Wednesday, July 19, 2017

Third Place Theory in the Devalued Marketplace

Third Place Theory is the foundation of the modern hobby game store. Here's a reminder of the characteristics of Third Place from the Wikipedia article cited above:

  • Free or inexpensive
  • Food and drink, while not essential, are important
  • Highly accessible: proximate for many (walking distance)
  • Involve regulars – those who habitually congregate there
  • Welcoming and comfortable
  • Both new friends and old should be found there.

Third Place Theory is the Unique Value Proposition every game store needs. It's not enough to exist and sell stuff well, it requires this special sauce. The problem with Third Place is it functions poorly in a devalued marketplace. When customers buy product online at a steep discount and use the Third Place to access community, the Third Place facility acts as a host in a parasitic relationship. 

With game trade product devalued, the response from the venue is to increasingly monetize Third Place, whether it be nominal fees or how we do it with paying a small fee to play that goes towards store credit, essentially guaranteeing anyone playing is a de facto customer. This is somewhat at odds with Third Place and a bit alien to store owners. 

Nobody wants to charge for game space. I'll just repeat that: Nobody wants to charge for game space. Game stores are not built on the movie theater or hotel model where our commodity is the space and there's a need to sell it in a particular space-time or forever lose its value. There is limited money and opportunity to make third space our main event. The main event is having things customers want, when they want it, with special sauce to increase that demand. We're not in the special sauce business.

Increasingly publishers are moving to protect their brands from predatory pricing. They understand the hobby game store is their marketing arm, and when people stop playing their games in stores, publisher sales fall. Store owners who understand this relationship between brand value and Third Place are actively shying away from devalued brands and actively embracing protected brands. 

Retailers no longer wish to be part of a polyamorous relationship. Let me be clear though that root cause of devalued product is the very system itself, the distribution model that sells to poorly run game stores that use the Internet like an exhaust port. There are only a handful of relevant online discounts, not that they don't bear responsibility as well. As with most dysfunctional relationships, there is blame and failed responsibilities on both sides.

The winners and losers in this selection of publisher value are not always obvious, they're not the usual winners and losers. 30 publishers account for 80% of my sales, and I'm increasingly looking beyond these top 30 for value, which assumes I have an apparatus in place that can push demand. For example, we're seeing stores shy away from Wizards of the Coast, with their deep devaluation and move more towards companies like Cool Mini or Not who are more active in protecting brand value and supporting retailers. 

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