Monday, November 23, 2015

Amazon Price Matching and the Angry Beaver (Tradecraft)

We don't price match with Amazon. We don't do this because we like the finer things in life, like food and shelter. Also, our investors would like us to one day make a consistent profit, unlike Amazon. I'm the primary investor and I can vouch for that. I understand some customers would like us to price match Amazon. It's the season when they come in and get angry that we don't. This getting angry I find interesting. What is that about?

I'm going to apply a little Buddhist psychology here. If you don't want a dose of Buddhist psychology,  you should move on. Buddhism is all about human suffering: coming up with causes and conditions, defining your particular type, and prescribing some spiritual medicine. It's all in your head, but there's so much of it. I just want to know what this Amazon anger is all about. What is the psychology of getting angry in this bizarre way?

It's a stew of ego of course (what isn't?). Primarily it's the category of being separated from what you desire. You really want this box of cardboard, or more accurately, you yearn for the experience that the board game promises. As I explain to staff, don't sell a colorful box, sell the experience the box promises. Sell the sizzle, not the steak. A board game promises connection with friends and family, intellectual stimulation, and the ego boost of victory, shared or by yourself. As you get older, most of us don't get too many victories in life. How wonderful you can buy that in a box.

I will not price match, so they can't have it, which causes suffering, even though they could theoretically buy it right now. This is the easier part to understand. Their desire for the game is in conflict with their desire to keep more money in their pocket. But we deal with thwarted desire all the time and we simply move on. If gas is too high, we go to another gas station, we don't yell at the gas station owner. Rational people don't do that. That brings us to the second part of our stew.

The second type of suffering is being forced to be with what you don't like. This is where it gets interesting. The price on the box is full emm ess arr pee! Outrageous! Have these Luddites not heard of the Internet? Are they unaware of Amazon's lasting testament of the slow-burn model of sustaining a business? We are clearly infuriating because, and this is a big thing, they want to support us from a gut level, but their head won't let them. We are convenient, we're polite, we're reasonably knowledgeable. In fact, the nicer we are, the angrier they get.

Nobody is forcing them to be in the store. Nobody is forcing them to buy from us. We don't sell diapers and cigarettes, we sell a luxury product. Why don't they go to another store? It's because they greatly desire the store to work within their parameters and it is refusing to do so. Their ego vision of the store is not matching the reality of the store. It's promises, well beyond colorful boxes, appear unattainable in its current configuration. This is a frustrating thing. If only the world were not like it is, things would be great. The store angers them, yet the desire for the game forces them to be there. Being there makes them angry. The circle goes around and around.

There are other types of suffering that play into this equation, the usual stuff like the crushing baseline dissatisfaction of being alive, old age, sickness, and impending doom. Insert Monty Python quote about people not wearing enough hats. So with all this suffering, how do we provide a solution? How do we come to a cathartic conclusion that brings happiness to our deeply conflicted customer, wracked with an endless loop of suffering?

We demonstrate what we provide has value connected with their life. We bridge the gap of their desired price and their perceived value. Although it may appear we sell the same thing as Amazon, we sell something different; more. We show them buying from us supports the local community where they live, not just the community of like minded gamers, but by supporting us, they help provide for the roads, schools, police and services that sustain them every day.

We demonstrate that the convenience they find maddeningly attractive is not without its costs and it's worth paying a little extra for that. The tables and chairs that allow for the community to grow and provide enjoyment has a cost. The extra rent on that open space has value, even if we don't expect them to pay for it like every other entertainment venue in their lives. We explain that right now, they can take that game home or in the back and satisfy their game related desires.

We make them realize that we are real people, living among them in their community, not NPCs or cogs in their machine, or as Amazon employs, hapless location tagged warehouse runners, timed and measured in their ability to find your discounted item in a sweltering warehouse while being short changed on their pay. We are real people.

In reality, we'll never end suffering by selling boxes of things, but we can turn an angry situation into a pleasant one, and hopefully win over a new customer.

Tuesday, November 17, 2015

Some RPG Numbers (Tradecraft)

We've been selling role playing games for 11 years now. About 75% of what we sell is D&D and Pathfinder with the other 25% being the top dozen game systems and a smattering of indie games. Just a smattering. I think we're fairly normative when it comes to RPG stock. We're not an RPG powerhouse, but we do sell an above average amount for an "alpha" store. Take that with a grain of salt.

We have had 4,005 titles in stock over the years. We currently have 498 titles. If you've been working feverishly on that RPG for years until it's perfect, know we've already dumped 88% of everything that has come our way. It comes in. We sell it. The market is saturated. We dump it and move on. Just put out your book already. We spent thousands of dollars professionally developing an RPG adventure for our Kickstarter capaign. You can buy it on the Paizo website right now. We've sold 15 copies since March. It's pretty much tapped out now. Moving on.

A successful product in the game trade reaches and maintains a turn rate of three or more per year. That means, in a year, we sell three or more copies. More accurately, we divide the sales by the number of copies on the shelf. Usually that's one copy, but in the case of a very popular book, it can be 3-8 copies. We'll get to that at the end.

The 3,507 RPG titles we no longer carry couldn't maintain that "3" sell through rate. That's just a fact of retail life. If you've ever wondered why a Wal-Mart or a Target doesn't carry RPGs or at least more than a reasonable selection, it's because they need eight or more turns on each product. Less than 10% of our titles achieve that.

Looking at our existing 498 titles, here's how they're fairing with their turn rates:

352 titles, or 71% of our RPGs, sell less than 3 turns a year. The vast majority of RPG products under perform. You might wonder why we bother carrying them with such poor performance metrics. The reason is the top 29% round out the numbers, bringing the overall total to an acceptable level, usually around 3 turns total. You can't just carry the top 29% and expect to accomplish this, and you can't even sell those without a lot of specialized knowledge, organized play and hand selling.

That's why game stores exist, to provide those services to make the unworkable majority of RPGs workable. If this sounds like a lot of work, it is, and it's why many new stores don't even bother carrying RPGs. We love them, so we do the work.

So the take away numbers:
  • 88% of RPGs get cycled pretty quickly.
  • 71% of RPGs underperform
  • 29% of RPGs sell so well that they prevent the system from crashing
  • The only way to make it work is specialized promotion
  • Many game stores are abandoning this model because there are more profitable ways to make a living.
Also, because I know you guys like lists, here are our top 10 titles with the extremely high 17-40 turn rates:
  1. D&D Next: Dungeon Master's Screen
  2. D&D Next RPG: Dungeon Masters Guide
  3. Pathfinder RPG: Strategy Guide
  4. Unframed: The Art of Improvisation for Game Masters
  5. Star Wars: Edge of the Empire Dice
  6. Fate RPG: The Secrets of Cats
  7. Pathfinder RPG: Ranged Tactics Toolbox
  8. Dungeons and Dragons RPG: Druid Spell Deck (110 cards)
  9. Dungeons and Dragons RPG: Arcane Spell Deck (230 cards)
  10. Dungeons and Dragons RPG: Cleric Spell Deck (106 cards)
  11. 5th Ed. Fantasy #2 The Fey Sisters Fate
Alright, so 11 titles because I wanted to show off Goodman Game's D&D 5e adventure, Fey Sister's Fate. You'll notice no D&D 5 Player's Handbook. That's because we're talking turns and having to stock deeply on this title (8 in stock at all times) means it has a turn rate of  only 10.

Wizards of the Coast has created a bit of anxiety with the D&D 5 release and early shortages mean we stock deeper which hurts our performance. The 5E Player's Handbook is actually the best selling RPG title in the store (119 copies sold in the last year). The Pathfinder Core Rulebook used to be number one and it's now number fifteen. It once sold as many as 90 copies a year, but sold a sad 18 copies over the previous 12 months.

Enjoy the crunch.

Thursday, November 12, 2015

Shoplifters and Thieves

I'm not a violent person.

If shoplifters knew how close I was to bashing them with a bat, rolling them in a carpet and burying them in the desert, they might think twice. I would never do that. I'm almost certain of this. Like 99% certain. Maybe 98%. Well, the situation could escalate out of my control, lets just say that. If you ever do it and I'm on your jury, I don't think I could convict.

How can I possibly joke about killing another human being, who by definition, committed a petty crime? It's the little things in life. If you talk to a loss prevention specialist, they'll tell you that 10% of your customers and employees will always try to steal from you, even with cameras, security gates and guys with guns. They like the challenge. They'll do it until caught, and then apologize, and if you let them, do it some more. 10% would never steal from you. Don't pretend you know who they are. 80% of your customers and employees will steal if given the opportunity. This is where you put all your effort, attempting to dissuade the vast majority of people not to rip you off.

So imagine you work in a field in which 90% of your co-workers and customers will steal from you, if given the chance. They'll take food from the mouths of your children and shrug when you chain up your front door. Business is hard and full of unexpected challenges, they'll say. Imagine watching it happen again and again, proving the ratios more or less true.

Imagine not knowing if a friend at work is in the 10% never or the 90% maybe, or perhaps they're stealing from you right now. Imagine finding out the dark truth, again and again. Betrayal as a matter of course. More than one retailer has talked to me about losing their soul over this. Losing your soul, crushing your spirit, leads to burying bodies in the desert. It at least leads to contemplating it. Also, nobody will understand this, except other retailers. Not your wife, your kids other non-retailer business owners. There's just that fraternity of bat wielding retailers who understand.

There is no justice here, by the way. The police are not interested in your petty crimes. We had a shoplifter on site and the cop showed up (an hour later) and asked me what I wanted to do about it. By the way, he said, nobody is going to jail. In other words, he would mediate a solution that did not involve him using his law enforcement capacity. When society decides victimization is the cost of doing business, well, you buy a shovel.

Don't take this personally, people will tell you. It's the cost of doing business. I don't agree. Those are just some words people say to keep you out of the hardware store. With more of retail going towards big, corporate owned stores, many people believe it's just the cost of doing business. Thieves like to think that. It's why people don't take shoplifting seriously. They'll joke with me about the stuff they stole as kids, as if I would find that amusing. It's sticking it to the man. Yeah, Wal Mart and Target have 3% profit margins, but those CEOs! They make millions! Stick it to the man. It's the cost of doing business. Then they'll post their outrage to Facebook when the line employees of those stores get laid off.

I'm really not a violent person, but the threat of violence is a necessity to running an independent store. Professional thieves have visited and asked about our affiliation, whether we're part of a larger chain of stores. Why? Larger chains of stores have clear policies regarding bashing shoplifters with bats, rolling them in carpets and dumping them in the desert. I've had them ask that question while they were actively shoplifting. Is my stealing from you the cost of doing business or will I end up in a shallow grave? It's important they know the bat is on the table. Or the counter, if you will.

But this is all just talk. I'm not a violent person.

Saturday, October 31, 2015

Courtesy as Flirtation (for Parents)

Hello Parents,

No, this will not be an indecipherable message using educational jargon from your child's teacher. However, I do want to talk about an educational deficit that unfortunately falls upon you, parent, to fill. That deficit is teaching boys to respect female customer service workers.

Please make this an addendum to your birds and bees talk, or if you've already had that, perhaps a new discussion. You see, I've given up on the current crop of young men entirely in this regard, so I'm hoping we can catch this early in the next generation, a social inoculation. My own boy will be getting this talk soon.

Female customer service workers, like the ones I employ, are a captive audience. Their job is to be friendly and helpful, which, in this day and age of indifference and hostility, can be mistaken for flirtation. Boys see these women as "practice" for asking women out.  I've seen their fathers encourage this. Ha ha, you go junior! Bad form, dads.

It may seem cute to you, and it certainly brings light into my life when this happens to me as a man, the one or two times a year when it occurs, but too much light will burn a person out. That's what I'm left with. Demoralized, burnt out female sales associates who are constantly hit on by "men" as young as 12, often multiple times a day (not year). It's not flattering, it's just harassing. It also keeps them from being happy and productive, which is what I need from all my employees.

Please teach your boys to let these women be. They are not there for the amusement of men or for eye candy. They are there to do a job, an authentic job, next to men who do the same job. Captive female employees should simply be off limits. Hitting on them or questioning their authenticity (Do you even play games?) is oafish and offensive.

I shouldn't have to justify why women work in a game store, but I will mention they bring a wide variety of skills and perspectives that my male employees (and myself) lack. Unfortunately, with a 75% male clientele, they have to put up with constant grief to contribute.

Thank you, and next Thursday will be a minimum day and remember, no peanut butter.

Tuesday, October 27, 2015

Stop Cheering REI Already

REI is sending their employees out to the wilderness on Black Friday as they #optoutside. That's a nice thing, especially since Black Friday has become such a wretched spectacle of consumer avarice. Let's remember a couple things though. Black Friday, for a lot of retailers, is allegedly called that because it's when retailers go into the black, since they've been in the red all year until that fateful day.

REI, on the other hand, is a 2 billion dollar company. The CEO makes 2 million dollars a year. It's a co-op with a net profit margin somewhere between nothin' and two percent (much like Amazon. Why do people invest in that again?). I'm good with that, since as a member (both REI and Prime), they pay me to shop there. Man I spend too much at REI. Another sale on Honey Stinger Energy Waffles and I'll be bankrupt.

Anyway, for those retailers who don't work at REI, we'll be planning and hoping and decorating like a mofo to get some customers in the door on Black Friday. My store did a fantastic $5,000 in sales last Black Friday and believe me, that money didn't go towards my 2 million dollar salary. It went to keeping the lights on. Really, the net on $5K will just about cover the electricity bill for one month. So just keep this stuff in mind when you expect everyone to follow the REI example. Also, pick me up a Honey Stinger Energy Waffle next time you go.

Saturday, October 24, 2015

D&D and the Three Pee Pee

This is a chart of our RPG sales over the last year. Dungeons & Dragons 5 and Pathfinder are neck and neck. Add in the 3PP (Third Party Publishers) and ... it's still neck and neck. Those 3PP are the interesting bit. They had no significant role in our store before D&D 5. We stocked some Pathfinder compatible items, but honestly, Paizo is so prolific, Pathfinder 3PP materials were pretty much ignored unless it was a special niche (psionics, for example). I have so much unread Pathfinder guilt, it's crushing.

What's interesting with D&D 5 is the return of Third Party Publishers. Frog God Games has made it into our top ten with their D&D 5 and Pathfinder compatible products. Really, it's about their D&D 5, especially Fifth Edition Foes, an excellent monster book that's D&D 5 compatible. Their similar Pathfinder books sell far fewer copies than nearly identical D&D 5 books. But what about the D20 glut, you ask? Isn't third party publishing for D&D dead?

As long as Wizards of the Coast keeps people hungry for new content with their trickle release schedule with D&D 5, The Stable IP Edition, there will be demand for 5E content. Coming in at #9 is Gale Force Nine with their D&D 5 spell cards (which would be higher with a steady supply), and Goodman Games at #19 with their D&D 5 adventures.

Adventures never sell well, so no surprise there.  Figure one in five players (the DM) could potentially buy a published adventure and only half of them actually do (10% of the market).

Licensing (or lack thereof) is a whole other discussion. GF9 sells licensed D&D products, while the others do not.

Note "Other" in the third position. D&D, Pathfinder, and compatible lines may be 70% of sales, but we carry about 25 additional brands in the Other category, for about 45 total "lines." A line can be a single book, so this can include a lot of things.

Wednesday, October 21, 2015

Business Plan (Tradecraft)

If you are planning a new store, write your business plan. I don't really want to talk with you, until you have a plan (and a giant bucket of money). I can give you all sorts of advice, but in the end, you need to write the plan. Just write the damn plan. Why?

The business plan will demonstrate that what you're about to engage in is a very bad idea. It's going to show you the margin for error on this behemoth, that you only vaguely understand, is far thinner than you realized. Most importantly, if you do it right, it will show you the capital you need to invest is far greater than you possess. Besides not planning (if you fail to plan, you plan to fail), undercapitalization is the biggest reason small businesses fail. So what is a business plan, really?

First, let me say, I'm not an expert. I've written exactly one business plan. However, all the aspects of my business plan have been daily concerns for me for over ten years. Not just 9-5, Monday through Friday concerns, every ... single ... day concerns, all the time. That will be your life too, by the way. Other people have written far better plans than me, but that doesn't matter, and it should't matter for you. Writing a business plan is about getting your head straight.

The core of your plan is your Unique Value Proposition. What are you offering, in your market, that is unique and special enough that people will spend money on it? Your plan should include an analysis of the industry you're hoping to be in, the competition in your area, and a look at the location you're proposing. It should include a marketing plan, because you will be marketing your business on day one. After you write this section, you may come to realize you're not offering anything special, your industry is dumb, your market is saturated and your location is bad. Great! That's the first draft. Or maybe you're done. Your choice.

Your plan should then include all your financials, which will require you to understand every expense of your business. When I wrote my plan, I was off by 50% with my expense. Not enough research. With your expenses nailed down, you can project (guess, hope, dream) your income and then determine how you'll get there. I use turn rate analysis, which then tells me how much capital I need to hit my income numbers and cover my expenses. That's the method I used when we doubled our operation. This capital number is really important, because this is your gut check number. Most people will (and should) quit right here.

Why quit? You've seen the narrowness of the profit margin, you've projected your PFA income (Pulled From Ass), and you're about to invest $50,000-$150,000 or more to make this happen. It's madness. No sane person does this. Your chance of success is completely unknown. It's probably more about your character at this point than anything else. Experience will make a great deal of difference. If you don't have experience, you will buy it with more capital (startup losses).

The financial section will assume you understand things like income statements, which most non businessy people have never seen before. They'll walk you through one when you buy a house. Get help here. Don't skip this section. People are tempted to write "The Poets Business Plan," like the dumbed down science classes I had in high school, with no financials. I had no idea how to do this and I get excellent help from a good friend (and now investor) as well as bouncing it off people from SCORE. Your plan is not top secret, so go ahead and bounce it off as many people as possible. The most likely response is your income or expenses are unrealistic. Or your value proposition is not unique.

Here's the thing about small business: failure is an acceptable option. Success is great, failure is second best. The worst thing that can happen to you is something in between. You don't want to waste years of your life "getting by." The opportunity cost for you is tremendous and it will be a horrible, demoralizing period of your life. Too hopeful to quit, not successful enough to succeed. It may happen to you anyway. We were there for a couple years, mostly because we moved to a space bigger than we could afford and it took that long to grow our income.  Nobody wants to buy something fun from a miserable person. Writing a plan avoids the terrible experience of limbo.

That reminds me, define success for you. How much money do you want to make? Build your salary into the plan. Take a salary from day one. If you are not taking a salary, you're not doing the thing. You want to write a plan that includes you getting paid, even if it means paying you money you just raised from yourself. You also want the option to hand it off later. You may build a successful business over a couple years, but realize you don't really want to do this. If you have a manager's salary built into your plan, you have the option of hiring someone else to do it, without losing your investment (at least not right away).

You should re-visit your plan and re-write it on occasion. I don't, but I crowd source my thoughts on this stuff all the time. If I were going to re-write my business plan or give you advice on a focus (other than the retail elements), I would suggest looking at Third Place Theory. Go through the linked article and address how your business will hit all the marks for a successful third place. Heck, if you're betting your livelihood on it, hunt down and master the source material.