Wednesday, January 28, 2015

Dungeons & Dragons Dilemma (Tradecraft)

Dungeons & Dragons 5th Edition has been released. Yes, we're all calling it "5th" now, even Wizards of the Coast. We're also universally admitting that 4th edition was kind of crummy. You can talk about what a piece of crap your old car was, but only when your fancy new car is sitting in the driveway. The D&D 5 play test, by most accounts, was a disaster. There was trepidation as the new edition of the past king of role-playing games released. So what do I think of it?

As a gamer, I love it. I've spent the last 30 days writing a D&D 5 campaign. It's called Mysteries of Laxa, about a frontier town established on an ancient site of power that has become a regional, medieval tourist trap for religious pilgrims. But something stirs under prosperous Laxa. An ancient power arises, yet the town elders are focused outwards on their trade, unable and unwilling to address the threats that may potentially destroy it. Can the young adventurers rise to the occasion and save the town? 5th Edition D&D lets me tell my story focused on the setting and the characters, without the gear trolling and murder hoboism endemic to past editions. It's streamlined without being dumbed down and the rules get out of the way of the story I want to tell. So yeah, I like it, and yeah, I'm embracing it pretty hard. It's fantastic. But what do I think about D&D 5 as a store owner?

Dungeons & Dragons 5th Edition has outsold Pathfinder 2:1 since its release last Summer. That's six products outselling well over 300 products, two to one. It has put D&D in the number four position for our top games, whereas it hadn't ranked for well over a year.

Position Game
1 Magic
2 Fantasy Flight Games
3 Cards Against Humanity
4 Dungeons & Dragons
5 Warmachine / Hordes
6 Warhammer 40K
7 Pathfinder RPG
8 Ultra Pro
9 Mayfair Games
10 Wiz Kids
11 Pokemon
12 Asmodee
13 Steve Jackson Games
14 Z-Man Games
15 Weiss Schwarz
16 Days of Wonder
17 Rio Grande
18 Chessex Dice
19 Vanguard
20 Citadel

Dungeons & Dragons is back baby! I should be really excited. But am I? Do I like to ask myself questions and then answer them? The answer to both is a resounding yes. But I'm also concerned. Mostly about future D&D sales. There's probably a pill for egregious self question asking. You see, this won't last. D&D 5th Edition is great and all, but it's kind of on the same track 4E was several years ago when I predicted (and was laughed at) for talking about how Pathfinder was about to dominate.

The problem with 5th Edition is the emperor has no clothes. There are very limited plans for D&D 5 releases. I call it Dungeons & Dragons: The Stable IP Edition. Here's the thing. There's very little money in RPGs, especially from a company that makes another game that's probably a quarter of all game trade sales. Where Dungeons & Dragons could make money is in digital properties like electronic games and movies.

When I look at D&D 5, I see very good "core" book releases that are currently driving sales and then sparse, setting related releases planned to occasionally trickle out in the future. It's a boring and not terribly profitable release cycle. Paizo released more Pathfinder products this month than you'll see new from D&D in 2015. The gamer in me says that's just fine. We don't need a product treadmill with intentional power creep and books of marginal value. We also don't need endless card packs, map packs, novels, dramatizations, monthly themed adventures, and goblin themed hats for D&D 5. That's the gamer in me. The retailer in me is deeply concerned.

Role playing games, in stores, are in trouble. Or more accurately, they're on the verge of irrelevancy due to their scattered nature, move to an electronic focus including PDFs and Kickstarter, rampant piracy, and a model that encourages only 20% of customers to buy products. Plus, as Mike Mearls of Wizards of the Coast painfully explained, electronic alternatives are easier to get, to play and they're everywhere.

For those retailers who hoe this pen and paper field, like myself, we make role playing work on the back of the dominant version of Dungeons & Dragons. That game, whether it's D&D or Pathfinder, is often 50-75% of our RPG sales. Everything else is community service. Really, for most stores, non D&D RPGs not only don't pay the rent, they don't justify their space economically. If you see them in a store, know they're loved by someone in charge.

When the D&D 5 core books have cooled, much like with 4th Edition, what will we be left to sell? A bunch a nothin'. The 5E release schedule is sparse. It will include "accessories" that traditionally sell poorly compared to core books. There is also no open gaming license for 5E, although companies like Necromancer Games and Goodman Games are slowly producing compatible products. There are currently two.

If you do sell Pathfinder well, and you're now encouraging players to move to D&D 5, which I do sometimes, you're not only undermining your Pathfinder sales, you're undermining your entire role playing department. When you've nuked Pathfinder from orbit and you're sitting on a dozen slow selling D&D 5 books two years from now (a dozen!), how are you possibly going to justify selling RPGs in your store?

As a gamer, I think D&D 5 is fantastic. As a retailer, I'm really happy with D&D 5 right now. Going forward I think RPGs in game stores will experience an existential threat with the current D&D release cycle. But there is a way out. It's called Pathfinder 2.0.

Stop groaning. We need it.

Sunday, January 25, 2015

Just Not That Into You (Tradecraft)

I used to date this girl.

She would only go out with me on Wednesdays and Thursdays. She was seeing other guys on other nights of the week, so I got the crummy middle of the week time slots. It wasn't like she didn't like me. We had a fine time and she was a good kisser.

Eventually though, my mid week slots made me feel like I wasn't her prime event. She wouldn't give me additional time. I felt I was probably a mid week distraction from what really turned her on, whoever that was in those weekend slots. I could have just enjoyed what I had, but my annoyance with the situation only grew larger.

That's how many retailers are feeling right now. There's no big conspiracy, but there is a lot of shenanigans going on, once behind the scenes, but now right in our faces. Reduced discounts. Street dates unevenly enforced. Distributors selling directly to Amazon while orders to independent retailers go unfilled. Stock outages galore, with exclusives not helping, while the mass market appears to get priority stock.

Game trade, we know you kinda like us. You're metaphorical good kissers, but we also know we're not the main event. Many of us who run professional operations, those big enough to put our kids through college or allow us retirement plans, are looking around for other people to date. We're hoping to diversify, be it toys, coffee shops, or even other businesses. I used to think there weren't big chains of game stores because the business model didn't scale. Now I think it's just too damn discouraging to think about managing this day to day nonsense and hypocrisy at a grand scale.

How can I put this game trade? You're a hot mess. We love you and all, but you're the kind of gal who's laughing one minute and stabbing you in the face with cutlery the next.

This unstable relationship we have with you is no way to find love. If you think all your dates are losers, I would suggest it's because you like bad boys and drive away the smart ones. You've got some winners right in front of you, if you would only commit the time to an adult relationship.

Monday, January 12, 2015

Three (More) Startup Misconceptions (Tradecraft)

I wrote a previous article about start up misconceptions. Here are three more, based on a lot of what I'm hearing. One caveat, if you're paying rent the equivalent of a car payment and running a shop yourself, paid with peanut butter sandwiches, there are all kinds of possibilities in the realm of low finance. I'm talking adult retail stores where going back to a full time job won't cover your hobby of a hobby store.

Stealing customers. We'll put our store next to this other one and steal their customers. Now imagine the kind of world we would live in, if such a thing were possible. A major tool in my arsenal would be arson. Why build a business when I can burn down my competitors? You learn the truth of this once your first competitor goes out of business and you get ... nothing. When people stop shopping at a business, they go all kinds of places, but only a small percentage, perhaps 10%, go to a competing business. I've seen half our Magic community up and leave for another store, but again, not a big hit.

In the game trade, when a store closes, some customers stop playing games, some shop online, some just take a breather and play the games they have. This is another reason not to bad mouth your competitors. It just doesn't matter. A good relationship with a good competitor is more useful than talking smack for no benefit. Oh, and every store within 20 miles of me has people talking smack about it, no matter how good it is. I'm sure there's plenty of smack talked about me. Bottom line: You will build your customer base through hard work. You will impress one person at a time, hopefully creating elusive "word of mouth." Nothing is free. Everything is earned. Occasionally you catch a small break. That break doesn't involve combustion, metaphorical or otherwise.

The online model. If we can prop up a brick and mortar location, we can make a killing online. I still get this from my business partners. When I talk about other opportunities, they tell me to make sure I have an online component from day one. These two businesses, brick and mortar and online, are very different. The amount of work it takes to keep a brick and mortar location open is staggering.  They often need completely different identities to cover for the fact that one discounts and the other doesn't. The amount of work it takes to make legitimate money online is also staggering.

The two work loads are entirely different. An online business is a separate endeavor, requiring separate marketing, separate skill sets, and additional work hours. People spend every minute of their day working on their online business. Are you really going to compete with them in your spare time? Online is also an enormous pain in the ass, mostly because of a discount model which makes you work twice as hard for the same amount of money as a full retail brick and mortar store. There is rampant fraud from customers, often adding up to thousands of dollars. Unless you're serious about a second business, with people covering for your previous position, time spent on an online store is likely time better spent on an aspect of your brick and mortar business. It's probably an issue you're trying to avoid.

For most game stores, online sales is an escape valve, a place to dump dead product and occasionally speculate. Amazon is the place of choice. You know that game that's out of print that you want on Amazon that's twice the retail price? Game store. About 1% of my sales are online. As long as my brick and mortar business is growing, I see online as a distraction. Now, if you're in the middle of nowhere with little local sales potential, by all means, supplement your income.

The Magic store. If we can just get all the Magic players to come to our store, run pre-releases at a loss, and make it up in Magic singles sales, we'll own the market and profit. There are plenty of stores right now, "casinos" or "club houses," dedicated to the Magic community, box flipping, and singles sales, that are essentially living off the cream of the game trade. They are making it up in volume. For real. Here's the thing. You're being actively squeezed with smaller Magic margins, pre-release allocations, and allocations of exclusive products. There is an active attempt to push you over the edge, so you don't make it up in volume, as you're not viewed as having a sustainable business model by the powers-that-be.

There are professional variations of the Magic store that are stunning in their ingenuity, with custom computer systems, professional tournament organizing, and the like. Those stores are not what I'm talking about. The club houses are rows of endless tables with a wall of cards and very little to offer, other than a place to churn Magic players and sell Magic at a volume discount. Is there a problem with that?

First, it's usually a blight on the community. These places are usually hang outs with bad habits. Nobody usually cares about that. Second, that "cream" would normally go to a professional retailer with a sustainable model. Again, not a lot of sympathy, capitalism and all that. Finally, it's just not sustainable in the long term. You're not only susceptible to a downturn in Magic, which will come, but this boom has been going on long enough that stores like this are getting undercut by other Magic stores. So if you do this, do it for the money with a clear exit strategy. Like a first marriage.

Wednesday, January 7, 2015

5 Ways to Spend Your Money (Tradecraft)

The tendency in January, the one time a year most hobby game retailers are sitting on a barrel of cash, is to find new product to buy for the store. Before you order in the full range of The Hobbit models from Games Workshop, consider a few options:

  1. Taxes. Have you been profitable before? If you're new at this, you might get sticker shock at your tax bill. The most dangerous expense in my business right now is my income tax bill. Wait and see what you owe before you spend all your money. When you do find what you owe, begin saving for next year. You could do quarterly pre-payments or you could just save that money with discipline (you should probably do the pre-payments).
  2. Marketing. Do you have a marketing budget? How about a marketing plan? With a cash cushion, this is a great time to make a plan and try some new mediums. Ask what other retailers are doing. Facebook is still the core for us, but in smaller markets, retailers have good success with cable TV and radio. Consider local options, like school newspapers. Budget for going to local conventions, making sure they're profitable and not a "marketing expense." 
  3. Education. Have you been to a trade show recently? Ever? Toy Fair NY is February 14th. The Gama Trade Show is in March and everyone should go at least once. I would ideally go every couple of years. Other regional options include ACD Games Day (May 6th), Gencon (July 30th), and The Alliance Open House (September 12th). Plan now while you can justify the expense. Are you one of those store owners paying $400 a month to have someone else do your books? How about taking a basic bookkeeping class and buying yourself a new car as a reward when you're done? That's some incentive, no? Backfill your education with some business classes or seminars. Or budget for some solid business books. 
  4. FFE. Furniture, Fixtures and Equipment. Last year we bought a new POS system and cash wrap fixtures. This year we bought a new camera system, new book cases and phone system. Entropy is your enemy and you need to keep up on this stuff. I'm sure you have a list.
  5. Buy New Stock. But wait. The game trade is "front list" driven, meaning most sales come from new items. New items for 2015 don't exist yet. Why spend your money on slow things? If you want to expand an area, it would be better to expand with new product rather than back fill. Where should you put those inventory dollars? Well, check out turn rates for each department. If your Games Workshop product turns at a dismal 2 turns, move on. If your board games are turning at 5 a year, that's a bit fast. Find the departments that have the high turns, because you're either losing sales from stock outages or the category is hot and the risk is lower. Just don't buy a lot of old junk (things that exist now).

Victor Dubreuil - Barrels on Money, c. 1897 oil on canvas

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.