Thursday, May 31, 2012

Top 10 Games

Our top two games this year remain Magic and Yugioh, with Magic almost it's own category, as its sales exceed the entire list combined. Our Magic coordinators are forces of nature and I give them a lot of the credit, with awesome amazing releases getting the rest. We've had good success with employee run Yugioh, thanks to our new guy, Austin. Konami continues the brilliant concept of "releases that don't suck." Pokemon has also had very strong releases once again in 2012.

Pathfinder is the new Dungeons & Dragons, as D&D 4th Edition slips into its twilight time, while the world play tests D&D 5th Edition (I hate calling it "Next"). Again, Pathfinder does exceptionally well thanks to our Pathfinder Society coordinator, who coordinates the entire Bay Area, as well as our store. I'm including Pathfinder minis in their numbers, by the way, a category that would be its own top ten entry.

Warhammer 40K and Warhammer Fantasy have slipped for us, but with news of a new 6th edition of 40K likely for this year, this is only temporary. As has been correctly stated by many fans, GW is a cyclical thing and the sky is not falling, although I do plan to flog it until morale improves.

Malifaux has slipped off the list, as we've seen most of the energy for that game move to Warmachine. No regular in-store play killed that game, something we were experienced enough to recognize from day one but powerless to do much to prevent. Warmachine, which didn't make the list, is on fire in 2012, thanks again to great coordinators and enthusiastic staff, and I expect that to continue for the rest of the year. I also think there's room for another small miniature game right now.

Board games are in the doldrums, but it's not their time yet. Most important releases happen in the second half of the year. The Spiel des Jahres is expected to honor Hawaii and Kingdom Builder, but that doesn't do us much good right now.

The big board game news is how Geek & Sundry's Tabletop program has driven customers to the store, some of whom appear to be new. I'll note that Tabletop only drives customers to the store for games that can't be found at the big box stores. If Target or Wal-Mart carry a game, it has no noticeable effect. I guess being the store of last resort is better than not being the store at all. Tabletop has had a similar effect to how our sales were boosted by the Fantasy Flight Games media center. Of all the games, board games seem to need that interactive touch, as it's very difficult for sales people to describe the board game experience.

Our sales for 2012 are up around 20% from 2011, which were up about 15% this time last year from 2010. It's all about cards. It's wonderful. It won't last. That's alright. Also, it's not just us, it's a lot of game stores. It's great for stores as they expand, pay down debt, and position themselves for the future.

2012 2011
Magic Magic
Yu-Gi-Oh Yu-Gi-Oh
Pathfinder Warhammer 40K
Warhammer 40K Pathfinder
Warmachine Warhammer Fantasy
Pokemon Fantasy Flight
Fantasy Flight Dungeons & Dragons
Rio Grande Pokemon
Mayfair Games Rio Grande
Warhammer Fantasy Malifaux

Saturday, May 26, 2012

Game Store in a Box

The economy is improving, the shove it indicator of people quitting their jobs to move on is up, and there does seem to be quite a bit of money sloshing around out there, both with consumers saving more and businesses hording cash. So naturally, people are looking to start their own businesses, including the dream job, owning a game store.

I've written extensively about the many aspects of a retail game store, but I thought I would condense some advice down to five points for those looking to do it right now. I get a call or email from a prospective game store owner about once a month, so I figured I would put up some prerequisites so you can ask the important questions later.

1. Capital. Simply put, you need a lot of money, and that means $50,000-$100,000 or more. Most stores fail within 18-months because they simply run out of money. If you have less than $50k, you better be in a very low cost of living part of the country. If you're going to do it on a shoestring, you better have extensive business experience, and therefore, probably don't need my advice. If you want to make a reasonable wage at this, you'll need to be at the top of the money range.

2. Research. Do extensive research on the game trade and retail. If you find you're too diverted by actual games, and can't get into the spirit of the game trade, you're probably going to be unhappy running a store. Follow game store owners using social media and join the Game Store Resource Forum. Get a variety of opinions, as every store owner has them, and there are no right or wrong answers, only right or wrong answers for each individual. Visit SCORE and consider a SCORE mentor and definitely take a few of their free classes. Consider working in a retail store if you haven't. Consider taking a class or two at a community college (or through SCORE) on accounting and small business management. You won't have time later. You can't research too much, really.

3. Business Plan. Telling you to write a business plan is shorthand for finding a location, designing your value proposition (what are you really offering), and learning all the expenses associated with a retail business. It requires you to write profit and loss statements, income projections, and other financial artifacts that you will need later. Writing your business plan is your introduction to researching your field and how your business will operate. Open a store without a plan, or at least the research required to write one, and you probably won't make it. If you're business plan is feeling hopeless, you're getting close. Profit margins are slim.

4. Gut Check. Why exactly are you doing this? Assuming you can do nothing else and nothing else will scratch that small business owner itch, how much money do you want to make? Write that into your business plan. Your money at the beginning will need to reflect that. Do not, under any circumstances, open a "protest store." These are stores that open because the local store owner doesn't run his store like you think he should. You do not "steal" customers, you create them, and protest stores inevitably fail, while hurting the original store and the community it claims to serve. Expect to put in 60+ hours a week your first few years and don't expect that number to dip below 50, probably ever. I think "part time" stores are a waste of your time and money.

5. Exit Strategy. What is the end goal? Selling for a profit in entrepreneurial fashion won't be worth your time, so figure out what you want to accomplish, for how long, and what failure looks like. Decide how much skin is in the game ahead of time, as it's easy to lose your life savings or your house in pursuit if these kinds of dreams. Write your exit strategy into your business plan. If you have partners, make it very clear how you each will exit and how you will value the business at that time. Write it down now, as I promise you won't agree when it's time.

If you do all these things, I would be very happy to talk with you and help in any way I can. I may want to take your photo to prove you exist.

Wednesday, May 23, 2012

The Bad Employee

Imagine you have this amazing employee. He shows up on time and sets a reliable schedule. He communicates well. He anticipates what you might need and he does it for you without asking. In general, this employee is a model the others could look up to. All employees should have it as together as this guy. You hired him, despite hearing rumors that he wasn't always so amazing, but for you, he performs. But then he doesn't.

It starts when he stops communicating with you. You ask him his schedule and he tells you to check his Facebook or ask his friends. Won't it be all the more surprising and a joy for you when he magically shows up?

You complain about his poor performance and he tells you it must be you who has the problem. And isn't it great that your other employees are doing so well? Go focus on them. He has no suggestions on how how his performance could be improved. The employee continues to perform poorly, noticeably becoming a problem, and then what does he do? The final straw: he asks for a raise.

Yeah, about that.

At a certain point that employee needs a reality check. They need to understand that no, they won't be getting a raise. That no, their performance is not up to par. Perhaps their hours need to be cut at first, and if over time they still don't improve, terminating them is in order. No matter how good an employee might have been in the past, if they aren't performing now, when it matters, they are of no use to you as their employer.

I am, of course, talking about Games Workshop.

Wednesday, May 16, 2012

Geek & Sundry

I've been surprised by the number of people coming in to buy recommended board games after watching the Tabletop program on the web based Geek & Sundry network. This is a slickly produced web show starring Will Wheaton, featuring various geek-level celebrities. It's one of the various geek culture vehicles produced by Felicia Day, the Zooey Deschanel of nerd culture.

What's kind of surprising is the concept of Tabletop is nothing new. There are years of video podcasts reviewing board games, many with more depth, and many with respected board game "gamerati." The production value of Geek & Sundry is certainly top notch, but the fan-based podcasts aren't bad. Yet, the podcasts have barely moved the needle when it comes to influence, as opposed to Tabletop, which can send a small legion of people to hunt for Tsuro after a positive review, an alright abstract board game with modest reviews that made it's debut in 2004.

The difference, of course, is the celebrity angle. Half a million people watched the first Tabletop review of Small World; a quarter million watched the Settlers of Catan episode that followed. No video blog with a scruffy gamer can come close that. My favorite board game podcaster, Scott Nicholson who makes Board Games With Scott got a little over 100,000 hits for his most popular video and that's after 6-years. And that was on Mah-Jong, about as mainstream as you can get.

It also goes without saying that there's a bit of geek resentment to see these kinds of vehicles move geek culture to the mainstream. Of course, half a million isn't even that high for mainstream culture, with a geek favorite like Leverage drawing 4 million viewers an episode in its debut season (and how come we haven't seen Leverage's Beth Riesgraf on Tabletop as promised?).

Sure, mention geeks in newspaper articles (usually with at least one glaring error), but to actually create a popular, near mainstream inclusion of geek culture smells of appropriation.
The Groucho Marx quote "I don't want to be part of a club that would have someone like me as a member" rings true in geek culture, be it technology or gaming. As gamers, we spent our childhoods dodging adults who thought our hobby was sinister and peers who wanted to ridicule us for it, plus it wasn't exactly a chick magnet. Carrying around a backpack of D&D books was akin to carrying a cache of explosive Barbies. The authorities will bust you while the bullies will still beat you senseless. To have geek celebs make your struggle popular can be viewed as a denial of that journey through the desert.

However, I would argue that geek culture is not what it used to be, far richer and diverse, but also stretched thin to the breaking point. Now you'll only be ridiculed for carrying a backpack full of D&D books because you don't have them all on your laptop. Much of what we love from our geek childhoods is in danger of becoming footnotes in geek history, dusty Wikipedia entries, or worse, something cranky white haired men play at regional gaming conventions (I'm becoming one myself). I think we need to accept a little appropriation, although feel free to remind them how you trudged through the desert. Tell them to get off my lawn while you're at it.

Saturday, May 12, 2012

Top 25 in Role-Playing

Here's a list of the top sellers in role-playing over the last thirty days, by quantity sold.

  1. PF: Skull & Shackles: The Wormwood Mutiny
  2. PFCS: Pirates of the Inner Sea
  3. Knights of the Dinner Table 185
  4. Kobold Quarterly Magazine #21
  5. CoC: Cthulhu By Gaslight
  6. PFCS: Isles of the Shackles
  7. Flip-mat: Urban Tavern
  8. PFCS: Blood of Fiends
  9. Pathfinder RPG: Core Rules HC
  10. Pathfinder RPG: Bestiary HC
  11. Pathfinder RPG: Bestiary 3
  12. D&D 4.0 Player's Handbook
  13. D&D Dungeon Survival Handbook
  14. Marvel Heroic Role Playing 
  15. Rifts: Lemuria
  16. Pathfinder RPG: GM's Screen
  17. The Rifter #58
  18. Dresden Files RPG: Volume 1
  19. Traveller RPG 2300AD
  20. Pathfinder Advanced Player's Guide
  21. Pathfinder RPG: Bestiary 2 HC
  22. Pathfinder: Ultimate Combat HC
  23. PFRPG: Ultimate Magic
  24. Call of Cthulhu 6th Edition
  25. 4.0 Monster Manual

Pathfinder clearly dominates the list with over half the entries. Dungeons & Dragon 4E still chugs along with a few entries, the best seller being Player's Handbooks, so it's far from out of the picture.

Magazines have made a comeback since the recession, and we now sell twice as many Kobold Quarterly and Knights of the Dinner Table than before. It's interesting that Kobold Quarterly is approaching the sales level of Dragon magazine from back in the day.

There are a couple Call of Cthulhu entries, a game that has gained a lot of traction with us lately. Traveller 2300AD would be much higher if the distributors weren't always out.

It's a fairly tame period in general for RPGs, especially when compared to the CCG  releases, any one of which would dwarf the entire RPG department several times over.

Here are the top 15 RPG companies in our store by sales. The number in this list is how they rank against other categories in the store (there are 146), not just RPGs:

6 Paizo Publishing
20 Wizards of the Coast 
34 Chaosium
60 Catalyst
61 Mongoose
62 Evil Hat
70 Palladium 
74 Open Design
75 IPR Titles
77 Margaret Weiss
78 Kenzer & Company
89 Fantasy Flight Games
95 Studio Two Publishing
107 Green Ronin
110 Hero Games

So our number one RPG company, Paizo, ranks sixth overall in the store, while Dungeons & Dragons, once a top five company for us, now ranks 20th. Again, just one month; just one store.

Tuesday, May 8, 2012

D&D and Turn Rate Tyranny

Yesterday I began putting Dungeons & Dragons 4 items on clearance. These things hadn't sold in a year and with D&D 5 about a year out, it was time. However, what this really meant was a removal of amnesty from inventory performance metrics.

I've got a few key principles for how I sell stuff, metrics on performance that inform what I stock and what I don't. In the case of some of our key games, the big ones I want to be known for, metrics are ignored in exchange for carrying the full line. It's not a long list: D&D, Pathfinder, 40K, and Magic. For these games, I will hunt down even the most obscure item to complete my collection. It satisfies the collector in me, even if it doesn't always make short term financial sense.

After the full line metric, I try to stock core. In some cases, like with 40K and Privateer Press games, the companies create their own "core" list. There used to be one for D&D and a lot of times you can infer a certain core from various games. I recently had good success with Reaper by using their best sellers list as a core. Fantasy Flight Games has a kind of core with their Media Center. If there's a video of the game, it should certainly get extra consideration.

With this metric, I represent. Yo. If you come to the store, you should see a good representation of that line, usually enough to satisfy most customers or inspire special orders. Stocking core is also the last refuge before more severe metrics are imposed. If you can't make it with core, maybe it's time to dump it.

The most important performance metric for me is turn rates. Turn rates measure inventory performance. While most big box stores require really high turn rates, like eight a year, I'm pretty happy with three to five. When turn rates fall, the usual response is to cut the slow sellers until your metric improves, hopefully without damaging the integrity of the line. For example, we recently dumped about half our Malifaux for the second time. The line continues to shrink and one day it will hit a tipping point where it clearly isn't a line any more and needs to go completely away.

Some games get a free pass to get me to "full line" status, like D&D or maybe a more obscure Settlers of Catan expansion. Core items also gets a free pass, which can be highly annoying sometimes. For example, I sell a Mines of Moria starter box from Games Workshop once every two years, yet I'm required to carry two at all times because it's considered core (reinforced with our partnership agreement). So yeah, a constant 4-year supply of Mines of Moria at all times. It's enough to make me want to, you know, find a way to sell it more often.

Where things get interesting (if these things interest you), is when a game jumps a metric category. For example, when Dungeons & Dragons is no longer considered full line and you move it to core, or focus on turn rates (what I'm doing now), there's a huge psychological shift in the customers mind, whether they recognize it or not. There's a whiff of death about it, perhaps a confirmation of doubt.

At the same time, moving a product line up the chain can have a positive effect. Measuring Reaper and Warmachine on a core strategy from a turn rate strategy helped breath a little life into the game, and customers were appreciative of the move. It had a psychological effect that the line was doing better. My customers were more willing to special order what I didn't have when they saw me focusing my attention on improving my selection. In fact, I mentioned recently in passing, that a store expansion might involve moving Warmachine and Hordes from core to full line, which got a couple people asking me about how that might come about (at the expense of Malifaux).

Finally,  I should mention that this is just what I do. Other retailers use other metrics (hopefully) or variations on these. When I had a much smaller store, sales per square feet became huge for me. Some store owners think turn rates and metrics take all the wonder out of their stores and have a more "seat of your pants" method.

Sunday, May 6, 2012

Anatomy of a Magic Pre-order

In the collectible card game market, we need to order everything we want up front. In the case of Magic, that's around a 30-day supply. How do you determine how much to buy as a retailer? First you look at how much you sold of the previous set in the first 30 days. Second, you gauge demand in comparison to past sets. Simple enough, right? Lets look at some of the factors.

Timing. Unfortunately, timing conspires against you. That Magic order needs to be put in weeks before the release and well before the pre-release, so customers don't really know how much they want. So you have to trust your gut to some extent, which is really a bad way of doing business.

Demand Forecasting: In the case of the most recent release with Avacyn Restored, I ordered based on the Dark Ascension release. We pre-sold about 100 boxes of Dark Ascension, often in case quantities. However, that number was a big surprise, so supply was severely limited as I scrounged everywhere for enough to cover our order. It worked out very well, but it was hit or miss for a while as I initially had more pre-orders than quantity on order.

Supply Allocation: This time I was prepared, with five suppliers on the line to get us our stock for release. However, there were no promises they would all deliver. In fact, since Wizards of the Coast has such a tiny allocation on release, they force you to deal with distributors, who look at your past performance with them, including everything you've ordered and not just Magic, and then determine how much they'll give you based on a percentage of what WOTC gives them. So although there were five suppliers, it was unclear how many boxes they would provide. Did I pay enough of them tribute in the last quarter? Some yes and some no.

Pre-orders: So with such questionable supply available, what did we do? We backed off on pre-selling, especially those case quantities. So our pre-orders on release were about a third of what they were for the previous set. Then we got a shock as suppliers called to tell us our allocation was close to 100%, meaning I would get everything I asked for. Huh.

Over-Supply: So now my 30 day supply was at 60 days. What does this mean? It means on a $10,000 Magic order, there's going to be a $5,000 bill due when there's no money. There are ways to stretch cash flow to prevent catastrophe in these situations, but ideally you avoid them entirely. It's also true that stores that have cash on hand and better credit terms are way better off than their competitors.

Increase Demand: So with an over-supply and a huge bill down the road, the only solution was to increase demand. I did that by lowering the price from $125/box to $100/box. The funny thing was, the set was pretty hot and supply was fairly tight for most retailers, so for the first time, our $100/box price was pretty close to the Internet discounters. In the first two days, we sold twice our pre-order numbers and were clearly out of trouble. Over the next few days, we'll probably bring the price back up as our supply stabilizes into that 30 day territory.

Why all the drama? It's Wizards of the Coast limiting supply regardless of demand. Part of this can be good for retailers, provided you have product to sell. Limiting supply does create a level playing field. It's something we already see with Yugioh, where the tight allocations mean we sell product at a reasonable price point compared to Internet flippers. It also means we run out sometimes, and we always run out sometime shortly after the next set arrives. We just don't have the budget to order years of product to sit around.

There is an up side to this. When you only have "X" product to sell, most retailers, including Internet ones, realize they don't need to cut prices so hard to make a buck. If you know you will sell everything in "X" period of time, there's no need to discount unless you're in trouble. This was something I learned buying cars. If a car dealership has a small allocation of cars each year, such as in the case of BMW, they don't need to discount. They will sell every car to someone at close to full price, and sometimes above their MSRP. The secret to buying a BMW turned out to be finding a car outside of allocation (European delivery).

Small allocations or fixed allocation is the mark of a premium product. The key, unfortunately, is steady demand, and collectible card games just don't have that. They're too hit or miss, too uneven to go this route. Will you sell every booster box of Magic? Is the risk non-existent?  There are crap sets that are still floating around out there at distributors from a decade ago. So with these small allocations, it means the retailer will either be unhappy with an oversupply, or unhappy because they sold out. Hitting the right number then is guesswork and not good business. However, the publishers are happy because they've eliminated the risk on their end.

Gaming the allocation system with Euro Delivery in 2001.

Wednesday, May 2, 2012

Some Meta (or Tea, Earl Grey, Hot)

I've been waiting for the pageviews for the blog to hit 300,000 to talk about how it has changed over time. To put this in context, the LA Times had an article about how over a dozen of their blogs did a million page views in one month last year. This blog is obviously a small niche compared to mass media, but it does put my 5 years of blogging into perspective.

Total number of posts: 1,307.  Number of drafts that I thought would be better not posted: 44. As you may have noticed, the posts are less frequent over the years, which is mostly a factor of less time and more self-editing. Lately, I've thought about giving up blogging, as I regularly feel I have nothing left to say. As you can see, that feeling doesn't last long.

The most popular kinds of posts:
  • Anything talking about board games. This one is the most popular.
  • Top product listings (yawn)
  • Pathfinder. This one is third most popular.
The least popular posts:
  • Me (hobby, cars, etc.)
  • Tradecraft
  • Reviews
I try not to let popularity of post types influence me.

Audience (I'm big in Poland)

The biggest change in my writing has been the influence of Facebook, as I link every post to our store page. This means I'm more considerate of the audience, especially customers, whereas when nobody was reading the blog (at all), I was posting more about my hobby activities, journaling about any old thing, and was generally sloppy in my writing. I do a lot more editing now for both content and style. You can thank me later.

Some other milestones include hitting the 7,500 mark on purchase orders recently. That's how many orders I've put in at the store. I wrote my Purchasing Manifesto in 2009 after hitting 5,000 purchase orders. I stand by what I wrote there, but I'll add that my Open to Buy process has started breaking down under the weight of increased volume.

Last year I was $10,000 over budget on purchasing, mostly because of much higher sales volume that just overwhelmed me. That's $10k of taxable income that could have been profit or used for expansion needs. It's de-facto expansion when you're sloppy this way. It's lame, rookie, knucklehead stuff. I figured after this little problem that my Open to Buy spreadsheet was about 98% effective, which turns out to not be good enough. You wouldn't put up with 98% with your birth control and you definitely shouldn't in open-to-buy. I really need a software package or checksum in my process. For example, a monthly inventory total count that adjusts OTB.

Other goals include a sales goal that I've plucked from the sky. I want to one day do a million dollars in sales at our location. We're years away, but I think it's important to have a plan. I believe it to be fully attainable and the plan includes first expanding our space (this Summer) and then our inventory. This is instead of a second store, the thought of which makes me delve into franchise listings of more reasonable businesses. The horror.

It sounds really strange to say that goal out loud, but why not? It sounds big if you're not in retail, but with a 5% net profit margin on a business of this type, it's like saying I one day would like a job earning $50,000/year. Wooptido. My last IT job earned twice that.

It's especially strange after writing a blog post of the coming Star Trekian apocalypse of the death of sellable things. So it's either a million dollar store or matter replicators, apparently. 

Maybe it's strange because the store owners I know who do a cool million in sales keep it pretty quiet. I know of one vocal store owner in all of the game trade who does a million in sales. Don't worry, I won't out you. Most of the blah blah blah you hear from store owners is not from the cool million crowd (case in point). My theory is they're too busy working (what I should be doing).