Tuesday, February 28, 2012

Boom Time Psychology

It appears that the game trade is booming. I have to preface that statement, because there are plenty of struggling, failing, and flailing stores this does not apply to. However, unscientific polls and discussions seem to point to great strength in the trade. We're riding that wave, and as I've stated, I'm highly dubious it will last since it's based on the shifting sands of the CCG market. That said, we've seen steady growth in all our departments for years and I expect it to continue despite the boom.

This success tends to mess with my brain as I try to plan for the future. There is fear of complacency, that with the extra money you start loosening up purchasing, employee hours or you start buying those things on your need list. I would call it a "wish" list but every store has things they need that they can't afford.

The situation reminds me of stories of Great Depression era people whose relatives discover money squirreled away in their homes after their deaths, despite the departed having millions in assets. Survival instincts are hard to break and it's often more comfortable to go on with your tight budget than accepting that you can change your habits a bit, you can loosen up. Tightening up is how we got the money in the first place.

Heck, most retailers are even afraid to mention that they're doing well in fear of the consequences from customers, employees, competitors and even the landlord (everyone complains their doing poorly to the landlord). If you don't have a culture of transparency, you're at the mercy of rumors and erroneous perceptions.

The danger of not addressing the reality of success is you don't progress. Retailers are like sharks, in that they must keep moving or they die. There are product trends you can miss, competitors that need addressing, events that need re-organizing, employees that need hiring, inventory that needs culling, and debts that need servicing. Plus, if you're ambitious, there is probably a long term expansion plan or the desire to set yourself up for financially for the future. I would love to own a building, for example, the Midwest game store retirement plan, but in California that's impossible without a couple hundred thousand dollars in cash.

In our current situation, we've got money in the bank that could be used for: a) expanding our game center, b) paying off all our debt, or c) the foundation of my son's college fund. There is no right answer on this one. There is no particular time in which you're supposed to take your draw and be content (c).  There is no best time to expand your business and hope you've got a long term future (a). It's always good to get out of debt but you don't want to miss an opportunity (b). The answer to this question will depend entirely on the mind of the business owner.* 

The most difficult thing about running a small business is there is no blue print on when things are supposed to happen, including success and failure of any variety.  What's the chance of failure in year eight compared to year three? It's the same. It doesn't get any easier or less risky, so we sew $20 bills into our clothes when times are good while occasionally running out of bags because ordering extra seems extravagant and wasteful. We try to keep our enthusiasm up for a job we can't easily quit. We are successful because we constantly feel the pull of the entropy of failure.

So small business owners have stress when things are bad and stress when things are good. The key to long term success, I think, is enjoying both of these as curious puzzles that need solving.

* the answer is a

Monday, February 13, 2012

Throwing Around Numbers

Wizards of the Coast made the rare disclosure that they sold $200 million in Magic last year. That's twice their revenue from 2008 and also explains a lot of our success recently.
That $200 million dollar amount is interesting. It's roughly the amount Games Workshop took in for 2011. So all of GW, Fantasy, 40K, Lord of the Rings and their nifty paint and tools, equals one brand: Magic.

As a store owner, I can't help think of the differences between these two. The small amount of space Magic takes up compared to the acres for Games Workshop. The bulky, nearly immovable terrain tables and cabinets and shelves of terrain needed for miniature games compared to the folding tables for Magic. Magic feels ethereal, wistful, likely to flit off at any moment like a fairy, while miniature gaming feels stolid, stable, and unlikely to go anywhere soon.

Sounds a lot like our customer base too. The problem with Magic is it remains a commodity, perpetually available at deep discounts  (an area where charging sales tax kills us), while miniature gaming tends to develop a more stable community. In an experiment a couple weeks ago, we sold our Magic Dark Ascension cases (not boxes, cases) at a price approaching Internet discounters. The result was our best gross sales day ever, and a struggle for more supply, as quite a few people supported us with case purchases rather than buy online. I would like to call the Internet the "shadow" market, but clearly, when it comes to Magic case buying, we're the shadow and they're the market. We're working to build our Magic community, but there's always that shadow over our efforts.

Like Wizards of the Coast, we saw our sales rise dramatically over the past three years because of Magic, but the rise is scary because of where it's coming from. If we saw a rise in 40K, we would be more content and willing to invest more into that community. However, a rise in commodity games, CCGs, is just bonus. It's shifting sands. Sure, there's community, but the money feels like some extra cash we shaved from the Internet sellers. So yes, we plan to expand our store and actually cater to the RPG community even further, but it's with an understanding that we're one bum set of Magic (and Yugioh) away from seeing it all fall apart. We're in a perpetual three month wait and see cycle.

Anyway, I was going to write a post on looking at the positive, at finding why stores succeed instead of giving excuses for why they fail. The moral of this story is diversification. Enjoy the boom, expect the bust, diversify into other games. The biggest threat of a boom, is neglecting your other customers or other departments. GW can tell you stories about how their sales people's skills atrophied during the Lord of the Rings miniatures boom when the movies were out. That's a real danger. Or maybe you start doing the math and realize that D&D makes about 10% of what Magic does, so you start wondering how much more money you could make if you replaced those crusty book shelves with more gaming tables for the Magic crowd. Money warps your brain. Don't let that happen.

Finally, some perspective. Hasbro is publicly traded, so we can do more math to determine that Magic is around 5% of their revenue. It's money, but it's no big deal. We don't know the numbers for Dungeons & Dragons, but I assure you, it's likely to be a rounding error when you dump it into the Hasbro spreadsheet. If they do ten times more Magic than D&D, like we do, then D&D would be .5% of their revenue. So if Hasbro is paying any attention at all to that brand, they're looking at how it can be something that it's not now, like a video game franchise. The danger from Hasbro, therefore, is not monkeying with the brand, it's losing it in the math.