Tuesday, December 30, 2014

Caring (Tradecraft)

What do I care about? In my business, I care about three things: I care about my employees, I care about my customers, and I care about the profitability of the business. I care about these things in that order. In the business, everything else is just details. Don't sweat the details. Sweat these other things. All else is the buzzing of flies.

My employees come first. The customer is not always right. I take care of my people. Do we have to ask why? Lets assume we have no moral compass and "because it's the right thing to do" is not a good answer. Take care of your people and their enthusiasm and happiness will result in greater productivity and will better serve the customer. Blah, blah, blah. If you fake this, it results in all kinds of corporate style perversions, like forced team building exercises and meddling in peoples lives. I suppose it's better than being a horrible tyrant and putting productivity sensors on your employees as they run around your environmentally hostile work environment.

I care about my customers. I want to build relationships. I want them to be happy long term. I'm willing to lose a sale over that. I'll send them across town or online to make them happy, but I'll also special order their $5 game with $7 shipping, if it comes to that. I'm willing to tell the occasional (young) person uncomfortable truths to help them on their path, that has nothing to do with selling games. The truth of this one is I never expected the customers to be the best part of the job, but they are. I had hoped to be the puppet master behind the scenes in the office. I hate the office.

Again, taking care of your customers is the long term correct business decision that will result in excellent word of mouth marketing and respect for your business and your opinion. That's more blah, blah, blah really. Customers know when you're faking, and similar to fake caring for your people, fake caring for customers comes off as crass and opportunistic. It's only slightly better than not caring. At least then they know where you stand. If you shop at Target or Wal-Mart, you've probably experienced the lowest common denominator of customer caring.

As an aside, there are many horrible people who will come in that resemble customers, but are not. "I don't want to be that guy, but this game is $5 cheaper at Target." Suddenly, without warning, not my customer. Buzzing of flies. "What was that you said, my good man?" These people will suck the soul from the top of your head with a cocktail straw.

The profit of the business is critical. As the leader of a corporate entity, I'm legally required to maximize shareholder value. I can actually be held liable for making decisions that do not do this. Before you freak out about all the corners I could theoretically cut, remember the first two imperatives of caring about employees and customers. There's not much wiggle room when you put it in that context. You can't fake profit, although you can hide your head in the gross like a business ostrich until profit passes you by.

Finally, not listed here because it tends to solve itself if you do everything else right, take care of yourself. Vacations are not optional. Time spent burned out can go on for weeks, months or years, and this time is lost opportunity. You have cheated your shareholders out of you functioning properly. Take time off.  Go do some gaming if that recharges your batteries. Take a trip. Do something else. You need fresh eyes every day to see where you can improve and come up with innovative ideas.

Taking care of yourself also means properly paying yourself. Oh, and pay yourself well. You absolutely, by textbook definition, earned it. That's your money. Compensate yourself for a job well done. It might seem strange that I emphasize this to such an extent, but I think it's necessary. It feels like a slippery slope to pay yourself well while negotiating down your garbage bill and changing cell phone providers to save $10 a month. But this is business. This is the point. Do the job. Get paid. Get a little somethin' for yourself.

Tuesday, December 23, 2014

The Tale of Zip Zap (Tradecraft)

Zip Zap is a fine little speed card game by Gamewright. Sure, it's got a depressingly low 5.67 on Boardgamegeek, but that's because it's a family game, perfect for 4-5 year olds. The snobs at BGG do not like family games intruding upon their geekery, so you always have to keep that in mind. We had it because it was a top family game in the San Francisco Chronicle in December, 2012. It was described as rollicking. Who doesn't like rollicking? I had to look that up. It's exuberantly lively and amusing. Cool! The man in the chair was clapping, although he admittedly wasn't doing cartwheels in his seat. So it was no surprise we had some left over.

On December 26th of 2012, I had five copies of Zip Zap that I stubbornly held onto. Zip Zap may have been the muggle mid level choice of 2012, but on December 26th it was adrift in a sea of much better card games. So those Zip Zaps sat on the shelf for two years. I let that happen. A couple sold the following December, some of those same returning customers. A couple sold over the Summer of this year, and finally the last one sold this month, a full two years later. This was quite dumb. Zip Zap should have been dumped like a bad habit starting December 26th, 2012.

That's the lesson here. After the holidays, if you've got "muggle specific" games you brought in, dump them immediately. Dump them hard. Dump them without remorse with a clearance tag that covers your cost, but not much else, and less than cost if that doesn't work. Ignore the talk of how it looks or what it teaches your customers, get your money back now so you don't wait two years to recoup it.

What did Zip Zap cost me? You could do some complicated math, since we know the sales points, but lets keep it simple. Doing some bistro math, if my average turns on card games is three per year, and I've got $11 (the MSRP of Zip Zap) times 5 copies ($55) tied up, it means over two years I lost $275 in potential sales ($330 minus the eventual $55 of the 5 Zip Zaps). That's nothing but stubbornness on my part. If you look around your store, I'm guessing you'll find half a dozen or more Zip Zaps, probably with much higher price tags, reminders of your bad purchasing. Tell the little man to sit down and take a nap. What I find exuberantly lively is seeing dead inventory walk out the door. It's a rollicking good time.

Sunday, December 21, 2014

How We Can Have Nice Things (Tradecraft)

When I opened a game store, the number one criteria was working in an environment that I enjoyed. That included clean floors, nice music and lots of warm wood in the form of matching store fixtures of high quality. It was a decidedly upscale environment in comparison to many game stores.

An upscale environment is a form of product branding. I didn't know this at the time, I just wanted a nice place where I was surrounded by cool things and people while I watched my house appreciate into the sky. Your product branding sends a message to your customers, and along with your own messaging, AKA advertising, it sets a tone for your business. In this case, the branding is premium, as opposed to conventional or luxury. I'm no marketing expert, by the way, but I think we've nailed premium pretty well.

Premium branding, as the article linked above describes, is open to anyone who wants to be a member, albeit at a price slightly higher. In the case of the game trade, we don't generally charge over MSRP (which is its limiting nature), we simply hold the line. In a world of crappy discount game stores that look like your basement, holding the line is what goes for baseline premium pricing.

Premium means building faith in your brand (your store, not your products), having the things people want, when they want them, and generally providing a level of service above average. It's also about having some class and promoting your brand and the hobby accordingly. If you can do this, and the best game stores do, you will be in the top 10% of stores in the country. The bar is low, but I'll admit it's wickedly hard to get all the pieces in place.

In the game trade, part of premium branding is a bit like running a church. Many customers will tell you to your face that they could have bought their game online for less (prayed at home), but they wanted to support you, the local guy who helps keep the congregation going. About 20% of our customers use our game space, but a much larger percentage, probably around 50% support our store because we have these facilities. They've told us as much.

The other half of our customers just like shopping at our store. Key point: less than 10% of US commerce happens online and it's a percentage that is not growing. Oh, and there will be those who don't like our tone, who want to game in a dingy basement while swearing up a storm and reeking of low grade marijuana. They'll choose a different denomination. Go in peace my son.

When it comes to premium branding, you have to continually uphold your side of the bargain. You have to maintain high quality standards both in staff training and with facilities. I've written before about how you might start with the best of everything, but if your store isn't as successful as you might like, over the years it all breaks down and you can't afford to maintain quality. I'm talking primarily about furniture, fixtures and equipment, the dreaded "FFE," but it also includes staff quality.

When you're not making money, it's demoralizing and the staff work ethic can fall and managing them seems rather pointless. You also have to keep your evangelizing going, meaning you might want to only run the most profitable events (CCGs), but part of your premium mission is to promote a wide array of games. Role playing games and RPG events, for example, are a labor of love that could be dropped entirely from the store from a purely business perspective. They're not just a labor of love, but also part of the mission.

I don't want to make this sound easy. It first starts with a level of business capitalization that is unreasonable. To have a beautiful store with high standards requires more money than is reasonable to invest in a trade that has very little profit. It requires more work and constant improvement than is warranted by the reward. However, if you happen to be that dedicated, foolish or stubborn, you might just have what's necessary to pull off a premium game store.

Sunday, December 7, 2014

About Looting (Tradecraft)

Happy holidays! Isn't this an exciting time of the year? Oh right, I was going to talk about looting. It happened last night in Berkeley and tends to be a regular occurrence both there and in Oakland. It's a wretched Bay Area tradition that brings in people from neighboring communities.

As business owners, we want to protect our property, and that includes damage and theft from rioting. The good news is most business insurance policies cover rioting. Call your agent to make sure though.

I am assuming you have business insurance. I was shocked to learn when I first started my business that quite a few game stores didn't have it. The guy giving the lecture on business insurance at my first trade show learned the hard way, when a car barreled through his plate glass windows and into his store. Twice. We must submit proof of insurance to our property management company annually. So looting is covered under most insurance policies.

When it comes to physically protecting your property, well, don't. I am not a lawyer, but the law is not on your side if you shoot a looter. Unless you're in Texas, which has the ever so helpful "He needed shootin'" defense that I sometimes wish we all had, especially during Yugioh tournaments. I kid! Don't shoot looters. Standing in your entryway with a shotgun might sound like a romantic and natural thing to do, but spend that shotgun money on a good security camera system instead. Make sure you can export that file and post it publicly for easy looter identification. It works.

That said, nobody ever gets prosecuted for shooting looters, except police. In fact, the real danger of being out during a riot or natural disaster is something called elite panic. In a real emergency, people come together to help their neighbors and recreational looting is rare. In anything but the End Times, you can expect generally helpful people. It's something I learned in my recent Community Emergency Response Team (CERT) training. I highly recommend training so you can help your community in a disaster. It's also a great antidote for fear and paranoia.

With elite panic, government freaks out during these troubled times and overreacts. The elites panic. You're far more likely to get shot on sight by a cop or soldier with shoot to kill orders than you are of defending your business. It's one reason why CERT members wear green, fluorescent vests and helmets.
Elites tend to believe in a venal, selfish, and essentially monstrous version of human nature, which I sometimes think is their own human nature. I mean, people don't become incredibly wealthy and powerful by being angelic, necessarily. They believe that only their power keeps the rest of us in line and that when it somehow shrinks away our seething violence will rise to the surface...  source.
So get business insurance, invest in a camera system and stay home.

Wednesday, November 26, 2014

The Dreaded Friday the Black (Tradecraft)

A lot of what we do in our specialty retail business has little resemblance to mass market retail. Black Friday is an example of that. The term was originally coined to describe dense traffic in the downtown Philadelphia streets the day after Thanksgiving. However, we know it more for the popular folklore of retailers finally getting out of the red from flagging sales January through November, and breaking into the black (profitability).

This may have been true at one time, especially with the ascendancy of mall stores (which are now mostly sad tombs to consumerism), but for most specialty retailers, the holidays are big, but aren't critical. Our season is Summer, while the month of December is our best month, one that usually erases past or future sins (like the tax bill or the store fixture tab). Stores in college towns see a reverse pattern, but this is generally true. So what about this dreaded Black Friday?

30% of people will be done with their holiday shopping by the end of this weekend. Some will be done before Thanksgiving and the rest will be done shortly thereafter. I just finished mine, since as a retailer, I have no time for retail shenanigans, and thankfully, many Black Friday sales start the week of Thanksgiving.

So what are our options with this 30%? We can be above it all, and turn our noses up at nearly a third of American consumers, who will do all their shopping, before you can finish digesting your turkey, or we can find a way to engage.

Engaging, first of all, needs to be respectful of our employees and their families.  We're closed Thanksgiving. We've been hungry enough, desperate enough, in the past to be open Thanksgiving Day. But maybe we're just more mature now as a business. No working on Thanksgiving.

As for Black Friday, it's a wretched day to visit our store. There are two days you shouldn't come: Black Friday and the Saturday before Christmas. Our location has spectacularly good parking, except for those two days. You will be disappointed. Nevertheless, there's that 30% who very much want an excuse to visit us, or they'll visit someone else.

For them, I would first encourage them to visit us on the much less hectic Small Business Saturday. There's parking, there are fewer annoying muggles looking to kill time, and our Black Friday Sale will continue through Saturday.

Anyway, this is what we do, cater to customers, with the goods they want, at the time they want them. You have sales when people are spending money, and this is a prime example.

This is also a period where well meaning folks, usually professionals who earn a living at a desk, will preach about the evils of consumerism and encourage people not to shop. You do what ya gotta do with your bad self. We'll be here for you on Black Friday, Small Business Saturday, or later on at a more leisurely December pace.

Our Black Friday sales this year:

  • Buy one Get one free on all Ding+Dent
  • All Clearance and Used RPGS are Buy One, Get One free.
  • Buy a regular priced RPG Hardcover, receive a free set of Chessex dice.
  • Buy a Tactical Miniature Starter Box, receive a free set of Chessex dice.
  • Buy a Booster Box of your favorite TCG, receive a free playmat! (while supplies last)

Thanks for your support!

Wednesday, November 19, 2014

Mass Marketization of the Game Trade (Tradecreaft)

The trending topic in my brain is whether the game trade is going mainstream, if it has grown enough in the past several years, to exceed the capacities and opportunities of the traditional morass. If so, what will it mean for specialty retail?

Why would I think this? We've got Magic: The Gathering and geek centric board games making appearances on South Park. We've got mergers and acquisitions galore, including NECA/Wiz Kids buying the regional retail chain, Hastings. But what really got my attention was the acquisition of Fantasy Flight Games by Asmodee. Asmodee is owned by the 5.5 billion dollar a year French investment group, Eurazeo. Eurazeo is not not some geeky game company, it's a long term investment group that buys things like hotel chains and parking lots. Some thought went into this.

Through Asmodee, they also bought Days of Wonder last year. The Asmodee, Days of Wonder, Fantasy Flight Games trifecta now accounts for 25% of my board game sales. This company IS board games in my store. There's now no company or segment bigger than Asmodee in my store, other than Wizards of the Coast with Magic: The Gathering. WOTC Is owned by a similarly large giant, Hasbro, with their 4 billion dollars a year annual revenue.

So is there cause for alarm? I'm going to say no, for one simple fact that recently dawned on me. Geeks are a massive pain in the ass. To put it in more technical term, they (we) are focused on, and dedicated to, minutiae, fiddly details. Dude, I have a masters degree in fiddly details, on the quantity of angels that can dance on the head of a pin, the 108 thises and the 16,000 thats. I totally relate to this, but there is no way the mass market wants to wade in. Sure, they'll own it from afar, as long as it's profitable, but at the tail end? No way.

And you can't franchise specialty retail. Oh, you can try, and several have, but the fiddly nature of specialty retail with persnickety customers makes this an impossibility to scale. I talk daily with many retailers. We have solutions for everything, but it's a bit like the rabbi joke. If you get two in a room, you'll get three opinions. Nobody is wrong. Everybody is right. And there may be a better third way, because we're never quite sure. Doubt keeps us going.

There are games and game system I sell to customers I can count on one hand. Half of what I order is a single copy that never returns after its sold. In store debates rage about the smallest details of army builds and book art. We not only debate it, we identify with the choices. As one excellent article puts it:
...The defensiveness oozes over onto everything: Tau aren’t simply a valid army she doesn’t play, they must be written off as Imperial Guard with a duller paint job. GURPS isn’t a system with flaws, it’s the fools choice. Nothing is a matter of taste: if it was a legitimate choice then they’d be making it. 
My point is, mega corps are willing to sit up top and reap the rewards, but the actual work? The farm like labor of hand selling one item at a time to an incredibly finicky and fickly class of customer? No way. They're happy to let us hoe that row all day long.

Monday, November 10, 2014

Shop Early (Shop Often)

It's early November and I'm sitting on $20,000 more inventory than I normally would at this time of the year. My store is relatively full, and other than releases between now and the holidays, and some specialty orders, I'm pretty much done stocking up. If you're a consumer, or a store owner for that matter, you should shop early too, and I'll tell you why.

Port Delays. There's a three week delay at West Coast ports that will throw the game trade out of whack for the holidays. Since a lot of what we sell comes from Asia, port delays will be a holiday wild card for product availability. New products may not make it in time. Older product is likely to be in short supply.

Poor Forecasting. Game publishers have been just, absolutely, terrible this year in forecasting demand. I don't know what black magic they use for forecasting, but their mojo has eluded them in 2014. A third of our best sellers are just gone right now. Upcoming games for Tabletop Season 3 are spotty at best. Whenever I see board game holiday articles in the making, I try to insert the availability of the games being suggested. That availability is poor. The worst offenders are game companies with exclusives, but that's for another article and consumers hardly know who they are (nor should they care).

Increased Demand. The game trade is not going mainstream, despite the fears that specialty retail will soon be invaded by mass market Mongols. However, there is certainly increased demand in board games that is driving sales quite nicely. This increased demand will exacerbate our other problems. A lot of board games are made in Asia, and board games, at least for my store, are where we see really strong holidays sales. Our board game sales in December are often double a normal month, while other departments only go up 10% or so.

Online Won't Help. Internet retailers like Amazon, as well as smaller online venues get their product from the same well. Although there is talk about distributors having private reserves for some of these big online discounters, don't expect online sellers to be holding product come December. They will run out too. Our brick and mortar store has been the "last man standing" on many products this year, according to people who only buy online who don't mind mentioning we were their last resort.

So there you have it. No bitching and complaining come mid December for things you could buy now. Also, if something is coming out between now and Christmas, pre-order with a local retailer. Yes, I'm biased, but a local retailer will get at least some product, and if you pre-order, which is still pretty rare for brick and mortar, you're practically guaranteed a copy. The "Amazon screwed me on my pre-order" complaint is common during these periods with both customers as well as publishers.

Monday, November 3, 2014

10 Year Anniversary

Ten years ago today I opened my store, gleefully ignorant of the game trade and just about every aspect of retail. I learned though, because that's what I do. I came from a career in information technology where it was assumed you didn't know many things, but you learned and moved forward. I have many veteran retailers to thank for helping me move forward, and quite a few books and articles. I'm starting to write my own.

The spreadsheet that I've lived by every day, for ten years now, says we made $95.02 in sales on our first day. Despite the common retail story, I never did a day without a sale, although that following Sunday came close at $8.49. I don't recall, but it may have been a pity sale. Sales for the entire month of November 2004 would add up to an average Saturday in the current store.

I've learned a lot in the last decade, seven years of which you can see if you go back in the blog posts.  I've considered deleting them, but I keep them up so new store owners can watch the process. Understanding did not come easy.

What I didn't expect, what I couldn't expect, where the life changes that happened during that time, often in spite of the store. My son was born and adopted by us six months after the store opened. I recall getting the call that we needed to go pick him up, 400 miles away, right now. I was working the counter that afternoon.

My wife fought and beat cancer, nearly by herself, as I worked 60 hour weeks trying to pay the bills. Not being around enough is a point of friction that's still there. My current goals are college funds, retirement plans, out earning the cost of increasing health care expenses and timing vehicles so we have no more than one car payment at a time. And I always make time for that little boy, regardless of everything else. Vacations? We'll do one again ... one year soon I'm sure. Our passports are expired.

If it sounds a lot like my goals are financial, you're not wrong. Another issue with ten years building a business is you're reluctant to aspire towards risky endeavors. It's why small companies can compete against big companies. Small companies can move fast and out maneuver the risk averse. Avoiding risk as a small business owner is perhaps the biggest risk.

My ten year lesson is once you're successful after a decade, it's unlikely you'll define success the same way as when you started. That $95.02 was a big success in 2004, when I didn't even know my break even point had another $500 to go. It's nearly impossible to think down the road that far, about the kids and the mortgage and your health, which is likely less robust than when you started. If my life had shifted just a couple years to a small child underfoot and a sick wife, I'm sure I would never have taken the plunge.

The good news is happiness. Hard work and long hours is taught to be a grueling, aging, eventually debilitating and self defeating experience ... when you work for someone else. When you work hard for yourself, you become younger. You thrive. My masseuse recently told me on my 47th birthday that I had the body of a 42 year old. I'll be basking in that faint glow for weeks to come. Happiness, for me at least, means being the master of my own destiny ... with work at least.

You have to like doing this, of course. You have to not mind being in a constant state of interruption. You have to trust people, employees to take care of your baby, and maybe even open up to them as friends and colleagues, despite the risk of betrayal. The customers are wonderful too. You're job is to make them happy, to make them smile. We do this! Working everyday with people who are happy to see you is a special blessing. I've enjoyed watching kids grow up before my eyes and employees developing into capable professionals. I give these people the credit for my missing five years, because it sure wasn't diet and exercise.

Please join us for our anniversary part on November 9th, if you're in the area.

Wednesday, October 29, 2014

The Shrinking Middle (Tradecraft)

Wizards of the Coast announced something today that Magic players will likely never hear about. On December 29th, they'll reduce the discount for Magic product by 2%, increasing our costs by 4%. They're not raising prices, they're just reducing the discount, meaning retailers will pay more, but will sell for the same price. How much more? I estimate $3,000-$8,000 a year, from each store, will just evaporate from retailer coffers. WOTC costs have been steadily rising for us in the form of shipping surcharges, but this is the first time the discount has been changed since 2009.

The reasons for shrinking margins is the usual stated added increases in costs of doing business that every reduced margin publisher provides us, be it Wiz Kids, Paizo or the myriad of others. Often those programs disappear or are entirely forgotten, while the shrunken margin remains. Even when they still exist, what other industry adds the cost of their doing business to their retailers?

In the case of Wizards, they have not raised prices on Magic since 2006, when packs went from $3.69 to $3.99. Using an inflation calculator, the price for a Magic booster, keeping up with inflation, should be $4.71 right now. So why not raise the MSRP?

It doesn't need to go up a buck, but even a quarter is well within what they need to cover their increased costs. More than likely, this is because Wizards of the Coast doesn't want to risk upsetting their customer base. When you've got a golden goose, you don't change its feed. But retailers? Whadda they gonna do about it? Nothing, that's what. We lack our own trade organization and an after hours email saying you've just lost $2,000-$8,000 next year is not an unusual occurrence.

As I've mentioned many times, with both an MSRP system and a discount structure, there is no way for game stores to cope with rising costs. When our costs go up, we can't raise prices, so we find a way to eat it, and that way is usually less staff, poorer infrastructure, and cost cuts in uncomfortable areas, from toilet paper quality to how often we clean the carpets. It makes the game trade a backwater, an inflexible business model that is inherently down market. Publishers then scoff at us and our operation, a model of their own making. It would be nice if the 500 pound gorilla in the industry was at least more understanding of our plight. 

Thursday, October 23, 2014

Gamers and Gates

On Fridays, if I'm lucky, I go to the rifle range and shoot holes in circles. It's a relaxing thing I like to do and it's a kind of reward, a conceit, after a decade of running a successful business. It's my golf. There is tremendous guilt in this time away, but that's another story. I mention this because you will never see a more polite group of miscreants as the fine ladies and gentlemen of the rifle range.

Why? Mostly because they all have guns. That tends to engender politeness, despite what you might have been told. When there's yelling, it's because there's a violation of safety. I was yelled at last week for not noticing someone else's safety violation. It takes a village.

They also have a common cause. They're all members of a maligned sub culture. They have vastly, wildly divergent views on politics, religion, the way of the world, but they all agree on one thing. They all want to continue to punch holes in paper circles, and much of the world disagrees.

I mention this because gamers are also members of a maligned subculture. Sure, the video game market is literally 100 times larger than the hobby game market, but any attempt to distance myself from video gamers ends up with me throwing stones within my glass house.

Their games are violent. Check. They're a black hole of time. Check. It's predominantly a male pursuit with difficulty integrating women. Check. My male dominated murder hoboism, AKA my D&D group, meets all standards for which I dislike vidya games. There are great, beautiful, creative, and non violent themes in both genres, and we all strive towards those examples, but the criticisms, the examples of what's normative in the sub cultures, are mostly the same.

The one saving grace of hobby gaming sub culture, one difference from video game culture, is eventually, hopefully, we'll meet face to face. It's social gaming. We're not all holding guns to engender politeness, but we still get along well enough to kill the monsters and take their stuff. Yes, our online forums are just as virulent as the video game forums, but have you ever been on a firearms forum?

Oh geez, the amount of time people spend trying to convince you that one, one-hundredth of an inch is vitally critical to your survival is just staggering. Arguments get just as heated, although there's very rarely threats of violence for obvious reasons. There is no deterrence in gaming forums.

Without a social outlet, video gamers have no social consequences to their douchebaggery, no deterrence. There is no convention or game store where they'll have to encounter each other and reconcile their differences. There's no rifle range of politeness.

I'm not a solutions guy, but if I had to guess, it would be more accountability and zero tolerance. More walled gardens and less Wild West. But I've got my hands full over here, trying to get my own hobby game house in order. Our basic guideline of Don't Be a Dick, Wheaton's Law, tends to work pretty well for us.

Wednesday, October 15, 2014

Fill Rates (Tradecraft)

Here's a little experiment. I'm taking my top 30 board games, which excludes expansions and card games, and checking availability from the largest three distributors at my local, West Coast warehouses. Over a quarter of this list includes Alliance exclusives (marked with an "x" for distributors that can't get those games), which pretty much guarantees I'll be shopping with Alliance. Lets look at the fill rates with these games, with Alliance being judged with their exclusives included. The other two distributors get a pass on those games.

Description ACD Alliance GTS
Pandemic: New Edition x Y x
Betrayal at House on the Hill N N N
Settlers of Catan Rev. x Y x
King of Tokyo Y Y Y
Small World x Y x
Ticket to Ride x Y x
Forbidden Desert Y Y Y
Smash Up N Y Y
Robinson Crusoe x Y x
Descent Journeys in the Dark 2E Y Y Y
Firefly: The Board Game Y N Y
Takenoko N N N
Arkham Horror Y Y Y
7 Wonders Y Y Y
Carcassonne x N x
Zombicide N N Y
Lords of Waterdeep Y Y Y
Castle Panic  Y Y Y
Star Wars X-wing  N Y Y
Super Dungeon Explore N Y Y
Red Dragon Inn Y Y Y
Elder Sign Y Y Y
Krosmaster: Arena Y N Y
Rampage N N Y
Shadows Over Camelot x N x
Agricola x Y x
Cosmic Encounter Y N Y
A Game Of Thrones Y Y Y
Mansions of Madness N N Y
Mice and Mystics Y Y Y
Total 22 30 22
Available 14 20 20
Fill Rate Percentage 63.6 66.7 90.9

Friday, October 10, 2014

Tradecraft: Problems You (Want/Don't Want) To Have

The new issue of ICV2 put the current game trade problems into context (the article isn't online yet). The game trade is booming. It has been booming for years now, but this year is one of the best in recent memory. Product availability, however, is poor. What am I talking about? The hottest games of the year, Marvel Dice Masters and X-Wing are gone. The D&D 5 Player's Handbook and the Pathfinder Advanced Class Guide are missing from our shelves. Board game mainstays like Betrayal at the House on the Hill and Carcassonne are gone, and worse, the new games, the ones we would like to build on, have disappeared without a trace in fire and forget fashion.

So who is at fault for this? Nobody. Everybody.  Retailers are told to order deeper. Publishers are either frustrated or elated by this increased demand. Some will call a sell out a victory, while others are seriously concerned with satisfying the market. If you're at a bake sale and you sell all your cookies, that's a clear win. You have the money and no need to take perishable cookies home.  If you're the guy in charge of selling the cookies, you're frustrated that you won't be taking in any more cookie money.

That's where retailers are right now. No more cookie money. The hottest games of the year are worth nothing to us if we can't put them on the shelves. We can't even call them hot, really, because we don't know the depth of the demand. Being the last man standing when it comes to inventory is great, but it doesn't build your confidence in a product line. There is a sense of a "ceiling of success" when there's a supply ceiling that can't satisfy demand. It's not greed, but a perceived limit to what's possible with hard work.

Will the next Dice Masters or X-Wing release be hot? Who knows? Some say Dice Masters is done. Some have massive pre-orders in. Not only do we not know our own depths of demand, but the lack of product overall perverts the local market, driving people to our store to suck up the last dice pack or space ship. When supply is plentiful, those people are not our customers. So without a way to plumb the depths, we're reluctant to take chances, to dive deep, on the next release, which means pre-orders are low, and the process repeats itself. Madness.

The next problem is organized play. If we were online retailers, no big deal. Sell whatcha got, blow it out or speculate, wash rinse repeat. In the case of game stores, publishers are expecting us to provide the value adds that we do so well, what differentiates us from everyone else. They want us to run organized play for their games, but think about that. Why would I run organized play for Dice Masters or X-Wing when I can't sell the product? Out of a sense of charity? Our customers certainly want that. So now we're in a jammed up position of wanting to satisfy customers, but not having financial incentive to do so.

There are bright spots of course. Besides miniature games, which generally have it together this year, there's Magic. Oh Magic, you savior of stores. We would run Magic events every day of the week, if we could. Wizards of the Coast almost always has supply. They provide wonderful organized play. The judges have it together. In fact, it's so easy right now, there's talk of game store blight, too many craptastic Magic only store stinking up the market and offering very little to their local communities. We're always lecturing them on diversification, but it's hard when the rest of the trade can't get their supply and demand formulas right.

So times are good, very good. Success is limited by the supply of products. I find it hard to blame anyone really. We're ordering what we think we need. They're making what seems a reasonable amount. Demand is outstripping supply. Future demand is hard to divine. If we could all just crack the code, there could be success at a much higher level. That potential is what's frustrating to retailers. Just don't call it a win.

Wednesday, October 8, 2014

Customized Service at Commoditized Prices

“All of us as consumers have gotten spoiled... We expect customized goods and services at commodity prices.  -Robert Rubin

This sums up modern retail quite well. We want things now, we want them exceptional, and we want them cheap. For the most part, you can have that. It comes in two flavors. The first flavor is mega corporation, because the only way to get this result is economies of scale, cutting out fat, as Robert Rubin goes on to say.

This is your Wal Mart, Target and Amazon. We expect these companies to be cheap, and they are. They can do this by squeezing their suppliers, paying their staff less, buying in bulk at reduced prices, using technology to increase efficiency, or in the case of Amazon, not making any money at all, much to the chagrin of their shareholders.

The second way retail addresses this is specialty retail. That's me! Specialty retail is about taking a small niche and hand serving a tiny customer base with customized goods and services. Customized goods and services means you can come to me needing a board game for an eight year old boy who likes trains and I can hand pick you a suitable game at a satisfactory price point in no time. Eight people can come to a miniatures event and pay $5 for store credit and we'll call that a win because of a complex ancillary micro sales model.

That's a niche I can fill that the mega corporation won't touch because of its fiddly complex nature and impossible to scale efficiencies. I do it by being small and nimble and having no fat whatsoever. We also have some big box characteristics, and despite the low tech nature of what we sell, we're extremely dependent on technology and sophisticated inventory processes.

There are reasons for more for less, but it would be wrong to claim it's all tech or pressuring suppliers. The way we've all been able to get customized goods and services and commoditized prices is almost entirely worker productivity. Our employees are pretty amazing, expected to master five times the tasks of a McDonald's employee for not a lot more money. That's been the trend over the years, expecting massive productivity increases, bit by bit, often a fraction of a percent in a quarter, but over many years.

The demand for more, better, right now at a low price has resulted in staggeringly high employee productivity. With unemployment falling, there's a concern in some quarters about increased inflation. However, the concern comes from an outdated concept that doesn't take into account the levels we've squeezed out productivity from today's workers. When employees are 50% more productive than they were just a short while ago, you can pay them more without feeling the pinch to the bottom line, which means inflation shouldn't rise. So we demand more with less, while we complain about income inequality, the shrinking middle class, and stagnant wages.

I am no exception here. One thing I tell my managers is if they can get through school, with the experience they're getting working for us, they'll be golden. Why? Because they work really damn hard, smart, and fast. Anyone who can master that in my employ is destined for success with a degree in hand.

Monday, September 29, 2014

The Pocket Knife

My son passed his knife safety "whittling chip" class at scout camp this weekend. They learn the "blood circle," how to safely pass your knife to someone else, and how to sharpen and store their knife when not in use. He's nine years old and he took this deadly seriously, as he should. Then they practiced whittling on soap bars.

While watching my boy with a butter knife, responsibly, slowly whittling bits of Irish Spring into the shape of a sports car, I decided he had earned the privilege of carrying a folding blade knife. I wanted his first knife to come from his dad.

That's when I became conflicted. Retail has changed my brain chemistry to where "buying things" the activity that I facilitate for the vast majority of my waking hours, is never an easy thing.

Where should I buy this pocket knife? As a brick and mortar retailer, surviving on very thin profit margins, it pains me to pay full price for anything. I am not cheap, because I tend to buy top of the line products, another retailer trait. I buy top quality because I don't want to buy it again. It's a "buy once, cry once" mentality that comes from not having the resources to replace stuff most of the time (It's also a bit of a Gen X trait as well; fewer things of the highest quality). Looking at "return on investment" isn't a conscious thing any longer, it's how my mind works. But being frugal, not wanting to spend a lot, that's different. It's a bit paradoxical.

It's paradoxical because I know where the cheapest price resides, and it's not with brethren brick and mortar store owners like myself. It's in the small store killers like Amazon and Wal-Mart. It's difficult not to give them my money without being a total sell out, but often I have no choice when my tastes outstrip local resources.

We went to a very good army-navy store. Victory Stores has been in Vallejo nearly forever. The owner is a solid guy, the kind who bends over backwards to help, has mastered special orders (despite it being on a notepad), and sincerely thanks you every time you make a purchase. The rest of the staff is just as professional. I wanted my son to experience this store. I wanted this even though the knife I wanted to buy him was much cheaper online.

When we entered, I announced my intentions to the owner and he assigned us a staff member, an older gentleman, to help us select a knife. We had many requirements, including price, the opening and closing mechanism, the blade style and length, and a knife that would fit his small hand. There was no good way to figure all this stuff out online. Knives that seemed perfect had locking mechanisms he couldn't disengage. One was perfectly balanced for me but was far too heavy for him. And again, I wanted him to have that now rare experience of solid customer service. I would be giving him his first blade, but he would be choosing it. They would be expertly facilitating that choice. It would have more meaning this way.

If you've ever seen the movie, The Matrix, that's how I see retail stores, especially ones I know well. The zeroes and ones make up the various product lines, the quick sellers, the long tail items, the mid level merchandise and what passes for top quality. It's all on display systematically, on endcaps and gondolas and gridwall, terms I didn't know a decade ago. It's also not uncommon to find me in someone else's store, re-shelving goods, organizing products, or helping customers. I don't intend to do it. It's kind of an affliction. I wouldn't have gone ten years owning a store if there wasn't some personal satisfaction in that.

We found his pocket knife. The owner said he had just put it on sale for 20% off, which felt good. He thanked us sincerely for our business. We thanked him and the gentleman who assisted us. It was good to know you could still have that experience. It was really good to know that store was still there.

Friday, September 26, 2014

The Magic Box

Around a third of all hobby game sales are of one product line. This game has releases quarterly, and as it fluctuates in popularity, businesses ebb and flow, including game distributors and every hobby game store. Stores choose their POS systems based on how well it handles this one product. Business plans, if they exist, focus on how to feature and support this one product.

It's such a popular product, that it's saved, hoarded, and tracked like currency over decades. It's the original Bitcoin. It's not inconceivable to forgo the stock market in favor of collecting this product. Thieves regularly break into game stores to steal it. It's published in ten different languages and we carry product for seven of them. Other than a couple games in Spanish, there's nothing else like it in our store. I'm referring to Magic the Gathering, of course. Today is the release date of Khans of Tarkir, the hottest set in at least a couple years for the hottest game in the world.

I previously discussed the Magic pre-release. It's a product of limited supply, with a huge demand, tied to an event that can only happen on two days ever, at a location with limited seating. It's a unicorn of sorts, with incredibly tight sales parameters that inevitably leads to profitability in a trade joked about for its lack of profitability. Magic the Gathering booster boxes are the exact opposite of this.

Booster boxes are often called commodity items, as in ubiquitous items of nearly unlimited supply. However, booster boxes fail the fungibility test, as in only Wizards of the Coast produces them. So they're not quite a commodity item, but they are widely available, nearly limitless in supply, and in high enough demand that the price of one is rarely the MSRP.

If you're a casual Magic player, you may not be aware that Magic boosters come from booster boxes. There are 36 packs in each box and there is nothing especially magical about the price of a booster box. A booster box doesn't really have an MSRP from Wizards of the Coast, they just sell us packs that happen to come in boxes.
1,728 boosters, which we then use a calculator to add to our system as 48 boxes (which the system then breaks out as pack again, go figure). And what's with Huey?
Every other product in the store is sold at roughly MSRP. So you would expect a Magic box to be 36 packs times the cost per pack. Since packs have an MSRP of $3.99 that should result in a Magic box price of $143.64. So is that the price? With a nearly unlimited supply and an enormous demand of this near commodity item, nope.

Khans of Tarkir, the hottest set in years, on the release day, right now, with a box cost of $73.08 ($2.03 a pack x 36) can be bought online for as little as $100 plus free shipping. Ignoring shipping, that's a roughly 37% margin for this industry driving, super hot product. With Priority Mail shipping, it's more like a 20% margin for that retailer or a $15 gross profit on a box that "should" sell for $145.
We know why the box is sold at such a low price, because of the market forces. But what is a retailer to do? How does a retailer know how to price this value price eroded product that makes up such a frightening portion of their sales?

First, lets get something straight. If you're not a box "flipper," as in a low box cost, high volume seller of Magic boxes, the vast majority of your pack sales are to casual players. Casual players are the backbone of this product. They allow you to have margins high enough so you can give deep discounts to the serious box buyers. If you're a casual Magic player, know that you're supporting this model. I've always felt bad for you guys. Without you, there would not be the profit that drives the game trade, as a 20% margin doesn't take you very far in a trade that agrees it needs 50% to prosper.

I should also mention the casual player is a very different market than the serious player. They find the concept of a $100 booster box just as obscene and inconceivable as a $145 box. They will not be buying boxes, possibly ever, and what you sell your box for is of no concern to them. These two customer bases are entirely different. Nobody has ever said, "Wait a minute, you're ripping me off by not giving me volume pricing on my booster pack purchase!"

Here's where I would like to be able to show you a chart (below) that demonstrated selling boxes at a higher price is far more beneficial than a lower price, but that's not realistic. The market price is the price. That incredible demand with unlimited supply sets the price and you just need to slot yourself into that equation to maximize your profit. There is no perfect information in the marketplace, no right price for everyone, just a right price for you to sell the most number of boxes at the best price possible.

That number is something you need to experiment with. The first few years of having a store, I sold Magic boxes at $145. Hold that line! When I say I sold them at $145, I really mean I sold one box, two if I was lucky, from each release. I wasn't really participating in the market. I had the wrong price. Since then, I've experimented with $125, $115, and low pre-order prices in the $100 range. By doing this, you start to see your supply and demand curve.

What you're looking for is that equilibrium point, where the price perfectly matches the supply and demand. That price is going to move as well and I suggest you freely adjust your box prices up and down as the supply and demand waxes and wanes. If a set is out of print or in short supply, move it up. If you're sitting on a ton of crappy product (Born of the Gods), mark it down. There's no fear of eroding brand value because the brand is already at near commodity levels. The brand has no absolute value.

If you're a retailer, contact Lincoln Erickson, who gave a presentation on exactly this two years ago at the Gama Trade Show. He experimented with box prices, created supply and demand curves and came up with a price that was right for him. Our price happens to be around $115. That's where I sell the most amount of boxes for the most amount of money. It's a price determined by the local market, the worldwide market and lots of trial and error. At $125, sales drop off. At $100, they don't increase appreciably and I'm giving away money.

Monday, September 22, 2014

The Disclaimer

Only in the game trade do we sometimes feel compelled to apologize for making money. There were concerns with my last post that some might get the idea that there's easy money in this whole game store endeavor. This post is to let you know that's not the case. Let me tell you how I've done.

I made no money for the first three years. It wasn't until the financial crisis, when my personal net worth cratered, that I got serious about running the business. Before then, it was just a thing I did while my house appreciated at an astronomical level. I was still one of the lucky ones.

56% of small businesses fail by year four, according to the SBA. So most make nothing and end up with years of debt. When you skip on your lease, which for us is worth nearly a million dollars, they tend to come looking for you. Everything you do as a small business is under your name, not some protective corporate entity.

Those that survive into profitability can expect a 5-8% net profit. So that $25 per head pre-release, seating 45 people per session, for 5 sessions, gives you gross sales of $2,644. How does that translate to net profit? It could be as low as $132. One of our bathroom sinks broke during our pre-release. Do you think you can get a new sink installed by a plumber for $132? Not unless the sink came from the sink fairy and the plumber got it installed within an hour.

So how is it being successful long term? We've invested a lot of money to develop a world class store. Our return on investment (ROI), is looking to be 10 years. That's right. If you gave me $10,000, ten years ago, I'm just finishing paying you back ... $10,000. I must have gone to business school with Jeff Bezos of Amazon!  What a crappy return!

If you had put that $10,000 into an S&P 500 index fund, it would now be worth $17,950. They (we, me) gave up $7,950 so I could run a game store. Has their game store investment appreciated 80% since we began? Good question. If I sold today, I would probably get 10 cents on the dollar for my inventory and close to nothing for the furniture fixtures and equipment. It's like that for most everyone.

So if you manage to be in the minority and not fail by year four, and if you were smart enough to have a shorter ROI, like five years, what can you look forward to? First, most store owners can't afford staff, so they're taking their managers salary, when they take anything at all. That salary is usually $30,000-35,000 a year. That's significantly less by almost half what they could make managing a mainstream store.

And their profit from this endeavor? The average store grosses around $200,000 a year. The owner will make their salary, plus the net profit from that $200K. In the 5% example, that's a measly $10,000. So we'll call the successful store owners take home pay in the $40,000-45,000 range. That's below the median household income in the US of around $52,000. That's why I'm always joking about having a WWGJ: Wife With A Good Job. Although I'm happy to say nowadays it's increasingly likely to be a HWGJ.

That's the basic economics, but it gets far worse when you consider the opportunity costs. If you're gainfully employed and have a career, you're likely in your 30's or 40's and you will be forgoing your peak earning period to run this store. Based on my last job and modest salary increases, compared to my very meager game store manager salary, combined with profits from those years, I figure I've forgone over $678,000 in income. That doesn't include any of the amazing benefits I did without as well, which would probably balloon that number by 30% or so. It's something my father warned about before I started, but it didn't seem important at the time.

So, you see, it's dumb. When I talk money and margins, it's to keep us below median salary, workaholic, control freaks from crashing and burning. If you get a fascinating inside look into that, all the better. Just don't quit your day job.

Sunday, September 21, 2014

Pre-release Pricing

Today I publicly discuss the incredibly touchy subject of pricing. Not just any pricing, the pricing for Magic pre-releases. This is Magic pre-release weekend, one of several times of the year that equate to game retailer Black Friday. We've had three Khans of Tarkir events so far, and each hit capacity, perhaps for the first time since the super popular set, Return to Ravnica. The importance of pre-release money can't be underestimated. It's a huge event.

Pre-releases are special. There are few "products" as exclusive as a Magic pre-release, other examples being other exclusive Magic products. Yet retailers are all over the board on pricing, and many are in a race to the bottom. What's special about a pre-release is this: Every serious Magic player has to go.

When I say has to go, I mean they can't buy it online. Because it's a brick and mortar exclusive, a game retailer unicorn of sorts, we get to see customers who don't normally visit. We see the guy who comes in after each release and buys $100 worth of sleeves for the three cases he bought from racetothebottom.com, or the downright resentful customer who hates that we somehow still have a role in his Magic equation. So with what's essentially a captive audience, how do most retailers price their pre-release?

Magic pre-release pricing is all over the place, but it's not where you would think. At one end of the spectrum, a few are doing it at close to cost, hoping to make it up in Magic singles, or volume, or some other mythical crack addled equation. The baseline is about $25. At the other end of the spectrum is a flat $30. I don't know of anyone higher than that. In between is a dizzying array of value adds, such as early sign up discounts, included food, extra prize support, and in some cases, a combination of all of these which I honestly couldn't unravel. There is no MSRP on a pre-release, so it's interesting to see what individuals come up with, but for the most part, they didn't choose the obvious answer. I'll get to that.

The cost of the pre-release just went up in price. My guess is most game stores didn't even notice. This was a surprise to many retailers and it wasn't announced. In fact, many retailers had already sold pre-release spots at their original price before other retailers noticed this jump in price and alerted them. That was a bit irresponsible on Wizards of the Coasts part and my guess is it happened because they don't actually understand the calculus that goes into pre-release pricing. It's clear to me other retailers don't understand it as well, and most just do what others do or react to their local market. For their sake (really because I was curious), I made this handy chart:

The chart is helpful as a means to compare one price to another. For example a $30 pre-release makes roughly the same amount of money with 25 people as the $25 pre-release store makes with 35 people and the $23 pre-release store makes with 45. These are the kinds of equations smart retailers use all the time with pricing of things like Magic boxes. Yes, competitor, you sold 100 boxes at ten dollars over cost, but you still made less money than my 30 boxes at twenty over. If you're hitting capacity every time in your small store, you might especially consider supply and demand in this equation and bump up your pricing.

$20 pre-release stores don't even make it on this chart. They would need a whopping 62 participants to make the same amount of money as the $30 store makes with 25 participants.  This is a captive audience. This is a hotel room model, where every empty slot is a potential lost sales, either because its empty or because its full. We only have so many packs and so much space to pack people. There is a very tight supply and demand in these equations. So why lowball it? Why don't retailers discuss this stuff more often?

It mostly comes down to misplaced attitudes towards customer satisfaction and the need to be liked, especially with glorified hobbyists who start a store. And not having a chart showing you'll be just fine holding the line. As a business model, it's choosing to fail. Or worse, it's choosing to ignore all the things you need money for in a small business. It's not being able to afford furniture, fixtures and equipment and the staff necessary for a store. It's the stuff that keeps a small game store in "gamer pit" territory and keeps it from breaking out into the mainstream. The thing is, most retailers don't have the tools to understand this, both at this micro level and the overall macro level.

Lets talk margin for a minute. A game store has traditionally thrived at around a 50% margin. This is part history, part folklore, but it's how things used to be, back on the Earth that was. The reality nowadays is you're lucky if you can get an overall margin of 45%. In our tenth year, we've managed to bump that as high as 47%, but with a lot of higher margin used items that have trade offs in other areas, like slow turns.

I've written about how game stores are stuck between MSRP and a discount model that squeezes them on both ends, making the game trade a retail swamp of its own making. So why would the vast majority of game stores, with a captive audience with this one product, sell it below a 50% margin? At the average of $25, they're getting a 47% margin. $26.50 would be keystoning it for that 50% margin, and it wouldn't be crazy in this situation to go a bit higher.

We've been doing $30 in the past and decided to add a food component to our pre-release this time. It was more as a thank you to our loyal base, who have many other options, but I think it will be part of our equation going forward. My food budget is $3.50 per head to get to my $26.50 keystone number. If you were wondering why there's a $26.50 on the chart, this is why. I'll also mention there was nothing wrong with our $30 price point. Heck there's nothing wrong with $35, if you can do it, but I bet there's bacon involved.

If you're reading this as a Magic player and you're howling in anger, disgust and alarm, know this is an attempt to keep the doors open. Nobody is getting rich here. Nobody will ever even get well off in the game trade again, thanks to the steam releasing valve of the Internet and micro supplies of hot products. In fact, these are the kinds of events that keep many a game store's doors open. Now go find the best value out there for your pre-release, and make sure you include things like staff quality, cleanliness, and the likelihood that business will be there to keep your hobby growing for years to come. You want to play with passionate players. You want your game store owner staying up at night worrying about how to keep you perpetually entertained.

Sunday, September 14, 2014

Take the Money and Run (Tradecraft)

There is a glut of "Magic" stores. Las Vegas, for example, has a population of 600,000 with 16 game stores. Normally a city like Las Vegas would have about four or five, and sure enough, there are four or five "real" game stores in Las Vegas, as in full spectrum game stores that carry a variety of game products. These stores have been around a long time and will remain after the Cardpocalypse. The other ten are various comic book stores and card shops that run Magic events. Many, many Magic events. This is typical of a lot of regions around the country. Those four to five game store are exasperated as the wind in their sales are depleted by these carpet baggers.

Before, I wrote something like, if you're less than five years old and Magic is more than 35% of your sales, you're at risk. This is still true. My new position? Don't diversify, just bank the cash. You have inadvertently hit on a boom. The idea of diversification, of taking profits from your highly efficient inventory, CCG sales, probably between 10-15 turns a year, and plowing them back into 2-3 turn product, is kind of stupid. It's not just counter intuitive, it's lacking in all sense. It's madness.

It's like the debate over home ownership. If you skip home ownership and invest the money, you'll usually come out ahead in the long run. Sure, most people don't have the discipline to take the difference between their rent and mortgage and invest it, but if they did.... Profit. That's where you're at if you've got a "card shop" in this current boom. You can buy a house, diversify into the hobby game market by deep sixing all your profits, or you can invest in a different future. Rent and bank the cash. 

The game trade, other than Magic, is a shambles. Tactical miniature games? Look at Games Workshop. Oh God. Those guys are really phoning it in of late. Did you read the CEO's "you can suck it" letter to investors? How about that new Dungeons & Dragons? Many stores have already moved away from RPGs, and Wizards of the Coast sounds way more interested in the possibility of movies and video games than dead tree entertainment. I don't expect them to produce a lot of content in the future, which is how that game is profitable for me. Board games? Oh the glut, and much of the momentum is arrested by Kickstarter. I'll still be selling these things, with great effort, probably for many years to come, but it's a rough row to hoe compared to your current cash crop.

The game trade outside of Magic is a fool's errand, an attempt to beat the house at it's own game. We compete against the producers of the product who regularly devalue their own creations and sell direct to customers for a quick buck. We're in a trade that waits for the Next Thing, knowing that the days of Next Things are behind us, along with dial up modems. The hottest games of the year have no supply. We work under the threat of the coming miniatures Apocalypse of 3D printing, the threat of Chinese Magic card counterfeiters and the perfect digital tabletop app that revolutionizes role playing. Other than Magic, the game trade is a swamp. 

We're in some weird game trade times with Magic. It won't last, and your best bet is to take that money, bank it, and work on your exit strategy. Why save up for the rainy day, the subsistence farming of the game trade, when you can take the profits from your cash crop and move on? Did you learn nothing from starting a store? Sandwich shop. People gotta eat. Open a sandwich shop.

Or maybe I'm just trying to thin the herd. Who can tell. I'm not a nice guy after all.

Tuesday, September 9, 2014

Not a Nice Guy (Tradecraft)

A long time ago, a professor friend was going back home to grade some papers. I told him, "Well, be nice." He gave me a sidelong glance and replied, "No, I'll be fair." Before opening the store I think I could have been called a nice guy. Nice is easy when you have limited responsibilities and you're not facing the world, front and center.

When you open a game store, a new set of responsibilities is thrust upon you. You are responsible for your customers, both their safety and their enjoyment. You are also responsible, legally even, to your investors and family for responsibly spending the small amount of capital you've all cobbled together. You will be taking on this role with no net, no unemployment, no disability, none of the safeties of conventional society. You are on the street if you fail, unlike the average employee. You are an employment outlier in the work world wilds.

You represent your community, their standards and expectations, and if you can't live up to them, if you can't maintain order and stability, they'll make your life hard until you do, or they'll close you down. The police will only come out to arrest Yugioh kids so many times before there's a ... conversation. Nice guy will have that conversation. Fair guy will make sure that conversation never happens.

When you open your store, there is also pie. It is assumed you have a giant budgetary pie that you'll be divvying out forthwith. As you are statistically likely to fail, the vultures come for their pie fast and furious. You will be called many times a day, indefinitely, by people assuming you're a fool in need of capital separation. I kid you not. They call every day.  Ten years now. The key is to first screen by caller ID. When that fails, it's a race to see how many seconds it takes before you can hang up. "Can I speak to the person in charge of..." is probably six words too many. These people are time bandits. You don't want to be nice.

When you open your store, you'll also be public facing. If you work in an office, you might think you're public facing as well, but you aren't really public facing until you've worked on main street, where every individual in your community will eventually mosey on in. Besides the usual customers, we get criminals, spies, the insane, people high out of their minds, religious zealots and many combinations.

A nice guy is sunk in these situations. I know this, because I used to be him. I used to engage these people, play a part in their fantasies, scams and intentional attempts to undermine me. I used to want to fix them, want to get to the bottom of their psychosis, want to unwind their crazy religion or dispel their predictions of failure, as if the universe had thrust me into this position to somehow bestow compassion and wisdom. Or maybe, and this is the worst delusion, I'm being tested.

One store owner warned me about leaving before I lost my soul. If that soul was nice guy, it's certainly gone after dealing with these folks. It's the woman who charged into the store in a cloud of fumes with a gas can and slammed it on the counter. It's the meth head who snuck into the office and stole my laptop. It's the criminal duo who tested me to the point where I made it clear I was not a corporate franchise, and hinted I would hurt them if they continued their scam. These guys killed nice guy. But it was for the best.

There is a look I've developed over time, perhaps involuntarily. It is the "I am not impressed with your bullshit, and I may hurt you" look. The troublesome know this look extremely well as they see it from law enforcement all the time. My cop friends and I talk about that look. The troublesome move on to greener pastures, where they can find a nice guy. Every veteran retailer has perfected the look. The look is some fantastic shorthand.

I'm not a mean person, but nice guy is long gone (ask my wife). I haven't lost my compassion for these people, even when they threaten to cause harm to my business or threaten me, but I strive more to be fair than the good Samaritan, administering aid. I strive to be more wrathful bodhisattva than angry demon. The pitfalls of striving towards wrathful bodhisattva is arrogance and anger, with arrogance being my likely downfall. My NPC role in this situation is that of shepherd and these are wolves. Like Jules grappling with being the shepherd in Pulp Fiction, the key is not to be the tyranny of evil men.

Fair, not nice, is what my customers and their parents expect of me. It's what my shareholders expect of me. The universe has decided it best you go back to the home, the treatment center, or the hole you crawled out of and reconsider your poor choices. You are a danger to the sheep (or are you the sheep?).

I strive to offer a fair value at a fair price. I don't do favors. I try not to make exceptions that cause trouble for my employees, although I'll bend over backwards to fix a wrong. I'm fair every day, where nice is far harder when it comes to consistency. Fair also includes firing customers, in rare occasions. It includes letting employees go before they do further harm to the business. It includes burning with fire when a product or product line is no longer working. Fair means doing these harsh actions as soon as possible, and not waiting longer than necessary. Fair means we give thousands of dollars of games to charities each year, but have to say no to the many people who would like us to support their cause.

Fair will put my son through college, pay my mortgage, and keep everyone safe.

Monday, September 1, 2014

Plastic Bag Ban

California passed SB270 Saturday banning single use plastic bags and requiring the sale of paper bags (if customers want them). Unless it's vetoed, the statewide ban will go into effect July 1st of 2015. In the Bay Area, many cities have passed similar ordinances, although Concord is not one of them. The bill is aimed clearly at grocery stores and pharmacies, other stores may also voluntarily participate (Section 1, Chapter 5.3, Article 1, G:5).

By voluntarily complying, we would stop using plastic bags and charge ten cents for a paper one. I'm not sure we'll actually sign up, mostly because the bill uses such fun government words as irrevocably, imposed and comply. The bill also makes the mistake (I think) of requiring cumbersome tracking of how that ten cent per bag is used. That was dumb. So we probably won't sign up, but we will stop using plastic bags. When our current supply of bags is gone, we'll switch to paper.

What do I think of the law? I spent $1,089 on 7,500 bags (5,500 plastic, 2,000 paper) over the last year. Over 10 billion plastic bags are used in California each year, according to some numbers, and many end up in landfills or in the ocean. From a business perspective, what's not to like? I save an extra $91 a month if bags were to suddenly fall off my books while making the world a better place.

From a personal perspective, I'm not a big fan of government behavior modification programs. I'm not a big fan of the upcoming (regressive) gas tax that will disproportionately hurt the poor. Personally, I would like to see more stability from year to year, and between the federal and state government, we're not getting that. There's far too much cheese moving behavior. I do believe in man made climate change and the need to protect the environment, and perhaps we don't have the luxury for slower change. But slower change would be nice.

The plastic bag savings will theoretically offset another change we're about to implement. One of the most profitable items in our store is bottled water, with profits about equal to our plastic bag expense each month. Bottled water is incredibly wasteful and is another major trash problem. Our eventual expansion will add two drinking fountains, one on each level, which I expect, from talking with other stores with updated building standards, will greatly reduce the amount of bottled water we sell.

Meanwhile, we're experimenting with carrying totes. One of our Kickstarter rewards is a custom tote, which we'll have for backers at the end of the month. We'll evaluate the totes and likely sell something similar in-store, giving customers one more option for carrying out their shiny new games. The ideal tote will be inexpensive (sold at cost), branded with our logo, and will carry a few good sized board games. If you're a store owner with a successful tote implementation, please share your experience.

We'll still carry paper bags. We'll give them out for free for the next year or so. Then we'll revisit this law and see how we want to proceed with charging customers ten cents for them. If everyone just switches from plastic to paper, there's really not much of a savings.

Friday, August 29, 2014

What Landlords Want (Tradecraft)

I've gone through three, about to be four lease negotiations and I've helped other people with this. I've been turned down for at least as many properties, if not more. When you're starting a game store, the lease seems like one of many items in your project plan, so it's natural that it doesn't get your full attention. You're busy with a business and marketing plan, inventory and fixture selection, insurances, and many more things. Choosing a site is critical though, it's the one and only irreversible mistake you can make. All the other mistakes can be fixed with more money or even selling your business, but a bad lease is terminal. Nobody can help you.

Finding a location is hard, but even harder is getting a landlord or property management company to give it to you. This is especially true with your first location, as you don't have a track record and you're considered high risk. If you can't get a prime spot, you could end up in one of the grubby, starter business locations in the bad part of town. The guys who rent retail spaces like apartments with one year leases, first and last months rent and a guarantee that no parent will leave their children with you.

I found after just one completed lease I was a shoe in for many locations. Landlords courted me. Site selection and lease negotiation are important, but I'm going to talk about what they're looking for. What does the landlord, and the city for that matter, want from you?

Money. They want to know you'll last your lease, which could be three to five years. Money means a couple things, but primarily you can dazzle them with cash on hand.

If you've raised $50,0000 or $100,0000 for your business, even if its a loan or money from family, leave it in the bank until you have your lease negotiated. Show it up front. Flash your cash. Consider a cover letter with that number in bold.

The landlord wants to see that. I recall doing an entire presentation for my business and the landlord said, "That's well and good, but do you have any money?" He never asked for forms from my newly opened business account with a six figure bank roll. Once that was disclosed, they were happy to separate me (the fool) from it (my money).

Experience. I've said it before, you need a lot of experience or a lot of money to survive your first couple years in business. If you've got retail experience, especially management, show that off. They want to know you have a chance of making it through your lease and that you won't be a pain in their butt during that period.

New commercial lease holders are likely to ask a lot of dumb questions or make requests not covered in their lease (like asking for anything, really). Who pays for the garbage? I used my neighbors garbage for two years before they yelled at me to stop. I didn't know. Who pays if someone breaks in through your front window (probably you, hopefully you have plate glass insurance). Experience says you'll be smooth sailing through this period.

If you don't have retail experience, show some business education, SCORE classes, or management in other areas. It can't hurt, but retail is its own animal. Most MBA graduates would be hard pressed to run a game store, especially with their own money. After completing the lease on my first business, my property agent confided in me that she talked to the property owner and they both concluded I would never make it through my lease, due to lack of experience (see Money above).

Tranquility. That pretty much sums up what they're looking for. Gaming means a lot of different things to different people. It might mean a card room, for example. Card rooms, legalized gambling, are horrible for communities, attract crime and desperate people and generate trouble. Gaming means gambling to most.

Gaming can also mean an arcade, especially if you have an older landlord. Arcades were often associated with selling drugs, juvenile delinquency, and hooliganism (again, if they're older). Imagine teenagers on bicycles littering the parking lot and painting graffiti on the wall. Damn vidya games.

With gaming comes consumption of alcohol, and if you've applied for your proper permits so you're zoned for "public assembly," they might see you as a social club which would include alcohol consumption. Our current building permit approval was very clear we were not going to sell alcohol on the premises.

What I recommend is you stress the community focused, family friendly nature of your business. If you're going to sell board games, make that a focus, even if it's 10% of your sales. People don't quite understand how you'll sell enough of them, but they know what they are. If you lead with Magic: The Gathering and Dungeons & Dragons, because that's where the money is, you'll alienate people and possibly bring up their prejudices. Focus on family games and educational value in your presentation.

That also leads to age and gender issues. Show that the demographics of the game trade are primarily men in their 20's, not teenagers. Stress that half the people that buy board games are women and that women make up the majority of family purchasing decisions, and you'll be creating a store catering to them.

Just about every game in a game store has an age range on it, and they all range from 6-14 years of age. They wouldn't be wrong in concluding that your customer base will comprise of a bunch of marauding 6-14 year olds, riding their bikes, graffitiing the parking lot and leaving Yugioh wrapper everywhere (that last one is probably true). Show that you're family friendly and you cater to intelligent adults with disposable income.

Finally. Understand your tables and charts, your ROI, your break even analysis, the difference between gross and net and net gross. Know your expenses like the back of your hand. Research the heck out of your expenses. Your sales projections are already made up, fairy tale numbers. Nail your expenses and you won't look foolish. I honestly had just a sliver of understanding of many of these things when I started, but that extra research ensured later success. Anyone looking at your plan will see that.

One more thing. They're going to compare you to local game stores. If those stores are bad, you should distance yourself from them in advance. If there are good stores around, tell them how you plan to be a local version of that store. If there aren't any good stores around, include aspirational photos from stores across the country, showing the great things you hope to do in your location.