Wednesday, November 19, 2014

Mass Marketization of the Game Trade (Tradecreaft)

The trending topic in my brain is whether the game trade is going mainstream, if it has grown enough in the past several years, to exceed the capacities and opportunities of the traditional morass. If so, what will it mean for specialty retail?

Why would I think this? We've got Magic: The Gathering and geek centric board games making appearances on South Park. We've got mergers and acquisitions galore, including NECA/Wiz Kids buying the regional retail chain, Hastings. But what really got my attention was the acquisition of Fantasy Flight Games by Asmodee. Asmodee is owned by the 5.5 billion dollar a year French investment group, Eurazeo. Eurazeo is not not some geeky game company, it's a long term investment group that buys things like hotel chains and parking lots. Some thought went into this.

Through Asmodee, they also bought Days of Wonder last year. The Asmodee, Days of Wonder, Fantasy Flight Games trifecta now accounts for 25% of my board game sales. This company IS board games in my store. There's now no company or segment bigger than Asmodee in my store, other than Wizards of the Coast with Magic: The Gathering. WOTC Is owned by a similarly large giant, Hasbro, with their 4 billion dollars a year annual revenue.

So is there cause for alarm? I'm going to say no, for one simple fact that recently dawned on me. Geeks are a massive pain in the ass. To put it in more technical term, they (we) are focused on, and dedicated to, minutiae, fiddly details. Dude, I have a masters degree in fiddly details, on the quantity of angels that can dance on the head of a pin, the 108 thises and the 16,000 thats. I totally relate to this, but there is no way the mass market wants to wade in. Sure, they'll own it from afar, as long as it's profitable, but at the tail end? No way.

And you can't franchise specialty retail. Oh, you can try, and several have, but the fiddly nature of specialty retail with persnickety customers makes this an impossibility to scale. I talk daily with many retailers. We have solutions for everything, but it's a bit like the rabbi joke. If you get two in a room, you'll get three opinions. Nobody is wrong. Everybody is right. And there may be a better third way, because we're never quite sure. Doubt keeps us going.

There are games and game system I sell to customers I can count on one hand. Half of what I order is a single copy that never returns after its sold. In store debates rage about the smallest details of army builds and book art. We not only debate it, we identify with the choices. As one excellent article puts it:
...The defensiveness oozes over onto everything: Tau aren’t simply a valid army she doesn’t play, they must be written off as Imperial Guard with a duller paint job. GURPS isn’t a system with flaws, it’s the fools choice. Nothing is a matter of taste: if it was a legitimate choice then they’d be making it. 
My point is, mega corps are willing to sit up top and reap the rewards, but the actual work? The farm like labor of hand selling one item at a time to an incredibly finicky and fickly class of customer? No way. They're happy to let us hoe that row all day long.

Monday, November 10, 2014

Shop Early (Shop Often)

It's early November and I'm sitting on $20,000 more inventory than I normally would at this time of the year. My store is relatively full, and other than releases between now and the holidays, and some specialty orders, I'm pretty much done stocking up. If you're a consumer, or a store owner for that matter, you should shop early too, and I'll tell you why.

Port Delays. There's a three week delay at West Coast ports that will throw the game trade out of whack for the holidays. Since a lot of what we sell comes from Asia, port delays will be a holiday wild card for product availability. New products may not make it in time. Older product is likely to be in short supply.

Poor Forecasting. Game publishers have been just, absolutely, terrible this year in forecasting demand. I don't know what black magic they use for forecasting, but their mojo has eluded them in 2014. A third of our best sellers are just gone right now. Upcoming games for Tabletop Season 3 are spotty at best. Whenever I see board game holiday articles in the making, I try to insert the availability of the games being suggested. That availability is poor. The worst offenders are game companies with exclusives, but that's for another article and consumers hardly know who they are (nor should they care).

Increased Demand. The game trade is not going mainstream, despite the fears that specialty retail will soon be invaded by mass market Mongols. However, there is certainly increased demand in board games that is driving sales quite nicely. This increased demand will exacerbate our other problems. A lot of board games are made in Asia, and board games, at least for my store, are where we see really strong holidays sales. Our board game sales in December are often double a normal month, while other departments only go up 10% or so.

Online Won't Help. Internet retailers like Amazon, as well as smaller online venues get their product from the same well. Although there is talk about distributors having private reserves for some of these big online discounters, don't expect online sellers to be holding product come December. They will run out too. Our brick and mortar store has been the "last man standing" on many products this year, according to people who only buy online who don't mind mentioning we were their last resort.

So there you have it. No bitching and complaining come mid December for things you could buy now. Also, if something is coming out between now and Christmas, pre-order with a local retailer. Yes, I'm biased, but a local retailer will get at least some product, and if you pre-order, which is still pretty rare for brick and mortar, you're practically guaranteed a copy. The "Amazon screwed me on my pre-order" complaint is common during these periods with both customers as well as publishers.

Monday, November 3, 2014

10 Year Anniversary

Ten years ago today I opened my store, gleefully ignorant of the game trade and just about every aspect of retail. I learned though, because that's what I do. I came from a career in information technology where it was assumed you didn't know many things, but you learned and moved forward. I have many veteran retailers to thank for helping me move forward, and quite a few books and articles. I'm starting to write my own.

The spreadsheet that I've lived by every day, for ten years now, says we made $95.02 in sales on our first day. Despite the common retail story, I never did a day without a sale, although that following Sunday came close at $8.49. I don't recall, but it may have been a pity sale. Sales for the entire month of November 2004 would add up to an average Saturday in the current store.

I've learned a lot in the last decade, seven years of which you can see if you go back in the blog posts.  I've considered deleting them, but I keep them up so new store owners can watch the process. Understanding did not come easy.

What I didn't expect, what I couldn't expect, where the life changes that happened during that time, often in spite of the store. My son was born and adopted by us six months after the store opened. I recall getting the call that we needed to go pick him up, 400 miles away, right now. I was working the counter that afternoon.

My wife fought and beat cancer, nearly by herself, as I worked 60 hour weeks trying to pay the bills. Not being around enough is a point of friction that's still there. My current goals are college funds, retirement plans, out earning the cost of increasing health care expenses and timing vehicles so we have no more than one car payment at a time. And I always make time for that little boy, regardless of everything else. Vacations? We'll do one again ... one year soon I'm sure. Our passports are expired.

If it sounds a lot like my goals are financial, you're not wrong. Another issue with ten years building a business is you're reluctant to aspire towards risky endeavors. It's why small companies can compete against big companies. Small companies can move fast and out maneuver the risk averse. Avoiding risk as a small business owner is perhaps the biggest risk.

My ten year lesson is once you're successful after a decade, it's unlikely you'll define success the same way as when you started. That $95.02 was a big success in 2004, when I didn't even know my break even point had another $500 to go. It's nearly impossible to think down the road that far, about the kids and the mortgage and your health, which is likely less robust than when you started. If my life had shifted just a couple years to a small child underfoot and a sick wife, I'm sure I would never have taken the plunge.

The good news is happiness. Hard work and long hours is taught to be a grueling, aging, eventually debilitating and self defeating experience ... when you work for someone else. When you work hard for yourself, you become younger. You thrive. My masseuse recently told me on my 47th birthday that I had the body of a 42 year old. I'll be basking in that faint glow for weeks to come. Happiness, for me at least, means being the master of my own destiny ... with work at least.

You have to like doing this, of course. You have to not mind being in a constant state of interruption. You have to trust people, employees to take care of your baby, and maybe even open up to them as friends and colleagues, despite the risk of betrayal. The customers are wonderful too. You're job is to make them happy, to make them smile. We do this! Working everyday with people who are happy to see you is a special blessing. I've enjoyed watching kids grow up before my eyes and employees developing into capable professionals. I give these people the credit for my missing five years, because it sure wasn't diet and exercise.

Please join us for our anniversary part on November 9th, if you're in the area.

Wednesday, October 29, 2014

The Shrinking Middle (Tradecraft)

Wizards of the Coast announced something today that Magic players will likely never hear about. On December 29th, they'll reduce the discount for Magic product by 2%, increasing our costs by 4%. They're not raising prices, they're just reducing the discount, meaning retailers will pay more, but will sell for the same price. How much more? I estimate $3,000-$8,000 a year, from each store, will just evaporate from retailer coffers. WOTC costs have been steadily rising for us in the form of shipping surcharges, but this is the first time the discount has been changed since 2009.

The reasons for shrinking margins is the usual stated added increases in costs of doing business that every reduced margin publisher provides us, be it Wiz Kids, Paizo or the myriad of others. Often those programs disappear or are entirely forgotten, while the shrunken margin remains. Even when they still exist, what other industry adds the cost of their doing business to their retailers?

In the case of Wizards, they have not raised prices on Magic since 2006, when packs went from $3.69 to $3.99. Using an inflation calculator, the price for a Magic booster, keeping up with inflation, should be $4.71 right now. So why not raise the MSRP?

It doesn't need to go up a buck, but even a quarter is well within what they need to cover their increased costs. More than likely, this is because Wizards of the Coast doesn't want to risk upsetting their customer base. When you've got a golden goose, you don't change its feed. But retailers? Whadda they gonna do about it? Nothing, that's what. We lack our own trade organization and an after hours email saying you've just lost $2,000-$8,000 next year is not an unusual occurrence.

As I've mentioned many times, with both an MSRP system and a discount structure, there is no way for game stores to cope with rising costs. When our costs go up, we can't raise prices, so we find a way to eat it, and that way is usually less staff, poorer infrastructure, and cost cuts in uncomfortable areas, from toilet paper quality to how often we clean the carpets. It makes the game trade a backwater, an inflexible business model that is inherently down market. Publishers then scoff at us and our operation, a model of their own making. It would be nice if the 500 pound gorilla in the industry was at least more understanding of our plight. 

Thursday, October 23, 2014

Gamers and Gates

On Fridays, if I'm lucky, I go to the rifle range and shoot holes in circles. It's a relaxing thing I like to do and it's a kind of reward, a conceit, after a decade of running a successful business. It's my golf. There is tremendous guilt in this time away, but that's another story. I mention this because you will never see a more polite group of miscreants as the fine ladies and gentlemen of the rifle range.

Why? Mostly because they all have guns. That tends to engender politeness, despite what you might have been told. When there's yelling, it's because there's a violation of safety. I was yelled at last week for not noticing someone else's safety violation. It takes a village.

They also have a common cause. They're all members of a maligned sub culture. They have vastly, wildly divergent views on politics, religion, the way of the world, but they all agree on one thing. They all want to continue to punch holes in paper circles, and much of the world disagrees.

I mention this because gamers are also members of a maligned subculture. Sure, the video game market is literally 100 times larger than the hobby game market, but any attempt to distance myself from video gamers ends up with me throwing stones within my glass house.

Their games are violent. Check. They're a black hole of time. Check. It's predominantly a male pursuit with difficulty integrating women. Check. My male dominated murder hoboism, AKA my D&D group, meets all standards for which I dislike vidya games. There are great, beautiful, creative, and non violent themes in both genres, and we all strive towards those examples, but the criticisms, the examples of what's normative in the sub cultures, are mostly the same.

The one saving grace of hobby gaming sub culture, one difference from video game culture, is eventually, hopefully, we'll meet face to face. It's social gaming. We're not all holding guns to engender politeness, but we still get along well enough to kill the monsters and take their stuff. Yes, our online forums are just as virulent as the video game forums, but have you ever been on a firearms forum?

Oh geez, the amount of time people spend trying to convince you that one, one-hundredth of an inch is vitally critical to your survival is just staggering. Arguments get just as heated, although there's very rarely threats of violence for obvious reasons. There is no deterrence in gaming forums.

Without a social outlet, video gamers have no social consequences to their douchebaggery, no deterrence. There is no convention or game store where they'll have to encounter each other and reconcile their differences. There's no rifle range of politeness.

I'm not a solutions guy, but if I had to guess, it would be more accountability and zero tolerance. More walled gardens and less Wild West. But I've got my hands full over here, trying to get my own hobby game house in order. Our basic guideline of Don't Be a Dick, Wheaton's Law, tends to work pretty well for us.

Wednesday, October 15, 2014

Fill Rates (Tradecraft)

Here's a little experiment. I'm taking my top 30 board games, which excludes expansions and card games, and checking availability from the largest three distributors at my local, West Coast warehouses. Over a quarter of this list includes Alliance exclusives (marked with an "x" for distributors that can't get those games), which pretty much guarantees I'll be shopping with Alliance. Lets look at the fill rates with these games, with Alliance being judged with their exclusives included. The other two distributors get a pass on those games.

Description ACD Alliance GTS
Pandemic: New Edition x Y x
Betrayal at House on the Hill N N N
Settlers of Catan Rev. x Y x
King of Tokyo Y Y Y
Small World x Y x
Ticket to Ride x Y x
Forbidden Desert Y Y Y
Smash Up N Y Y
Robinson Crusoe x Y x
Descent Journeys in the Dark 2E Y Y Y
Firefly: The Board Game Y N Y
Takenoko N N N
Arkham Horror Y Y Y
7 Wonders Y Y Y
Carcassonne x N x
Zombicide N N Y
Lords of Waterdeep Y Y Y
Castle Panic  Y Y Y
Star Wars X-wing  N Y Y
Super Dungeon Explore N Y Y
Red Dragon Inn Y Y Y
Elder Sign Y Y Y
Krosmaster: Arena Y N Y
Rampage N N Y
Shadows Over Camelot x N x
Agricola x Y x
Cosmic Encounter Y N Y
A Game Of Thrones Y Y Y
Mansions of Madness N N Y
Mice and Mystics Y Y Y
Total 22 30 22
Available 14 20 20
Fill Rate Percentage 63.6 66.7 90.9

Friday, October 10, 2014

Tradecraft: Problems You (Want/Don't Want) To Have

The new issue of ICV2 put the current game trade problems into context (the article isn't online yet). The game trade is booming. It has been booming for years now, but this year is one of the best in recent memory. Product availability, however, is poor. What am I talking about? The hottest games of the year, Marvel Dice Masters and X-Wing are gone. The D&D 5 Player's Handbook and the Pathfinder Advanced Class Guide are missing from our shelves. Board game mainstays like Betrayal at the House on the Hill and Carcassonne are gone, and worse, the new games, the ones we would like to build on, have disappeared without a trace in fire and forget fashion.

So who is at fault for this? Nobody. Everybody.  Retailers are told to order deeper. Publishers are either frustrated or elated by this increased demand. Some will call a sell out a victory, while others are seriously concerned with satisfying the market. If you're at a bake sale and you sell all your cookies, that's a clear win. You have the money and no need to take perishable cookies home.  If you're the guy in charge of selling the cookies, you're frustrated that you won't be taking in any more cookie money.

That's where retailers are right now. No more cookie money. The hottest games of the year are worth nothing to us if we can't put them on the shelves. We can't even call them hot, really, because we don't know the depth of the demand. Being the last man standing when it comes to inventory is great, but it doesn't build your confidence in a product line. There is a sense of a "ceiling of success" when there's a supply ceiling that can't satisfy demand. It's not greed, but a perceived limit to what's possible with hard work.

Will the next Dice Masters or X-Wing release be hot? Who knows? Some say Dice Masters is done. Some have massive pre-orders in. Not only do we not know our own depths of demand, but the lack of product overall perverts the local market, driving people to our store to suck up the last dice pack or space ship. When supply is plentiful, those people are not our customers. So without a way to plumb the depths, we're reluctant to take chances, to dive deep, on the next release, which means pre-orders are low, and the process repeats itself. Madness.

The next problem is organized play. If we were online retailers, no big deal. Sell whatcha got, blow it out or speculate, wash rinse repeat. In the case of game stores, publishers are expecting us to provide the value adds that we do so well, what differentiates us from everyone else. They want us to run organized play for their games, but think about that. Why would I run organized play for Dice Masters or X-Wing when I can't sell the product? Out of a sense of charity? Our customers certainly want that. So now we're in a jammed up position of wanting to satisfy customers, but not having financial incentive to do so.

There are bright spots of course. Besides miniature games, which generally have it together this year, there's Magic. Oh Magic, you savior of stores. We would run Magic events every day of the week, if we could. Wizards of the Coast almost always has supply. They provide wonderful organized play. The judges have it together. In fact, it's so easy right now, there's talk of game store blight, too many craptastic Magic only store stinking up the market and offering very little to their local communities. We're always lecturing them on diversification, but it's hard when the rest of the trade can't get their supply and demand formulas right.

So times are good, very good. Success is limited by the supply of products. I find it hard to blame anyone really. We're ordering what we think we need. They're making what seems a reasonable amount. Demand is outstripping supply. Future demand is hard to divine. If we could all just crack the code, there could be success at a much higher level. That potential is what's frustrating to retailers. Just don't call it a win.