Friday, August 21, 2015

West Coast Game Store Tour 2015, Part Five

We're back from our trip! 4,700 miles, ten states and provinces, and 21 game stores in 19 days. I've learned quite a bit on this trip, both ways to improve Black Diamond Games, along with reinforcing what we're doing right. So much of what you see in a store is in response to local conditions. Many factors are within the store owners control, but I still think communities get the game stores they deserve. Deserve means what they can support based on demographics, culture (including ordinances at all levels) as well as the desire to support small business.

Every store owner or manager greeted us warmly, invited us in and had no problem with my taking dozens of photos of just about everything. Most didn't know we were coming. All of them had clean bathrooms. None had foul odors, profanity spewing customers, or dark corners where small children feared to tread. We crowd sourced our visits to get the best selection and we weren't disappointed.

With all that said, here are the remaining stores we visited that we enjoyed but didn't fit a particular model or niche I was discussing. You can see more photos on my Facebook page.

San Rafael, CA: Our first stop on our road trip. My favorite (not mine) game store. Family friendly store that features a broad selection of games, toys and puzzles.— at Gamescape North.
Las Vegas, NV: The most solid, well rounded game store in Las Vegas. Miniatures are a specialty, but you'll see a good selection of board games, RPGs and CCGs. — at Little Shop of Magic.

Glendale, CA: A cafe (not a game store) where you can play board games for a fee. $5 during peak periods and $2 off peak. Wide selection of games to play (none for sale). — at Game Häus Cafe.
San Luis Obispo, CA: Large comics, games and video store with a ton of new and used product, attached to an equally large music store. Lots of character. I would love shopping here. They also had the latest Rat Queens. They have a nearby hall for gaming that seats 75. — at Captain Nemo Comics & Games.


Tuesday, August 18, 2015

West Coast Game Store Tour 2015, Part Four (Utah)

Before I opened my store, I commissioned a feasibility study. This was done by someone in the industry with expertise and fancy software. They plugged in my three choices of locations in the expensive suburb of Pleasanton, California. The feasibility study checked for competition (mostly my legwork), demographics and the magical ten minute drive time. That ten minute drive time was crucial, according to common wisdom. Most customers wouldn't drive beyond ten minutes for the average store (hint: don't be average).

As a last minute addition, the study included a space I drove by in Walnut Creek on the way to work every morning. After I got the study results, I learned Pleasanton was a terrible place for a store and Walnut Creek was forecasted to do much better, probably twice the potential sales. Note that I don't live in either of these places and I've commuted 30 minutes to work and back every day for ten years to have a store in the correct location.

Why was Pleasanton so bad? It's the Gertrude Stein quote (about Oakland actually) that there is no there there. It not only lacks a center, but crucial for retail, it lacks a critical mass of customers. The houses, albeit all very expensive, are spread along the freeway corridor. If I lived in Pleasanton, perhaps I would throw caution to the wind, but it's a 45 minute commute for me. It was originally chosen because there were no game stores there, and now we know why (one just opened recently). So I opened a store in Walnut Creek.

I mention this because we just left Utah. Utah has a similar "there" issue as Pleasanton. So rather than large stores, as we get in population dense regions, we get many, many small stores, and a number of locally owned chains. Visiting the good stores of Utah was a game of Wack-a-Mole. Oh, thank you for coming, but you should really check out that store!" Eventually we had to call it and move on. You could spend a week there, just visiting stores. We were there overnight.

Your new store in Utah is probably your first store.  The stores are almost all nice, but they serve that ten minute drive time, often with other stores close by, competing for Utah gaming dollars, of which, there are many. Most stores don't do everything, they specialize in what their local customers want and ignore the rest. Most also diversify into comics, which is something rare in high density regions, which confounds low density store owners. Why would you not carry comics? Because we don't have to and somebody else is locally doing just comics very well.

There are over a dozen stores within 10 miles of Salt Lake City and a couple dozen more on the outskirts.  To attempt a comparison, here are some numbers: Salt Lake only has a population of about 200,000. Oakland has a population three times higher with roughly the same number of stores in roughly the same footprint. This wide spread obviously effects the character of SLC stores. You have three times the demand from one third the customers spread out in the same footprint as a major city. That's some sketchy bistro math to be sure, but you get the idea.

The upside to all this as a store owner is there is likely something to learn in Utah if you plan to open multiple stores or you wish to serve a small community with what's likely to be your first store. If you're not in a population dense region, Utah may have something to teach you. Fly into Salt Lake City, rent a car, and spend three to four days driving around a lot and talking to store owners (call ahead).

Once again, go visit my Facebook page for the publicly accessible photos of all these stores. Lots to see! Also, thanks to the game store folks of Utah for being so gracious and open to talking with me about everything under the sun.

Ogden, UT: Comics and collectibles store with a small amount of games. They've got a Magic community. Lots of comic books, retro games and 80's toys.
 — at Hee Bee Gee Beez.
West Valley City, UT: It's a comic and collectible mall store with a Magic and Yugioh community. They're two and a half years old and they opened a second store a few weeks ago. Unusual in that they do Internet price matching
 — at The Nerd Store.

West Valley City, UT: Delightful store featuring board games and CCGs (Magic, Yugioh and Force of Will). They've got a respectable RPG section as well. The space is separated so CCG players and board game players can play in peace. Lot of retailer interest in their hand made fixtures.
 — at Epic Puzzles and Games.
Sandy, UT: Nice store, one of five. Includes a cafe! They're strong with CCGs (Magic, Yugioh, Force of Will), with a nice board game selection and the requisite RPG offerings. They also sell comics, mostly DC/Marvel.
 — at Game Haven Sandy.
Lehi, UT: One of 3 (soon 4) locations. They serve a college community with comics and a wide swath of games, including very popular Pathfinder. The only store in Utah, so far, with my favorite comic, Rat Queens.
— at Dragon's Keep.

Sunday, August 16, 2015

West Coast Game Store Tour 2015, Part Three

The Sentry Box
This post is entirely about The Sentry Box, in Calgary. Calgary is the third largest city in Canada with about one and a quarter million people. To be honest, this trip was founded on an excuse to go there. If we took a trip to The Sentry Box, how would we structure it? It's around ten hours from our last game store location, Vancouver, but we spent some down time in Banff to to rest and recuperate.

The Sentry Box is, by all accounts, the largest, pure game store in the world, with over 13,000 square feet of games on two floors. They have empty spaces and storage areas beyond that square footage as well as renting out a part of the building to an Internet service provider.

By pure game store I mean they only sell games and they're not a hybrid of comics, hobby supplies (from the hobby trade) or other stuff. That said, they have a fantasy novel section to die for, easily as big as most stores. The Sentry Box is simply the best stocked game store I've ever visited. It's a conversation ender. It has The Games. It comes pretty darn close to everything.

The Sentry Box business model, according to my guide for the day, Zach, is that of the antiquarian book store. That means they are more than happy to collect older games and have no problem sitting on them, pretty much indefinitely. This makes The Sentry Box a world class destination and as I mentioned to one Facebook friend, there could be a Gameageddon, in which all game stores were destroyed, and it would be alright as long as we had The Sentry Box. I use the word "we" as if it's collectively ours. It's that amazing and worthy of protecting.

So what do they have? They have it all, for the most part. Most everything I know of in the game trade is there now, along with quite a few wonders from the last 30 years. I took over 120 photos while at The Sentry Box, so check out my Facebook page to see them. The photos are the real show, go see the photos.

Besides everything a regular store would have, including a ton of older back stock, they have miniatures from over the decades. They have that previously mentioned section of fantasy novels. They have a room upstairs with all those historical miniatures you can only buy online, like Old Glory, which they are a major online seller of in Canada. Think of a product category, and The Sentry Box will have the entire range, and if possible, like with direct only Games Workshop product, a bit more on top of that. Other than my own store, they're the only place I've seen a deep stock of Pathfinder product beyond hardcover books. They may have the rare customer disappointed in an offering, but they're going to be at the super fringe end of gaming.

How do they do it? First thing to say is don't try this at home. Like most shock and awe stores, it tends to emerge over time, usually accidentally, but in this case, it was an intentional decision to grow that inventory and not to cull the herd. Part of how these stores survive is through attrition of ones competitors, growing bigger over the years as the others fall before your feet while you listen to the lamentations of their women, or something. This is true of The Sentry Box as well as Imperial Hobbies, but also other mega stores in the US.

As mentioned before, Internet sales are not as big a threat to Canadian game stores. As explained to me, it's more about the exchange rate from American dollars, duties on imports when you get something shipped, with shipping costs playing a smaller role. The Sentry Box has a price plus model, with many items marked with a base price with an exchange rate multiplier attached, that magic number taped to the front door and changing all the time. They don't even try to adjust the ebb and flow of international currency in their POS system.
Three Bucket Model

Finally, they own the building. Game stores work on the Three Bucket model I've written about, modified from the restaurant industry. After cost of goods, expenses go towards three buckets: rent, employees and everything else, with all three buckets being relatively equal in cost. Owning your building requires that bucket to be far smaller, meaning you can increase your cost of goods, lower your turn rates to have older inventory, or even have more employees (Sentry Box has 30).

So they've got an antiquarian bookstore model that has survived decades in the market, insulated somewhat from the Internet, and given breathing room by owning their own building. There are other ways to bend the expense curve, but they usually require tweaking your cost of goods (services, buying used, high margin items, etc).

What's Next? Go over to my Facebook page to see the public posts, photos and conversation about The Sentry Box.  We headed down through Montana yesterday, spending the night in a teepee during a thunderstorm (an experience, but an exhausting one). We're in Idaho right now, hoping to hit several game stores in Utah today and tomorrow. Then it's off to Las Vegas to sleep in a pyramid, a swing through Los Angeles, and a stay in a Danish village. Then it's back home. We're both tired, exhausted and missing home and there's not a lot of great innovators along the way, but there will be at least one more post of what we discover. I always learn something new from every store I visit, even if it's boosting the signal of something I already know.

Edit: For a great interview with Gordon Johansen, owner of the Sentry Box, check out this Manaverse podcast.

Before the exhaustion and the mud and the truck littered with X-Wing packaging




Thursday, August 13, 2015

The Tension

Tomorrow I'll be visiting Sentry Box in Calgary, the biggest game store in the world, but today I wanted to re-visit something I found on my store tour, which I'm referring to as The Tension. The Tension is the desire to run a profitable, professional business versus the desire to please customers.

Nobody opens a Subway franchise because they love sandwiches. Their passion for the Monterrey Chicken Melt didn't lead them down the path to small business ownership. Game store owners are, for the most part, not this way. They go freakin' nuts over their metaphorical Monterrey Chicken Melt and would like nothing more than to sell a store full of chicken melts to just chicken melt lovers, if such a thing was possible. Passion comes first in game retail and the ability to survive slinging chicken is something that's often picked up later, if at all.

First, let me say, there is no wrong answer, if you're keeping the doors open. There are no metrics that apply to you if you're doing what you love and satisfying customers. Ignore guys like me. Sell just Magic or every miniature game in existence, even at one turn a year, if that's what you want to do. Just know that as a business, this way is probably not the most profitable and is fragile and inflexible when times are hard.  This is an example of the tension, giving into your or customer wants at the expense of the profitability of the business.

When I walk into a store, I know. When I walk into Mox Boarding House, as a retailer, I can sense the store is managing inventory well, is diversified and isn't sitting on dead product and lines to satisfy customers. I question a few things, certainly, but there are always regional variations in demand or the conceit of an owner or manager who likes a game or is trying to build it up.

Likewise, when I walk into an Imperial Hobbies, with its "shock and awe" decades of product, from three industries, stacked eight feet high, I know I'm seeing something special that would not work in the US market. However, when I see shock and awe in the US market, I know the owner is likely taking one for the team. There is no money made there.

From a purely analytical perspective, we have only so much money for product, our economic engine, and so many turns you can squeeze out of it, how often that inventory sells each year. When you work your inventory, you decide how fast, how efficient, how much money you want to make with your investment. Every store makes this decision, works this tension between satisfying customers and making money.

My own store runs far too lean, with turns well beyond what's healthy (3-4) to satisfy customers. Our turn rate of 9+ means sales being lost, products not given a fair chance, and it requires a full embrace of the Cult of the New. Old stuff is moved out when it loses momentum, and new stuff is brought in sparingly with great care, whereas a more balanced rate would order in depth. I still sell chess sets and jigsaw puzzles with abysmal turns, and I'm still suckered into the Miniature of the Month club, but weeding out dead wood is essential for our current model. We're trying to make money to expand and pay our construction loan, so there's not a lot of wiggle room for artistic flourishes. You come to us because we have new things, not because you're looking for that older, out of print game.

In contrast, I know of regional stores in the 1+ turn rate category that never really get rid of anything. The Imperial Hobbies of the world are amazing, and customers love them, but if you're not in a market that supports that (Canada), it means a choice of less profit (or none) in exchange for customer satisfaction. As Monterrey Chicken Melt lovers, game store owners love visiting these stores, but we don't want to own one. In fact, we often wonder how it's possible. It's more a thing that happens to you than is actually planned.



Monday, August 10, 2015

West Coast Game Store Tour 2015, Part Deux

Two key elements play a big role in the character of game stores in this section of our tour. The first is the liberal nature of Washington state liquor laws and the second is the role of the Internet in Canada.

Washington state will gladly issue a liquor license for a snack bar in conjunction with a retail establishment. This means you can serve beer in your game store without having to ban minors from the area (as we saw in Portland). The question of why doesn't my local game store serve beer is answered with the response: because it's not in Washington.

This means we have some interesting combinations of beer serving snack bars right inside a bunch of family friendly game stores, but this also means you shouldn't expect to replicate this model in your home town. Coffee is a thing though, and there's no reason why you can't have a cafe with just coffee, which is more of what we see popping up in California and other areas. The problem is coffee is so ubiquitous, it's not nearly as big a draw as a beer with your game. Still coffee shop, malt shop, ice cream shop, all viable elsewhere with different, somewhat easier to get permits.

The Internet in Canada is not a big deal. The small discounts are often eaten up by the high shipping plus the exchange rate is a killer. Internet game shoppers in Canada are outliers. What does this mean? It means game stores in Canada are an interesting microcosm of what stores in the US might have looked like if the Internet didn't play such a huge role in sales. As one Canadian friend says, Canadian game stores are stuck in around 1995.

You're not going to get those lower Internet prices, which is the supposed consumer good of the Internet, but you will get a game store with a lot more depth and breadth. Stores tend to have far more scope and fewer tables for organized play. The Internet has caused US stores to embrace third place theory and become tournament centers because the Internet has undermined the traditional retail model. Canada apparently still has kitchen tables, as I like to joke. Go home and play with your friends; there's retail happening here.

That's not to say there's no organized play, only that the insanely expensive dynamic of spending thousands of dollars a month for mostly empty space is not as prevalent. Game customers buy games in stores. This is a big reason why I'm visiting stores, trying to find options when straight retail is undermined.

Coming up at the end of the week is The Sentry Box, the largest pure game store in the world. Following that we'll be visiting smaller stores on our way back through Montana, Utah, Nevada and California.

Here's where we've visited since our last update, again you can see the vast number of photos (especially for Imperial Hobbies) on my Facebook page (marked public).


Seattle, WA: Solid venue for the Capitol Hill neighborhood. Serves beer and wine along with snacks. Store features video games and a few pinball machines, including a Gauntlet machine and the D&D pin. There's a relatively small selection of board games Magic and RPGs, but they're happy to special order.
— at Raygun Lounge.
Vancouver, BC: It's a mall store! Two thousand board games and a nice selection of RPGs, miniatures (Privateer Press) and gundam models. Half a dozen LAN stations. Two tables for play.
 — at One Stop Shop Cards & Games.

Vancouver, BC: Wow! 30+ year old store is packed with hobby supplies, games and comics. They're only 3,400 sqft but they're moving to a 5,500 sqft location soon. Not much game space but there's not much they don't have. Amazing.
 — at Imperial Hobbies LTD.

Friday, August 7, 2015

West Coast Game Store Tour 2015

I'm on an epic journey along the West Coast attempting to discover the best game stores in the region. Alright, I'm on vacation. My son and I started in the Bay Area, the baseline for what I consider excellent game stores. Bay Area stores are big, well managed, with lots of game space and great events. They have not been innovative in quite some time, however, and that's why we're out exploring.

Innovation on this trip has come in several forms. First, what every gamer wants to hear about, the cafe/bar model. A number of stores serve coffee and beer, or just beer. How they deploy this "third place" is as diverse as the stores themselves. Some are adult only areas in the back of the store (Guardian Games) while others are cheery family friendly niches, like Meeples Games. Some are hip and trendy while maintaining a vibe that can still attract families, like Mox Cafe. We've even got sophistication, in the form of the restaurant at Mox Boarding House. All employ third place theory in an attempt to provide customers a not work, not home place to hang out, socialize and imbibe.

Second, almost all of what I consider the best stores we visited do game demos. Why is the game demo important? It's what allows brick and mortar retailers to take a modicum of control over the sales process and actually drive interest in games in their area. As one retailer told me, if he can sell a couple dozen of a game through his demos, he's created an evergreen product in his region. Without game demos, you're just surfing the wave of outside interest or the slosh over from your events. Become the source and customers return to you. Running game demos requires adequate staff, something it became painfully clear my store is lacking. More staff, more demos, more sales, more control.

The Tension in all of these stores is making money versus customer satisfaction. It's clear as a store owner, that there are a lot of things that look great to customers that are retail illusions. Nobody is making money selling these things or doing these things, but they exist to draw you in, attract your attention, create a vibe so that you'll spend money on the 20% of stuff that you spend money on. That's pretty much how the game trade works, 80% useless crap or services you think are important and the 20% of stuff you actually buy and use. Which are the 80% and which are the 20%? That's the stuff retailers discuss privately.

It became (painfully) clear to me through exploration that our mid life (10+ year old) store was still operating on some survival, new store principles and was ready to deploy some of the concepts the veteran (15+ year old) stores were using. More staff, depth of stock, demos, and similar concepts were staring me in the face as obvious enhancements to our store. We probably won't offer concessions anytime soon, but talk to me in another five years.

You can see hundreds of photos of these stores along with much discussion on my personal Facebook page (all but one is designated Public). We have a couple more West Coast stores before we head into Canada today towards the holy grail of game stores in the The West, The Sentry Box in Calgary. It's supposed to be the largest game store in the world, but I'm hearing grumbling about Madness in Texas holding that title, so we'll just say "The West" for now.

We'll then head through Montana, Idaho, Utah, Nevada and Central California (perhaps a store in LA as well).  We'll be looking for ideas, but the store owners in these places will tell you themselves they don't compare to the West Coast stores. They just don't have the demographic to support amazing stores.

Here's a photo of the front of each store with a quick blurb:

Eureka, CA: Nice store with a broad spectrum of hobby games and comics. Their RPG selection is a combination of the new hotness and old school games like RIFTS and Harn (not much indie stuff). Small and open about 35 hours a week to meet the local demand. — at North Coast Roleplaying.

Portland, OR: Wow. A huge store with a ton of miniature games and board games. The RPG shelves must reach fifteen feet. The CCGs get their own grotto. Several private rooms are just big enough for an RPG session. They've got a bar in the back, open in the evening and closed to minors. The manager, Scout, was welcoming and she talked about how they built out this new location a couple years ago. They've been around over 10 years. — at Guardian Games.

Aloha, OR: My kind of store. Family friendly suburban store at 3,500 square foot owned by Steve Ellis. Warm, inviting with attentive staff and a broad (and deep) selection of what you want. — at Rainy Day Games

Seattle: WA: Family centric store with board games, puzzles, and a very small amount of Magic and RPGs. No miniatures. They've got a game library and their events include a kids FNM and a casual adult Magic Thursday. Great signs!
 — at Blue Highway Games. 

Seattle, WA: Attached to Card Kingdom, the cafe serves beer and coffee drinks but emphasizes the cafe aspect. So we have kids playing, groups of young women, families and the usual gamer dudes. It's as busy as a regular cafe with a game library available next door.
 — at Cafe Mox.

Seattle, WA: I had mixed feelings about Card Kingdom and it turns out it's because the store has been without a manager for a while, a problem they're about to solve. Their sister store, Mox Boarding House is a sorted out version of Card Kingdom. Card Kingdom has beautiful fixtures, professional signage, a large staff, and a vast inventory, but it feels like it's on auto pilot.   — at Card Kingdom.

Seattle, WA: This is a happy place. It's a hybrid game store-cafe featuring coffee, beer and sandwiches and like Cafe Mox, emphasizes the coffee. The owner Laura built it a couple years ago. There's good signage, a wide selection and a lot of happy customers, especially families. It's on a harder to get to second floor location, but we found it easily enough.
 — at Meeples Games.
Bellevue, WA: In the burbs, this place has a more put together, adult vibe. The manager greets customers and works to keep the huge place organized, straightening shelves as we shopped. The restaurant looks classy. The entire place is more open and relaxed. The stock is as deep as Card Kingdom (really deep) but it feels more cohesive.
 — at Mox Boarding House.


Friday, July 31, 2015

Setting Up Agreements (Tradecraft)

I've just spent the last couple of weeks working on our company shareholder agreement. Game stores don't have a lot of money, so most are likely one man, sole proprietorships. It's easy, simple to form and operate, and doesn't require complicated structures and fees. The down side is it's not set up for investors and offers no legal protection. It's the default.

Most stores that take the next step usually go LLC, since it offers legal protections (in theory), allows for distribution of profits to investors, is simple to understand "pass through" taxation, and requires minimal paperwork and meetings.

I say it offers you legal protection, but in reality, if you work in the business, you essentially give up protection. The investors are protected though, and nobody should give you a dime without an LLC or a corporation in place. Also, no bank or business will loan you money without your personal guarantee. All my leases have the corporation and me on it. Here's something else we've been working on recently:



Corporations are not much different (the federal government looks at LLCs as corps), but may have other benefits. Our state based LLC charges fees on gross, while corps tax on net. Game stores have a lot of gross and not much net, so converting to a corporation saved us thousands of dollars in state LLC fees. There is zero difference in how we operate day-to-day between the two structures.

These types of organizational structures are incredibly complex. You can form them on your own with various kits, but what you end up with is a hollow structure without agreements or protections within your business. Both types of structures usually require a minimum of one meeting a year, and beyond that, it could look like the Wild West in between. I'm always trying to get some sort of written documentation of our conversation in case we're audited.

Corporate structures also don't help you answer the big questions, like how to get people in and out of the corporation in a way everyone agrees upon. For example, you can form a corporation and legally decide upon the value of an initial share, but what happens when a shareholder wants to leave? Valuing shares isn't in any corporate documents, it's part of a possible side agreement (that shareholder agreement). If you've been in a company for a while and watched it grow, you certainly don't want new people coming in at your initial share value. You also don't expect to leave at that initial value, knowing the company has become more valuable over time.

What if a shareholder dies? Are you obligated to do business with their spouse or children? How much can I spend as the CEO without triggering a meeting? Am I violating that if I make a huge Magic purchase on release? What are the limits? What keeps my partner (or me) from opening a competing store in the same town and taking all my customers and know how and abandoning my business? What does shutting down the business look like? Who gets money when?

These are all in the shareholder agreement and the funny thing is, they are all logical, reasonable, with legal precedent for what's normal. It's a boring document to read. Really boring. At least that's true when you read these documents ahead of time. When you're the one trying to sell your shares or the spouse of a deceased shareholder, you might have very different ideas of what's normal and what you deserve. That's why you do these things early (we're in year eleven).

The main trigger for my shareholder agreement was the desire for the business to continue after I'm dead and to keep my family from having to deal with it. In most scenarios, there's a fire sale and your heirs come in and drive the business into the ground with a massive sell off.

In my scenario, there's a "key man" insurance policy on me. When I die the business gets the money, but that's only half the story. What I personally don't want is for my family to be burdened by this complicated business. I want to leave it to my management staff. That requires an agreement that investors get bought out (including my heirs) and the management team gets the business, along with some operating capital so they have time to figure it out, deal with suppliers who have no idea who they are, and keep the store moving with essentially no credit or understandings. The first half of that is part of the shareholder agreement. The second half, my intent to give it to management staff, is an estate plan (my next project).

In any case, you can see we're planning for a Black Diamond Games for many years to come. Once a business is successful, it just seems like the right thing to do, for your family, your employees, and your community.