Monday, February 1, 2016

Transparency Agenda Interview

I did an interview with Louis Porter Jr. over the weekend where we talked about the game trade, starting a store and the usual stuff you read here. Check it out.

Sunday, January 24, 2016

90% Punches and Kicks (Tradecraft)

I once studied aikijutsu in college, a kind of battlefield aikido.  We worked on holds and throws in the hopes we would one day prove worthy to advance to training with wooden swords. Our instructor showed up drunk one day, something it turned out he would occasionally do, and proceeded to yell at us. "This martial art is 90% punches and kicks!"  I hadn't learned a punch or kick since I started, so the message was, you people know nothing.

When it comes to hobby game retail, we spend a lot of time talking about things that are not the 90% punches and kicks. Retail hasn't really changed much in pretty much forever, yet we rarely talk about retail fundamentals like inventory management, cash flow techniques and improving net margins. Instead we talk about events, the hottest Magic card, and the latest employee drama (rather than how to create systems for managing employees).

So why do we practice all these complicated techniques, discussing them endlessly online, when we really don't have a firm grasp on the fundamentals? The obvious answer is money. The biggest problem game stores have is undercapitalization, and the vast majority of distracting discussions is because the real solutions to game trade problems is not only out of reach, but beyond the comprehension of the average "buy a job" owner.

Nobody began by asking what do I need to be successful with a hobby game store, they started with a small amount of money and worked hard to see where it would lead them. They need to keep their balls in the air which does not lend much time to juggle fancy new concepts, like how to actually make money. You can change this though. You can put the petty concerns of fat pack pricing and handling your latest card shark on hold and you can say to yourself, I need to learn punches and kicks.

I am no drunken master. I don't want to put myself in the position of the drunk aikijutsu instructor, so instead I'll just reiterate that we all really need a better understanding of punches and kicks, the fundamentals.  Stop being a gamer store owners and start being a business owners. If you're looking for a time and a place to learn some punches and kicks, let me suggest Las Vegas, March 14th-18th.

Sunday, January 3, 2016

Opportunity to Work Hard (Tradecraft)

Some people believe game stores are demanding price protection. In the case of the Asmodee and Mayfair, game companies are employing policies to restrict online selling or restrict deep discounting of their product. There are two parts to this. First, publishers recognize hobby game stores provide a valuable marketing service and sales channel for their product. They've said as much. Second, and this is on our end, game stores aren't looking for protection or a handout, game stores are looking for the opportunity to work.

The opportunity to work means we're looking for games we can sell and promote, through our hard labor, that will provide us benefit and allow us to leverage our talents. It's the kind of work everyone is looking for. Nobody really wants a free ride. Everyone wants to be valued and they want to use their talents. Having this opportunity is a shot at being great.

When it comes to collectible games, being great means running quality events, which are insanely resource intensive, with the expectation that we'll be a valid source of product for the majority of our customers. We run events; we sell stuff; profit. For example, nobody wants to run a Cardfight Vanguard event, only to discover Potomac is selling booster boxes near cost. The result of that scenario is events are canceled or marginalized as we shift resources to better opportunities.

When it comes to board games, our game trade experts have shown that intensive game demos will increase sales 400%. That means if we work hard, have trained staff, space to run demos and enough inventory predictability, we can leverage this opportunity with hard work to be wildly successful. It's not easy. Not everyone can do it. It takes a ton of resources and training. That's the point. That's our value proposition and our opportunity in the marketplace.

When a game is perpetually at cost on Amazon or the supply chain is weak, or there's a limited amount of inventory slosh after Kickstarter backers get their copies, then we're unable to leverage our skills. There is no opportunity. We move on. Fixing these problems on the publisher side allows us opportunity. No hand outs here, just a shot at success. What everybody wants.

Game stores are shifting away from games that don't provide strong organized play or that don't provide good in-store value. The best examples are miniatures and role playing games. These are the two areas in my store that see the least growth and energy, and it's a combination of price pressures (geez, books, right?) and poor event service. New game stores often shy away from these segments of hobby gaming. You can personally step in and champion these games as a store owner, but as a system, they tend to provide limited opportunity.

A store can survive with minimal effort. My first store had no game space, minimal demos, a sad lack (but growing at the time) amount of product knowledge, but it survived because I ran it like a traditional store. I listened to customers. I ordered what they wanted. I managed inventory like a fiend using every tool in the box. That allowed me to survive, but not prosper. Who wants to just survive?

Nowadays, game stores need to go well beyond traditional retail if they want to be prosperous. A great store needs that opportunity to work hard and do their job. Stocking the shelves and counting turns is not enough to be prosperous, which nowadays just means a middle class lifestyle. Does your store have the talents to move from getting by to prosperity? If you're a publisher, does your game provide that opportunity?

Friday, January 1, 2016

Report to Stakeholders 2015

I'm going to copy part of the format of the very good Steve Jackson Games report to stakeholders, a detailed and transparent online report SJG publishes each year. Black Diamond Games is already transparent with employees and shareholders, who often receive identical information on a monthly basis.

A stakeholder includes employees, event coordinators, shareholders, distributors, publishers and, of course, our customers.

We primarily sell through our single, brick and mortar store. 0.34% of sales are done online, comprised of junk we discard on Ebay. Yugioh, I'm talking about Yugioh. We intentionally and entirely focus on our single brick and mortar store customers. Delighting and enticing them to shop with us is our goal. We avoid the distraction of additional stores or online sales. One big store.

2015 Summary
This was a fantastic year for us, as we saw a 13% increase in sales while I personally transitioned to a more strategic role with the company. 2014 was the first time we had a down year, as we dropped our number two game, Yugioh, turning our back on $100,000 in revenue.

In 2015, we had gross sales, with sales tax included, of a million dollars. Yes, including tax is cheating, but the report showing that seven figure number is mesmerizing. This is in year 11, for those who think this was easy pickings or we're an easy target. Do not get crushed in our orbit. We will not apologize for said crushing. A million dollar store in California is enough for one owner to make a middling income while employing half a dozen part time people (probably half that full time).

We consider ourselves an alpha store, in the top 10%, a term I invented so I don't mind throwing it around. This lofty position currently has us with 7 days of cash flow. Million dollar store living paycheck to paycheck. Yes we are in touch with our customers.

My role this year is that of behind the scenes strategic planner. I sat in the Game Center and worked on the business, rather than in the business. There are many things that get put on the back burner when you're an owner-operator. Stepping back allowed me to do all those things. That lasted until the end of March. Since March, it has been a lot of small tweaking and polishing policies and procedures.

Winners and Losers
What were the winners for 2015?  Collectible Card Games was our top category with a 10% sales increase. CCGs narrowly beating out board games, which had a 25% increase. Board games were ahead for much of the year. Board games and CCGs make up 60% of our sales and this year, more than any other, it began defining our identity.

Q4 was our best quarter to date, but the poor reception of Battle for Zendikar made it a hard slog. BFZ is credited for a down December and much soul searching. It killed quite a few Magic centric stores, by some accounts. Diversification people.

Board games were driven more by card games this year than larger board games. Cards Against Humanity made an inevitable decline though. Tabletop stopped being as influential. We felt the pull of the Internet this year more than any other time in this business and we considered dropping a lot of board games, ceding to the "dumpster fire" that was the online market. X-Wing, especially, was on the cutting block. The AMA changes were applauded here in this blog.

Used and Ding & Dent games sales were up 29% and all supply and accessory categories (sleeves, dice, cases, miniatures) were up. Puzzles and Toys were up, and we're committing resources to becoming a better puzzle store, after learning how to do those better.

Losers included Tactical Miniature Games, which were down 1%. We announced yesterday we're dropping Warmachine and Hordes from the store, which performed terribly in 2015 (1 turn, for those who do inventory management). This was due to poor events, increased competition, and a change in the game meta that turned off a lot of casual players. I regret having to let it go and I will absolutely consider bringing it back, if circumstances change. It's on sale in the store right now at 40% off.

A strong Warhammer 40K revival is why this category is only down 1% and we'll be shifting inventory dollars in that direction, although there's not a lot we need. I never thought I would consider Games Workshop a worthy partner, but after the turmoil of 2015, they're a safe bet. Also, as a suburban store that caters to casual players, it makes no sense for us to chase smaller, specialty miniature games. It took a decade to realize that and the help of retailer friends.

Role Playing Games were down 12% as D&D 5 wasn't nearly as new and fancy as it was in 2014 and Pathfinder began to run out of steam. Pathfinder, like the example with Warmachine/Hordes, is also heavily event driven, and lackluster events is certainly a reason for the drop. We need more volunteer assistance in that area. It lost its "inventory immunity" this year and a lot of dead product was cleared out. We know that doesn't help that line.

Collectible Miniatures were down about 9%, as we retreated from that category. It's where we slot Dice Masters and Heroclix, games that we walked away from in 2015. Classic games like chess continues to be games we sell for some reason.

2016 Plans, Including The Mezzanine!
Our lease is up at the end of March. What does that mean? It means we figure out where we want to be very soon, or technically, we're done. That's about as dire a way of saying that as possible. However, we've got a draft lease in hand and we're slowly moving forward, trying to negotiate it, but it's mostly finished. Negotiations are mostly over.

It's a seven year lease with a seven year option that includes construction of the mezzanine expansion beginning in April. Between now and April, we'll need to decide if this lease suits our needs, and if not, what we plan to do in the short time we have left in the current lease period. For what it's worth, looking 14 years down the road makes this a career defining document. This new expression of the store will probably be as far as I personally go with my game store career. I don't want another one.

Waiting on the decision of whether to move or stay has been frustrating over the last couple of years. There are unacceptable things that can't be addressed until this decision is made. The carpets are shot. The bathrooms need remodeling. The office is a pit of despair. All of that gets torn out or changes if we move. So I smile and pretend these things don't grate on my nerves.

This holding pattern is why we didn't have an anniversary party for the first time since we opened. This was a year of waiting, a year of glacial lease negotiations, scouting properties and attempting to meet with flaky property managers. It was a frustrating year that thankfully rewarded a focus on the basics.

If you're a retailer, come see one of my inventory management seminars at the Gama Trade Show this year.  It's in Las Vegas in March. We'll talk turn rates and product pyramids and all sorts of exciting, metric based words.

Tuesday, December 29, 2015

The Nebulous Customer Value Proposition (Tradecraft)

A recent blog comment was basically this: I shop at a brick and mortar game store. I spend a lot of money there. I use the game space and have a great time. What is my duty to support this store? When does supporting the store become charity? What do you, as a store owner, expect from customers like me?

The answer is: I don't know.

This is a taboo subject amongst retailers. It's taboo because we're insecure in our belief that we provide a UVP, Unique Value Proposition. We're not sure we offer enough value to customers, so we tend to tread lightly in the area of customer expectations. We try light guilt, subtle suggestion, and the promise of a social good to make the sale. We'll take your card sleeve purchases, even though you bought that $100 board game online (for $60). It's good my friend; no worries. We won't say anything during the Magic pre release when the quarterly pre-release customer, who we only see this one day, sneers in a way that begrudges our existence. It's cool.

We'll take all comers. We're even afraid to offend when being abused. The abused retailer is a common theme in retailer forums. The buy nothing D&D behemoths who comes in with their 2-liter soda bottles and wreck the bathrooms. I mean, that guy might buy a set of dice one day, right? Lets not offend him. Yes, they violate the "no outside drinks" sign, but his buddy, the DM, buys books sometimes!

We're not really sure how many customers are rational actors and how many are acting charitably, possibly against their own interests.  Price is obviously what we're talking about, since our three legged stool of price, service and convenience is a bit wobbly on that first leg. We don't compete there because we can't, yet we fail to properly monetize the services that make us special, because we believe game store customers won't pay for that value. They'll spend $15 for a movie ticket, but many will balk at a nominal fee to use your space. It costs me about $250/day to have game space. Will customers pay for that? The answer for us is they will, to a limited degree. The answer for many stores is probably not. $5/week to some people is a hardship. I say stay the hell home if a fiver is gonna wreck you. The other store owner is afraid of losing them as a customer.

It's also fairly true that we, a) make gamers by introducing them to new games and talking with them about the hobby, and b) many veteran gamers graduate from brick and mortar stores and no longer need us. Somewhere between "a" and "b" are many customers who aren't quite sure they value our unique proposition. As a retailer, this ambiguity is maddening.

I've talked with staff about my magic Wand of GFY. Imagine you're in a relationship where your partner isn't quite sure they want to be with you still. They liked you initially. You had a lot to offer. You're certain they'll leave you eventually. They always do. But you just don't know when. That in between zone is a horrible psychological burden. Heck, going from relationship to relationship like this is pretty much the definition of dysfunctional. Wouldn't you sometimes want to wave a wand to make them decide?

The Wand of Go Fuck Yourself is the retailer fantasy of waving that wand. Customers who see your Unique Value Proposition will stay. Those that are wobbly will leave. Now, nobody is doing you any favors. Everybody is certain about what everyone is offering. The amazing advantage would be we could talk to all those who value us and better tailor our business to satisfy their needs. Customers assume we already know how to do this, but we don't. We do a lot of predictive guesswork.

We wouldn't wave the Wand of GFY out of anger or hatred. We would wave it to better serve customers who value us. To save the village, we must destroy it.  Unfortunately, the number of leaving people would be anywhere from 1-100%. We're uncertain exactly how much charity and how much unique value customers are perceiving.

It's also unlikely customers accurately know how they feel. If you think customers and consumerism is rational, you know nothing about why people buy. That guy on the Internet, who can't fathom why people don't buy everything online? He's a moron. He can't understand because he doesn't understand human behavior.

As retailers, we barely understand people, which is why we'll never wave the Wand of GFY. We simply don't know who would be left, if anyone. But sometimes I want to watch that bridge burn. I'm certain I could build a better bridge, if I only had better design requirements. I'm pretty sure it involves roasting my own beans.

EditRetail is basically two steps forward one step back. It's building a satisfied customer base faster than you lose customers from the many variables that cause attrition. Wanting to wave a magic wand is wanting to clear away all the two steps back in the mistaken fantasy that you could somehow freeze reality to serve the one step forwards. You can't stop the process. But wouldn't it be amazing?

Saturday, December 26, 2015

Four RPGs

I feel I need a palette cleansing after the last post. Here are the four RPGs that were most influential for me. It's a meme going around #fourRPGs. Rambling and layout atrocities ahead....

My favorite character after
Johnny B. Good who died on
 that gazebo
I think we played Top Secret more than D&D when I was a kid. We started with the original box set and moved to Top Secret/SI later.

Some were happy with the rulebooks, but I recall cutting out photos for my character sheet from the Brigade Quartermaster catalog (Brigade QM still exists) and finding cars to buy in the Auto Trader. We would destroy vehicles in that game like you wouldn't believe.

The Auto trader provided
vehicular fodder
We wanted different firearms too, and I created fake police department letterhead to send to firearms manufacturers, like Heckler & Koch, requesting catalogs for police only weapons, like the MP5 (see the video at the bottom of this post).  I got them too. Kids those days.

It was the more mature D&D of the time for us. Yet, I remember the shame when I ripped up my dead character sheet and pushed it through the slots of the gazebo where we were playing. The gazebo was over a lake, the pieces fanning out as they dispersed. I don't think I ever had that connection with a D&D character.

Baron Mughummlaminarrinarrr
Traveller was a one off for us, and its character creation system, where you could actually die in training, was intriguing. I used to generate random planets just for fun, to satisfy my imagination. I didn't play much Traveller, but it was always memorable.

Like Call of Cthulhu, Traveller usually ended in disaster, blowing the jump drives as the authorities closed in (you would think this was a pirate game). If you don't get why Firefly is a cult favorite, it's partially because it's an envisioning of a sci-fi RPG that may be Traveller. Oh, you know it is.

The Baron's World
My favorite character was Baron Mughummlaminarrinarrr, a lizard alien with an incredibly high metabolism. He would raid ships while his slave pushed a shopping card full of canned food in his wake. He had to eat constantly or die. That's how strange the Traveller system could be. That's where my teenage imagination went.

Gamma World tapped into the 80's sense of impending nuclear destruction, long before the current zombie meme. Long before memes. It was mostly D&D compatible, so it satisfied our sci-fi itch that Expedition to the Barrier Peaks wouldn't exploit in D&D until a few years later.

Gamma World was a bit quirky, where Traveller seemed to be more serious, probably because of all the sciency things, like calculating distance between planets and attempting to understand space combat. It wasn't nearly as nerdy as Star Fleet Battles. The uber science geeks in school would play that game, calculating ship positions and firing solutions in 3D space. I'm not sure how that's fun, but they enjoyed it. One of those guys showed up to the high school reunion in his new Ferrari. We always knew you were smart, Brando.

Character roster. An "x"
marks a dead character.
Dungeons & Dragons is where it all started for me. I think I must have had the magenta box set under the Christmas tree in 1981. I mostly messed around with it with my younger brother. It wasn't until junior high school that I found a group of friends to play with, guys who are still friends to this day. That group included the older brother playing D&D in the movie E.T. (an acquaintance really) and the guitar player for No Doubt, who I tormented with my lawful evil priest of Asmodeus named Damien (I was a jerk).

My D&D  friends were more serious about school, which led to me being more serious about school, taking a few AP classes, and even choosing colleges together. "D&D got me into college" is a line I've used on more than one curious parent at the store.

We grabbed hold of AD&D as soon as the books were out, occasionally mixing older supplements, as we found them. With only three books available, we could recite the rules by heart and you could thumb to the combat tables, saving throws or treasure tables by feel.

None of my friends played beyond high school, as far as I know, but I moved on to play Oriental Adventures in college (as an Asian Studies major). Later we played AD&D 2nd Edition at a dot com I worked for; Planescape in the board room.

When Third Edition came out, I swore we wouldn't go to it, but I became an evangelist after reading the Player's Handbook. I could go on here, about the disappointment of 4th Edition, the walking in the RPG wilderness for a while before discovering Pathfinder, and how 5th Edition has been a breath of fresh air.  It's what I play now.

Overland map from this week
As for my gaming, I ran an urban, planar campaign for ten years (3rd Edition, then 3.5, then Pathfinder). For the last three years I've been running a sandbox game (Pathfinder, then 5th), mostly because I missed trees and nature. You can read about my sandbox campaign by searching for it on the blog search feature.

Bucket List: Shooting an HK MP5 on full auto

Friday, December 18, 2015

Fixing A Devalued Market (Tradecraft)

I have written much lately about the despair of attempting to sell games in a market where my peers are dumping product online at cost. It was pressuring me to move away from the game trade, to consider investing in things like coffee shops and survival gear stores rather than in the trade I've spent 11 years learning and to some degree, mastering. So it was a Christmas gift of sorts to see the Asmodee Group announce a new retailer program that prohibits sale of their games online.

Asmodee Group, as I've talked about in this blog, is the big player now, comprised of Asmodee, Days of Wonder and Fantasy Flight Games. In my store, that's 36% of all the board and card games I sell. A mature market usually has an unassailable player of over 50% market share. Asmodee is on their way. I wrote about this last May.

Why do this? I'll let Christian Petersen, the new CEO of Asmodee USA explain it from this recent ICV2 post:
“The marketplace has long been distorted by providing one-size-fits-all sales terms to every retail account, regardless of its channel of sale,” he said. “The growth in demand for games over the last decade, in our view, has been fueled not only by fantastic product, but by the support of specialty retailers who incubate personal connections between players, facilitate tournaments and leagues, provide instant product availability, and increasingly provide a ‘third place’ that is instrumental for so many gamers to enjoy and discover our products. The retailer cost of providing such channel services is significant, and so we’re now making policy changes to ensure that the sales terms provided to those retailers, relative to other channels, are positively reflective of the value they add to our distribution chain.”
He gets it. Christian Petersen has decided pure volume of sales, at any price, is not as valuable as thousands of retailers growing their market by building relationships with customers.

This will not end all online sales, but it doesn't have to. What it does is prevent dumping. It ensures that retailers will not speculate, will not over order, will not crap all over the marketplace because they lack the skills to budget, purchase and sell properly. Some retailers won't be happy, because this is their standard business practice. I wanted to come up with a nuanced response to them, so here it goes.
"Fuck you guys."  -- Gary Ray, Black Diamond Games
You may quote me on this. I'm not going to win friends or board elections, but if you're one of these guys, you are the problem. The reason Amazon sells this stuff at near cost is because you, the dumper, have driven the price to the bottom. I wrote about this a couple weeks ago in a post entitled We Have Met The Enemy. With any luck, other companies will follow the Asmodee Group example.

What will the consumer get out of this? Well, if you're just a get the thing at any price consumer, prices will return to normal, or more likely no more than 10-20% off MSRP as we discover the chinks in the Asmodee armor. On the plus side, I'm suddenly much more keen on running X-Wing and other events AND recommending such products when Asmodee Group games are not sold at cost online.

There is a lot to this. It won't go into effect until April, so I expect a lot of dumping before that. It allows for retailers to apply for exemptions to sell online for various reasons, which might undermine this. It ends the exclusive for Days of Wonder with Alliance and it specifies that only five distributors will get access to Asmodee Group products, all large ones we have accounts with. I see this as a victory for brick and mortar stores that do brick and mortar activities and support the community rather than the mercenary activities of faceless online commerce. Now we begin strategizing how to step up our game in supporting Asmodee.