Sunday, March 19, 2017

Competition (Tradecraft)

Here's the thing about competition, a well run, well rounded store is shielded from direct competition. You can't generally steal customers. It doesn't work that way. If you could steal customers, game store owners would have endless online debates about their favorite Zippo lighter style rather than preferred brand of point of sale machine. The tool would be fire. Just burn down your competitors store and voila! Instant customer base. Instead, we see this figurative burning down, petty back and forth bickering and low ball giveaway events, between small stores.

This is because a poorly run, narrowly focused store is entirely vulnerable to having customers stolen. Customers will be taken and their store will die. If all they sell is Magic, their tool chest consist of a calendar and price. That's not even a tool belt, more like a pair of hammers in your back pocket.

So the same customer base runs back and forth between stores as each store owner races to the bottom with customer appreciation events for unappreciative customers. Here's a tip, run customer appreciation events after customers have shown loyalty to your store, rather than trying to constantly bribe them. What a clown show.

I know all about this because we experienced the clown show first hand. I had competitors open to steal my customers because of their superior pair of hammers. However, because we were well rounded, and sold many other things, we shrugged and waited for them to implode. When they imploded, the competitive Magic community came back (which were really perhaps half the people who bought Magic). You can't build a game store with a pair of hammers.

If you're looking for a solution to this problem, it's pretty clear. Your construction skills are weak. It's not about pounding with your hammer. A solidly built, diversified game store is built to weather the storm of the ups and downs of the game trade, as games and customers ebb and flow. If the need to succeed at any one game or the need to cater to any one community is enough to sink your store, you are a slave. Your stated goal to run a small business and be independent is a lie. Put down the hammers and start building value for yourself and your customers.




Thursday, March 16, 2017

A Path To A Middle Class Income In Five Years

I've been writing the book since the last blog post. As you might expect, it's a lot of work. It is not a bunch of blog posts turned into a book, although the core of it is a re-written and expanded section on how to start a game store, complete with numbers and examples.

A bunch of meat is then hung off those bones, such as marketing, selling online, third place theory and the cafe model, and similar themes you've probably read here before, completely re-written. A blog post is a nugget of ideas, but it's rarely a starting point for writing a book chapter. In fact, it has messed up my writing style quite a bit. Lets just say I'm brief.

The book is essentially two parts, a how-to book on opening a successful game store, and a narrative portion of my personal experiences doing so. This is stuff I only share with close friends and fellow store owners. According to my buddy who has written a personal finance book, the book could have the sub title: A path to a middle class income in five years. That's kind of sexy in a mass market way. You've got a path towards a real, sustainable future in this book, and you've got a narrative that hopefully makes you think twice before starting. Or maybe I'm just crazy and you'll see that on display.

The narrative parts are the behind the scenes of starting a small business, the fear and loathing, the sense of freedom, the crazy things that happen along the way. If you already own a store or are just curious about starting a small business, this narrative part is likely the appeal of the book. I honestly can't read a book on starting a business without falling asleep. The narrative portion should cure your insomnia. When I ask people outside of the trade, they want to hear more about this stuff.

I've been posting teasers on Facebook. Here are some of the sections I've written. Most have been re-written after posting, but I'll post the draft versions for now. I've completed most of the how-to and I'm about a third of the way through the narrative. Then it will likely get thrown in a blender and re-written to some degree. That's my guess. I hope to finish by the end of April so we can have a book by the end of the year. Gameplaywright is my publisher on this. They're a small publishing house in the game trade.
















Thursday, February 23, 2017

Growth and Books and Miniature Games

I'm on vacation, so of course I'm writing a blog post. Here are a few updates on what's going on:

Post Construction Growth
We spent $133K to build our two story game center with the hopes this would increase sales, grow the business, and solidify Black Diamond Games as a regional gaming hub. The ROI on this project meant we needed modest growth of around 5% to cover our costs within a five year window, our loan period. That didn't seem like a big ask. When I approached lenders, this 5% number is what I pitched, and since cash flow could already cover our loan payments, risk was minimized.

What we've had since construction completed is a sales increase of around 16% (February has been phenomenal, by the way). That's pretty good, considering our average growth was around 10%. That extra 6% is right on target for our ROI.

Expanding the game center has allowed us to run many more events, thanks to a legion of volunteers and our employee organizers. Magic went from one night a week to five nights a week. Board game nights are now twice a week with lots of activity. New events are being added all the time and existing events are growing, with some nights already packed like before.

We're poor, having paid off over $20K of cost overruns in December, but we're healthy and looking forward to the next challenge.


Writing the Book
I've got a publisher for the book I discussed writing. The book will have a dual focus. One aspect of the book will be a how-to of opening a profitable, hobby game store making a reasonable amount of money -- my way, as you've read about it here. The second focus of the book is a running commentary on all the mistakes, problems and surprises of starting and running my own store over the past 13 years. I made a ton of mistakes, almost lost my marriage and my house, and in the end survived, even managing to leverage an international bank over a barrel to get my way. Business taught me that.

There is a "do what I say" aspect to the book, combined with a "not as I do" element. The goal is to write a book my peers would want to read while also writing a book a prospective business owner would find useful. I personally can't read a business start up book. The letters don't even register as words any more and my brain shuts down.  Usually these two types of books are two very different things, but we'll try to combine them. Together they may even form a cohesive whole that's of interest beyond the game trade.


Miniature Games
We came to the difficult realization last year that we're not a miniatures store. We dropped Privateer Press (mostly) and stopped bringing in the miniatures game flavor of the month that inevitably brought heartache and a clearance sale. But have we really stopped selling miniatures?

Talking with other store owners, their concept of miniature games is a much expanded category. My category is narrow, comprising of unpainted models with rulesets. That leaves out a lot of pre-painted miniature games, not to mention things like Reaper Bones and D&D/Pathfinder miniatures.  I ran the reports and here's a pie chart, because everyone loves pie:



So when I look at this, I see what I see in every other game category. A strong market leader (40K) with half the pie, a strong secondary game encroaching on a quarter of sales (X-Wing) and everybody else. So maybe we are still a miniatures store.

Thursday, February 16, 2017

Tariffs and You

With a proposed 20% import tariff, I was wondering about the game trade exposure and specifically my store. Only six of my top 30 best selling game companies manufacture exclusively in the US. As with everything nowadays, a lot of companies have mixed content, like boards printed in the US and pieces manufactured in China. All that could change with a stiff tariff.

* Battlefoam confirmed all their products are made in the US

My guess is there's an economy of scale advantage when manufacturing large quantities in the US for the US market. The good news is some of the top game companies are in this top six, especially Wizards of the Coast and Pokemon. Around a third of my sales are products manufactured in the US. For some game stores it's much higher, considering how Magic (Wizards of the Coast) dominates.  If prices do rise dramatically, it may mean a shut out for the smaller manufacturers who can't afford US production, meaning a consolidation and thinning of the herd. This makes a lot of assumptions, so maybe some publishers can comment on that.

If prices do go up and manufacturing continues abroad, the likely scenario for retailers is higher prices and more market erosion, with sales moving online. A $50 board game is expensive enough. Make it $60 and a portion of our customer bases will break off in search of cheaper options. Perhaps publishers will respond with more economical games, either lower quality parts or less content.

This tariff is all speculation, since this is being debated at great length. It's also unclear if a "pass through" tax reduction would follow. That would help someone like me, as I make a good portion of my income on my S-Corp profits, but most small retailers make their income via their salaries. That is, if they make any income at all. So like all things proposed with corporate taxes, the more money you earn, the more the proposed legislation helps you. Personally, I like a steady, even playing field without the massive disruption these schemes entail.

Friday, February 10, 2017

A Book

This week I've spent time thinking about writing a book. Let me tell you up front, I find nothing particular amazing or noteworthy about writing a book. I love books. Some of my favorite things are books. But I also have giant stacks of unread books. It's just a written medium, no more important than any other.

I used to publish a small magazine that had national distribution in Barnes & Noble. Part of that role was writing many articles, including when we were short content and sometimes under pseudonyms to hide this fact. Seeing my name in print is no big deal. Seeing my hard work published without credit is no big deal. Writing and publishing is kind of a slog, especially if you aren't making money (most writing). Publishing a magazine takes not making money to dizzying new heights, let me tell you. At least when I'm sucking at running a game store I know right away.

I learned the Ten Tricks To Magazine Article Writing, using lists and other magazine industry crutches to generate prodigious content. One time I wrote a completely fictional article about a Tibetan lama living in the hood, under the name of my Top Secret character and channeling my inner lama. I was just trying to fill pages with something true to my spirit, even if it was completely fabricated.  The article was re-published as a truthful account in Harpers, which I found terrifying and hilarious at the same time. I ended up fielding calls from Leno and Letterman for interviews, or at least interviews with this fictional street smart lama. Eventually the buzz faded and the reality of magazine publishing set in.

To help pay for the magazine, I got an entry level job in IT. The magazine eventually fizzled, doomed from the beginning with no proper research that would have been performed with even a rudimentary business plan. This left me in an IT career during the exciting and ridiculous dot-com days, where I quickly discovered adapting and learning new skills meant new opportunities and compensation. Don't know how routers work? Read a book. Take a class. Eventually I transitioned from IT to owning a game store. I read some books. I took some classes. Here we are.

What kind of book would I write, nobody asked? There are two possibilities. One type of book is a nuts and bolts book, similar or possibly just including blog posts massaged to be helpful to new or existing store owners. There have been books like that before and there are a couple out there now.

The second type of book is a more narrative style, "tell-all" about the trials and tribulations of owning a small business. This has broader appeal. It's also much harder to write and could go in many directions. The first type of book is more assembling existing content in a meaningful way, while the advice I got for the "tell all" is to just write it and pitch it, a more daunting task. The end goal is to leverage this exposure towards consulting, but to be honest, writing is a lot more fun, if there was a path with some modest income.

If you're a publisher and reading this, I'm ready to talk. If you're a reader likely to buy my thoughts in dead tree edition, please let me know what you would like to read. Here are my most popular blog posts, showing that even a cursory review of the Imperial Guard codex is vastly more popular than most of what I write about the game trade. Maybe I need to write Game Store in the Hood.


Monday, February 6, 2017

The Order Narrative (Tradecraft)

This is a nuts and bolts article about understanding where a product stands at any given moment. Before an order is placed, even while talking with a customer, I like to run down this flow chart so I have an idea of product availability. I have it in my head, but it's worth printing out until you get it down:



The flow chart may seem complicated, but once you do it a few times, it's quick enough to perform while speaking with a customer. All my sales associates should be able to do this for every item we sell. Where we get hung up though, is information at distribution. The part of the flow chart where it says "tell them it's not available and why" is often a bit of guesswork. If you don't know, tell them you don't know, but there should be a product narrative available from distributors.

This starts with product codes. When I look up an item in a distributors system, it's more than likely by product code, especially if their keyword search is janky. One of my pet peeves is the seemingly arbitrary changing of these codes.
*Often, code changes are manufacturer driven... There are other reasons that codes get changed. But at least in our case, the majority of the time it is either dictated by the manufacturer or done to move to "code synergy" in the industry. One example of manufacturer-driven: Warlord is switching their codes from the long mostly alpha codes to very long mostly numeric codes. Liana Loos-Austin at E-Figures.
GTS has their own codes for a lot of products, especially Ultra Pro, but the standardized code is searchable on their order site. For example, Top Loaders is inexplicably UPTLX at GTS, but I don't care because the description includes the standard Ultra Pro code of 81579. This is smart. Usually when a code is changed, the item is difficult to find. It would be helpful if other distributors kept old codes searchable (Alliance does this sometimes).

Getting back to product narrative, I need a story when a product is no longer available. I need to know why. Some distributors just delete products from view if they're sold out and not expected to return. Others don't add pre-order items to systems until fairly late in the release schedule. This breaks my narrative and results in often not ordering from these distributors. This is because my staff uses the system with the best narrative for pre orders and special orders, which can sometimes lock in that sale to that distributor. The best story teller gets my business.

Alliance tends to be the best story teller. They recently added "X" marks for items no longer carried in a particular warehouse, either because it's discontinued or just not coming. This extra bit of nuance confused some retailers, but it added to the product narrative. I won't be waiting any longer for the "X" product, so I know to order it from another warehouse, another distributor, or give up on it.

Any other status indicators is also helpful: Limited, Discontinued, Pre Order. The goal here is to provide retailers good information to make us informed customers who can help our own clients. I am assuming all this information is true and accurate. This has come a long way in the last decade, where there used to be a lot of disinformation, laziness and accusations of outright deceit regarding information from sales reps. More than likely, they were just as clueless as us and trying to create their own narratives.

Saturday, January 28, 2017

Reasons For Your Unearned Success (Tradecraft)

This is a harsh trade. When I first started, employees of other stores would come over and tell me how badly I was gong to fail. Their store had been around for decades and there was no way I could compete. So you say? Another competitor would come once a quarter and give me the bad news that the game trade was failing and there was no hope going forward. So you say?

Eventually, you outlast those people. There were six local competitors when I started thirteen years ago. Every one is gone. There are some new ones, but the original ones are ancient history. You usually don't have to do anything to fight competitors, if you've got a sound business model. Failed business owners self exit. The primary key to living is not dying. Then just do a little better tomorrow.

After a few years, they stop taunting you about how you're going to fail. Instead they give you excuses why you succeeded. They will come in and tell you this. I get it in my store reviews sometimes. Most people, including game store employees, have no idea what it takes to run a small business, so they have no idea what decisions are necessary to be successful. As store owners, we work exceedingly hard to set the stage. The audience arrives and gazes at our wonders. They leave and tell their friends. Most assume we stand around watching them gaze at wonders all day, having no idea what it took to set the stage. How hard can that life be?

I've compiled a list of excuses you're likely to hear. I've heard just about all of them. By the way, I would like to think I'm not a hardcore narcissist who believes success is all mine, acquired in a vacuum. I do believe many people have been instrumental in our success, including a community that provided me opportunity to succeed, be it this great country, which encourages small business and offers a safety net for failure, the state of California with its many opportunities that have enriched my area, or the SF Bay Area, with a culture of appreciating small business and quirky endeavors. That's what President Obama was getting at in his infamous "You didn't build that" speech. I'm grateful and aware of this assistance and it's a major reason I live where I do. That said, nobody succeeds without smart, hard work. So here's my list.

Reasons Your Success Is Not Your Own:

  1. Luck. Right place, right time. Ignore the feasibility study and the business plan, it was luck. I'm about to run a Norse D&D campaign and nobody is a hero without Luck. Nobody is noteworthy without snatching victory from the jaws of defeat. That means Luck is risk taking. It's not something that just happens.
  2. Easy Local Market. Anyone can succeed where you are. Over here? Much harder. This is true in the SF Bay Area, which is sheltered from a lot of Game Trade concerns. However, it also requires overcoming tremendous barriers and costs, along with high taxes and fees. I had to interview with my first landlord and the answer was no until I revealed the nest egg I had ready to invest. The barrier to entry is why we don't constantly fight pop up stores. Start with six figures or GTFO.
  3. Timing. Something was going up and you road the coattails. After a few years, my main competitor retired. I also started at a time of relative calm. Imagine starting your store the month of 9-11, or in 2008 during the financial meltdown. That said, timing is just one factor.
  4. Bad Competitors. Clearly since they're all gone, they weren't very good. Now if you had real competition, bam! Running a store is like flying. To paraphrase Douglas Adams, the goal is throw yourself at the ground and miss. Making sure you miss is where the work comes in.
  5. Staff Are Smarter Than You. The brains behind this operation is clearly not you. In fact, you're holding this place back from its true potential. This might be true, but it's also true hiring smart people is a management strategy. Bottom line: I can't run my business the way I want without smart people helping me. Thankfully I have them.
  6. Volunteers Smarter Than You. You've built this on the back of organized play and coordinators. Again, it's a team effort, and we're grateful for the assistance.
  7. You're Rich. The "you think you hit a home run, but you started on third" argument. One of my well known competitors was thought to be a dot com millionaire. I asked him and he laughed. "Ha! I'm sitting here in my back office eating my tuna fish sandwich." Ask Wizards of the Coast about this. I recall a story about the local Wizards of the Coast store manager installing a six figure mosaic in the front lobby of the store. There's no amount of startup capital that can save a business from a bad model. 
  8. You're Lying and You're Not Successful. I have one competitor who couldn't believe my sales covered the expenses I revealed. I must be lying on one end or the other. Then there's the question of defining success. My definition at year 13 is very different than year 6 and year 2. The definition of a 20 year veteran is likely very different than mine. Do I have to wait to be a 20 year veteran before I'm allowed to speak? Most 20 year veterans I know would rather just take a nap. Also, I can think of a combination of not inconceivable events that could easily destroy my business today. That's just the life of a small business owner.
  9. You Cheat On Your Taxes. This is usually the excuse successful store owners give for why pipsqueak start ups haven't failed yet. They're often not wrong. Having a really conservative accountant and business partners looking over my shoulder helps keep me honest in this area.
  10. Your Business Model Isn't Pure. Perhaps you've diversified into another area like used video games or cell phone repair. Perhaps you've vertically integrated your distribution or publishing business with your game store business. There are people who do this and offer a reverse excuse: The game store is only possible with such a model. 
  11. You Get Special Treatment From Suppliers. This might be true, as business relationships are not entirely transactional. In the game trade, your margin is determined by your purchasing loyalty and there are side deals and opportunities if you know where to look and who to ask. Opportunity doesn't just knock on the door.
  12. The Internet. Either you sell enough to survive on the Internet or they'll tell you the Internet will crush you any day now. Only a fool shops at the LGS. Notice they drop the "F".
And there you have it. Feel free to add your own to the list. I hope you'll excuse the negativity. I would like to think the vast majority of this blog is not about excuses but talking about how to succeed in this excruciatingly difficult field.