I think this is a solid point. Different distribution methodologies change the numbers. If you sell to a distributor at 60% of list (giving them "40 points" in the lingo) and they then sell to a reseller at 80% of list, the brick and mortar store has the option of having a "10% to 15% off sale" and still making money.

Hence the "rule" that your cost of goods needs to be 1/3 of the MSRP if you want to go through two tiers of distribution.

At Freegate we shipped directly to retailers and gave them 30 points off MSRP, but that meant on a new order, they ordered from us, we shipped to them and they shipped to the customer so a fairly long lead time between order to arrival.

When I was at Google the PM for "consumer devices" was looking at what it would cost to get things on the shelf at Fry's and Bestbuy and the price negotiation was more about where on the shelf it sat rather than store profit it seemed. Something to factor in to the economics as well.

But the bottom line here is that there is a "market price" for something, and the "cost to get it to market" + "cost to make it" and if that market price is less than the sum of the other two, well you can't make it up on volume :-).

I think Amazon's LAAS business made that calculation simpler and thus there was less uncertainty about whether or not one could make any money selling them.