Company spilled the beans on a podcast last week that has now been deleted due to upsetting Stern.
My quote has been misused. My conversation with Gary regarding them possibly building Jetsons (so we can sell for $3999) was many years ago (before MMr). That was when I referenced wholesale was “slightly” higher than $3999. Slightly to me means several hundreds of dollars and since then wholesale prices have risen along with retail prices. At this point using $4000 as Stern wholesale price for Pro models is very innacurate.
The topic of manufacturers selling direct has been something on my mind for years now. I think it makes sense but it is hard to implement when you have a lot of distributors. I think it’s easier if you are a startup and can set a up a service network from the beginning. I do not think having distributors and then selling direct works (JJP). Competitive forces may make it necessary for manufacturers to sell direct to survive, but only time will tell how that will pan out.
We were not direct with Stern for the first few years and we flourished by selling a lot of refurbished machines and building a large service network across the country. There are way too many distributors today and not much money to be made selling new machines.
Quoted from jgentry:Actually for the last few years most games are shipped directly from stern either as they are built or because a distributor has not bought them. So they are storing some games even if it's a small amount. Most distributors keep a very small number of games in stock. Out of the last 6 sterns I have bought only 1 came from directly from the distributor. The other 5 were shipped directly from stern.
this is only due to them building slow. when they have enough ready they want a truck moving out of the building. They do not want to be holding any finished inventory longer than needed. As for drop ships, those games are already bought by the distributor, they just might not physically see it. You're still paying the distro who paid stern. Stern isn't holding unsold inventory if they can help it.
Quoted from Marvin:this is only due to them building slow. when they have enough ready they want a truck moving out of the building. They do not want to be holding any finished inventory longer than needed. As for drop ships, those games are already bought by the distributor, they just might not physically see it. You're still paying the distro who paid stern. Stern isn't holding unsold inventory if they can help it.
Building them slow? I take it you haven't been to the factory before? They pump out games at an almost unbelievable pace. Several of my games were not prepurchased by the distributor either. He called them and they had it in stock, I paid him, he paid stern, games came directly from stern usually 2 days later.
Of all my NIB purchases not ONE distributor had the game in stock...all were shipped directly from the manufacturer (Stern, CGC, JJP)....basically the distributor plays the role of customer acquisition...its also my experience that distributors try their best, but if you really need technical support they add very little value. All will have u directly call the manufacturer....
If it made business sense for Stern to sell direct I’m sure they wouldn’t hesitate to change the model. I’m not surprised that Nic has weighed in that $4k wholesale is way off current wholesale pricing. Stern is not going to give away $. They will model distributor costs and price to let them make a reasonable EBIT, probably 10-15%. The largest, best distributors who bring real market vale/are not easily replaced likely get some perks in a way that doesn’t undermine the ability of other distributors to compete.
Wonder how pinball shows would be affected without distros. You think stern is going to set up booths at every show around the country?
Quoted from TKDalumni:Distros definitely keep stock...if it’s early in a games release or super hot title maybe not, but look for a slightly older title NIB and they got em.
Oh yeah, my buddy's got NIB games stacked to the rafters right now. They seem to be coming in faster than they are going out.
Quoted from jgentry:Building them slow? I take it you haven't been to the factory before? They pump out games at an almost unbelievable pace. Several of my games were not prepurchased by the distributor either. He called them and they had it in stock, I paid him, he paid stern, games came directly from stern usually 2 days later.
slow is relative. Sterns output is minimal compared to historic output. its more than a few years ago, buts its not fast. Stern makes less in a year than the old companies made of a single game in a month or 2. Stern had them on the dock awaiting a truckload to move. If a distro calls and needs one they get if off the books to the distrib asap, or dropship. Otherwise its waiting for a truck full they can push to multiple distribs who don't have a sales pending.
Quoted from o-din:Oh yeah, my buddy's got NIB games stacked to the rafters right now. They seem to be coming in faster than they are going out.
I can tell in his pictures 
Stern holds some machines temporarily... but most are on the truck the day they are built... international orders are held to make up larger shipments. I didnt see a lot of machines just stacked up and waiting to be purchased and shipped, mostly Stern collects orders until they meet a minimum run lot size, then run those machines through the line... All machines are built satisfying an order... they are not building anything on speculation that I know of, every box has a purchase order/customer ticket on it and are waiting to be shipped out.
I think in the old days, distributors played the warehousing role, keeping machines NIB, waiting for Operator demands for games. They provided uncrating, initial setup and delivery to the customer location or shop. They had a parts department and usually one old cranky fart technician who worked on the machines... the customers (Ops) generally never delt with the manufacturer, and the manufacturers never delt with the general public (or operators directly, except to maybe push their latest games.)
I think the old model would work if the customer wasn’t the general public like it is more so today than in the past. HUO has really changed the sales model and customer expectations... it used to be the question was, does it take money and spit balls? Now the fru fru owners are asking if the latest dimple is a crater, why coke isn't pepsi... ad nauseam.
If manufacturers thought facing just operators was hard enough, along comes Mr. Disposable Income to really fuck with them... if a distributor is worth having and paying the markup, it’s worth it to reduce the hassle to a manufacturer.
What is confusing things today is the sales channels are fluid, you can get a machine from anyone. Before, it was location, location, location... if you were located in city x in state y, you were buying your machines from distributor z, no other way around it. This forced sales into very distinct and rigid channels which let the distributor have some peace of mind that his teritory was his.
Without those types of arrangements, you might as well start selling direct, because I am not sure what a distributor in Pennsylvania is offering a customer who is buying a machine and having it delivered to Arizona except the gaurantee of having it “in stock” (which is probably just a letter of intent to purchase between manufacturer and distributor in the first place)
To me, eliminating the outside distribution model creates the same problem for pinball manufacturers as it would for most other industries...getting your product in front of people. This isn't the pillow guy on TV hawking directly to customers for $30 pillows. And they're not Apple with a fanatical following of customers that generates enough revenue to open your own "distributors" (what is an Apple store if not still a distributor that is wholly owned by the company) in every town.
In my opinion, the market for these products can be broken down into 2 very broad segments...Type A and Type B buyers. Type A home buyers have the resources and mind set to buy every new title, sight unseen, that sounds interesting to them...putting deposits on an LE the day it's announced. Ops surely buy new machines sight unseen as they have to keep current to keep drawing the customers. But do all ops buy every new machine? I doubt it. Distributors are just an additional cost to these buyers, and I'm sure they would gladly do without them.
However, Type B buyers have limited space and resources (either literally limited or rationally limited) and are unwilling to shell out thousands of dollars without knowing specifically what they're getting. I believe these buyers make up a significant portion of the pinball market. They want to see and play and interact with the machine before purchase, as well as have direct contact with someone who will be there down the road if they need them. That's the driving force behind distributorships in most industries. No one wants to pay the "middleman", but most people aren't able or willing to buy directly from the manufacturer without laying hands on a product close to home.
I'm a flooring retailer, and the same applies. Distributors (or wholesalers and retailers) serve a purpose that average manufacturers can't replace or don't want to deal with.
Quoted from CrazyLevi:Probably the wrong time in history for Stern to get into the brick and mortar biz.
Maybe they thought so too ? The Stern Stores seem to have gone by the wayside.
LTG : )
Quoted from pinmister:Most distributors started of as OP's
Many got into operating by inheriting routes from operators that owed them money and went bankrupt.
LTG : )
As more and more home owners buy games and have no skills or desires to work on games. Distributors might have to evolve.
My friend that was looking into opening a store was planning on selling a service package with the game, if the buyer wanted it. X number of service calls a year and once a year shop the game, clean-wax-new rubber rings - new bulbs.
He does this with a different industry/company. So he knew it could be done.
LTG : )
Quoted from LTG:As more and more home owners buy games and have no skills or desires to work on games. Distributors might have to evolve.
Perhaps all new games should be sold thru e-bay now and let them handle any service issues.
Real distros (as opposed to hobby, garage, club distros), are needed because ops still like to walk in with cash and drive out with a trailer full of coinop.
If you were required to buy directly from Stern, ops would have a paper trail, and they don't want that.
Quoted from vid1900:ops would have a paper trail, and they don't want that.
What?!? Ops don’t want a paper trail in a cash only business?!? You would think they were trying to dodge the tax man or something... nudge-nudge, wink-wink, say no more, say no more...
Quoted from Bublehead:What?!? Ops don’t want a paper trail in a cash only business?!? You would think they were trying to dodge the tax man or something... nudge-nudge, wink-wink, say no more, say no more...
and by not selling games direct stern is not at fault.
Quoted from Joe_Blasi:and by not selling games direct stern is not at fault.
Good point.
Quoted from HighProtein:No....
Next shit post thread please!?
Dear edge lord,
Unnecessary. This has been a good discussion so far, and nobody made you click on the thread.
Quoted from JodyG:Given the market saturation we are seeing in the pinball world lately, I have to wonder if the traditional distributor model is going to eventually go by the wayside in the coming years. I know there are a lot of distributors on this site, and I am not lobbing flaming arrows your way. However, I think market forces are going to cause a change to come sooner or later when it comes to the way pinball machines are sold.
Deeproot has been rumored to be planning to disrupt the marketplace pricing in some way. Lets say they do this, and sell machines for less than Stern Pro pricing. Stern, in an attempt to compete, could severely disrupt the pinball marketplace by going to a direct distribution model. We have recently come to know that wholesale pricing on Stern Pro machines is right around $4,000. Distributors have a MAP price of $5,800 on new machines. That is ~$1800 profit per machine (before overhead). If Stern decided to pull back and distribute on their own, they could split the difference and sell machines for $4,800-$4,900 and decimate the boutique market. That additional $800-$900 per machine over what they are selling at wholesale now could easily cover the services a distributor offers over the 30/60 day warranty period at the volume Stern does business. There will still be room for independent service people to offer the services a distributor offers for an additional fee if they choose.
Distributors have traditionally been a sort of marketing arm of the manufacturer. This was especially true in the time before the internet came around. With the internet offering Twitch and Youtube streams, Pinside, Papa TV, etc, is the distributor still needed by the manufacturer?
Before everyone thinks I am crazy, something very similar to this has already happened several years ago in another couple of disposable income hobbies- HO/N scale Model Railroading and entry level Model Airplanes. Horizon Hobby bought up a couple of the major brands in these subjects, and then created their own in-house distributor network. They pulled their products out of the big traditional distributors like Walthers and Tower Hobbies, and went to their own distribution model to maximize profits previously lost to the middle man. They have a team that hits all the major shows with their display booth full of new products. So far, it has been working for them. So much so that smaller companies have formed since this time, and now are only selling direct to consumer.
What are your thoughts?
Distributors are an important piece of the puzzle many do not have a game on location near them to play and a distributors showroom may be the only chance to do so. As for comparing pinball games to a toy that fits in a shoebox and can be easily shipped are apples and oranges
Quoted from Blitzburgh99:For selling direct...see Super Chexx and ICE for how they do it.
They have a great business model....they make a high end product and sell directly to the public...no reason manufacturers couldn't easily do this...their all essentially low volume businesses
Quoted from PtownPin:They have a great business model....they make a high end product and sell directly to the public...no reason manufacturers couldn't easily do this...their all essentially low volume businesses
they also have a lot of BTO choices on Super Chexx
I like the IDEA of the distro model in pinball as when you have a problem you have someone to strong arm the manufacturer. However, just like with car dealers this doesn’t seem to ever happen. I do think Nic’s Number of around $4k was correct and that distro’s do make great money. That’s why they don’t bite the hand that feeds them.
I HATE MAP pricing and distro did nothing to stop it.
I had a bad Playfield on my MET and I had to deal directly with Stern.
When I had demon head issues with KISS LE I worked direct with Chas at Stern
When I had Hulk issues with AVLE I worked with Chas at Stern.
The problem is if the manufacturers cut out the distro we will NOT see cheaper pricing they will just keep more profits.
How do I know, again Nic Parks, idiots on his thread are saying they will send him preorder money once they see Scooby Doo Playfield pics. WTF we invite these guys to think we are suckers with unlimited pockets.
Quoted from Sinestro:That's what everyone said about Apple retail stores.....
I don’t remember anybody saying that.
Regardless, a bigger apples and oranges comparison would be hard to find.
I can't personally speak to the business end for Stern and it's current model. However, I will say I am absolutely not in favor of losing any of my distributors. That would be rough and it would eliminate some of my personal relationships that I'm not willing to lose.
Quoted from sethi_i:To me, eliminating the outside distribution model creates the same problem for pinball manufacturers as it would for most other industries...getting your product in front of people.
This is a really good point, and dovetails with an interesting trend I've watched over the last few months.
Stern has now gone all-in with promotion of pinball machines via Twitch, primarily leveraging the over 20,000 and growing follower community curated by DeadFlip, aka Jack Danger.
They had DeadFlip livestream The Munsters unveiling this week at CES in Las Vegas and multiple days of playing. Note that Stern didn't set up their own channel on Twitch to do this; they used DeadFlip's existing channel, which plugs directly into his vibrant community. Those live streams get on average 500-700 views in realtime, and the replays on his YouTube channel are easily getting 1,000 views in 24 hours, with The Munsters reveal up to almost 5,000 (as of January 11, 2019).
So getting pinball in front of more people certainly has a lot of potential with platforms such as Twitch and YouTube, and it has the potential to disintermediate distributors as the ones with "exclusive access" to becoming familiar with machines, since playing them used to be the only way you could get an idea of the ruleset and "fun" value. Now anybody can watch players of all skill levels play almost any machine and see how they do from the convenience of an iPhone.
How can distributors capitalize on this?
By hosting their own Twitch and/or YouTube channels, or partnering up with someone who already has an existing channel, and post pinball sessions on a variety of machines for sale.
In addition, walkthrough and tutorial videos, when done properly, can effectively introduce novice pinball players to the intricacies and challenges that are unique to each machine.
The real question, though, is whether or not the audience consuming content on Twitch/YouTube etc. is the intended target audience, which I suppose (for distributors) would be affluent households with disposable income and the space to locate one or more pinball machines.
So if you crack that code of audience targeting, then I believe you'll have tremendous success and fun in this recent resurgence of pinball!
If you liked my take, please follow me on Twitch! https://www.twitch.tv/billwinterberg
Twilight Zone pinball stream setup (resized).jpgQuoted from pinmister:I think Stern could protect MAP pricing for x amount of days after initial release and after that allow distributors to sell at whatever price so they can clear their stagnant inventory and purchase more new machines to keep the cycle going.
Quoted from JodyG:I'd like to hear some pros and cons if Stern allowed dealers to drop prices after a certain amount of time.
Stern would repeat the lesson that WMS learned with Road Show: if people knew it was going to happen sales of new machines would be hurt due to an increasing number of buyers waiting however many days for the MAP restriction to expire and a reduced price.
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