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.



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 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 a 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. 

Wednesday, January 25, 2017

Too Many Board Games (Tradecraft)

There are too many good board games on the market for my store to carry, and I think this is true throughout the trade. 2016 was the first year I stopped carrying board games that met all my performance metrics. The primary metric is turns, with three being a minimum turn rate for this category for me. The average is now around six.

With sales so strong, there just wasn't enough money in the purchasing budget to carry everything good, so good games gave way to great games. Inventory, whether it be store inventory or distributor inventory, is a zero sum game. There is only so much money in the pie and if I have to bring in one thing, it means something else has to go.

You might be reading this and thinking, well sure! That's just common sense. However, that's not how this trade usually works. It's often a case of stand out hits propping up a lot of crap. An enormous pink pond of pig poop, surrounding a few prize hogs. For my board games, there is no crap, no propping, the market is on fire. It's all tasty bacon.

I can't find enough product like this in RPGs or miniatures, it's fairly unique to this one category. I would throw thousands of dollars at RPG publishers, if they had something for me to sell. They just don't, at least not without a lot of time consuming farming.

This embarrassment of riches has migrated to purchasing. I've begun using the same strategy as my customers. All things being equal, games are bought on pedigree. A great board game from a top publisher not only gets picked over a great board game from a one off publisher, but it gets bought deeply. And if budget allows, very deeply. There are break out hit exceptions, but we have top 30 publishers where it's not a question of if I'll carry a game, but how many. By the way, this does not mean mediocrity from name brands sells well as in the past. Customers are well researched and don't buy entirely on brand. A solid brand is a guarantee of no surprises, like poor component quality or rule sheets ran through Google translate.

I'm planning a larger board game budget for 2017, but it's not about expanding my breadth, it's about jumping on board game intelligence when I get it. Games like Terraforming Mars and Scythe were hot in 2016, but we couldn't get them without a deep order.  We didn't have the cash, so we lost out. We had an angry review recently from a customer because we lacked product knowledge about Terraforming Mars. That's because we had it for 10 days in October and never saw it again. What can I tell you about that? It's rectangular with nice artwork, as I vaguely recall.

What does this likely mean for the game trade? I think it will mean increased balkanization, with Kickstarter games lacking penetration into brick and mortar. I think it will mean distributors will take the same approach as us, essentially not taking new clients and using their budget for big hits. Small publishers are likely shut out. Metrics for picking up a new game will increase. Good is no longer good enough, we all want great. It should also mean retailers like me need to dig deeper, go to more shows, play more games and network with like minded individuals to crack the code of hotness.


Gloomhaven is one of those "go deep" games in 2017. It's a $120 Kickstarter game, currently at the number one "hotness" spot on boardgamegeek. It's sold out on release but still open for pre order at distribution (I'm encouraging my customers to put theirs in).  I'll get my copies and won't expect to ever see it again. I could be wrong. Also, someone will point out there are areas of the country where a $120 board game is a non starter. I think if you consider it an RPG cross over, with legacy game mechanics, $120 isn't a big commitment for a group. 



Saturday, January 21, 2017

The Struggle is Real (Tradecraft)

I've got five days of cash flow, a huge sales tax payment due, a massive credit card bill, payroll, and the need for a new cars worth of sales in the next ten days. This makes me happy.

"The struggle is real," is a popular meme, but the struggle is often the only "real" part of this business. Success is ill defined. Money in the bank, real money, capital expenditure money, is a rarity for most store owners, at least until they've become well established. The need for things far outstrips cash flow. Entropy is a bitch and she demands replacement fixtures and an endless flow of toilet paper.

We're poor because we just paid off tens of thousands of dollars of construction debt, enough to enter the new year with a sliver of a chance of making it through January without dipping into some form of debt. But it's a pleasant place to be, especially knowing I won't be writing some of those monthly checks ever again. It's mostly pleasant because it removes decisions from my life. You work, you get paid, you pay the bills. We sold the van and tweaked our insurance to save $400 a month. This is the comforting work of the ancestral merchants. Wash, rinse, repeat. Routine has a warm embrace.

It's far easier to obsess over what's in front of you than forecast the future. It's like that person whose always busy at work, who has to constantly work late to catch up with what's in front of them. Those of us who've gone beyond that level know they're just poor planners, that resources haven't been allocated, that they're poorly managed in one aspect or another. It's a weakness of sorts, a comforting one that enshrines them in long suffering work and avoids the complications of social interaction or happiness seeking.

What I should be doing is planning. I should be working on a marketing plan. I should be setting up our demo programs. I should be planning those mini cons I talk about wanting so badly. I should consider a path to a book, but I question the value of such things. I should really find a way to swing the GAMA Trade Show this year. What I really should do is go on vacation. But five days of cash flow, man. I better put my head in the sand and and get back to the grind.




Monday, January 16, 2017

Less is More (Tradecraft)

Much of the last several years has been more about dropping games than adding them. This particular post is about saying it's a viable strategy for a profitable store. Don't be afraid of making hard decisions. I'm not talking about culling the herd, dropping slow board games or low performing SKUs. I'm talking about identifying broken game trade participants and showing them the door. The end result has been slower sales growth, since it's turning your back on gross, but much higher net.

Our net income topped out in 2015 at an astonishing 11%, and that's without significant sales in used product or other (highly profitable) cheats. It was straight up game trade retail at MSRP. This does require you to stop the genitalia measuring, which is gross, as in gross sales. I've written about that before, so no need to go into the "nothing but net" mantra again. Gross is a lie. You can't pay your mortgage on gross.

This is, of course, one way to do things. It's saying it's not necessary to be the one stop shop for all things games, because all games are not worth it for you, personally, to carry. We're talking big titles like Yugioh and Warmachine and for you, it might even be Magic. There are no sacred cows. There is nobody worthy of your unquestioned loyalty. This is also about crafting your store identity, admitting to yourself where you stand in the marketplace, acknowledging the limitations of your demographics.

No publishers are immune. If Wizards of the Coast can't protect their brand value and you can't make a profit selling it, drop them. If Warmachine can't discontinue SKUs in their creep towards infinite models, well, let them go. If Konami can't address the violence inherent in the system, send them on their way, give up their low margin product and troublesome crowd. Also, because this is business, it's not personal, so don't take it that way (your customers will). Also because it's business, reconsider if companies change.

Focus on net and the slow roll to higher profitability. Like fertilizer, take the money you get from dropping the bad actors and spread it liberally where it's needed to enhance growth. What you'll likely find is a lot of pent up demand in cash starved areas. We put our Warmachine money into Game Workshop and it paid off wonderfully. You might do the exact opposite and have the same results. It's a weird field. What you'll likely find though is a lot less cash crunch, a lot more time to explore new opportunities, rather than the churn of low margin, high gross nonsense.