Tuesday, February 24, 2009

Purchasing Manifesto

Across the game store world, purchasing is feared but not understood, and thus we, who do well with purchasing, should make our views understood.

That's adapting the Communist Manifesto's opening language to my post, but you get the picture. I was going to post something like this after my 5,000th purchase order, but I'm a little early. What have I learned from nearly 5,000 purchase orders?

The history of all hitherto existing game stores is the history of product availability.
The struggle for game store owners is having the items customers want while maintaining their finances. Therefore:

  • Budget Purchasing Separately. Most stores buy product with available cash. They pay rent, payroll, utilities, and, oh yeah, some games. Budget purchasing separately, so that stock is never reliant on your bills. This requires having a buffer of cash on hand for the ups and downs of any given month.
Freeman and slave, patrician and plebeian, lord and serf, guild-master and journeyman, in a word, oppressor and oppressed ... all want their games now.
  • Customer Centric. You can't stock everything, but you do want your customers to spend all their gaming money with you, so focus on special orders. One of your catch phrases should be next day delivery, or two day delivery, or however long it could possibly take to get that customers game in their hands. Customer pre-orders are important, as are back-orders, so you can lock in those sales and teach them that you are a reliable source for their gaming needs. This promise means you'll actually place that order, even if it costs more, even if it means seeking it out across the country, or from another retailer. It should be your policy to bend over backwards to acquire that item, even at a loss at times, if it maintains your customer centric policy. It pays off in the long run.
Let the UPS driver tremble at a purchasing revolution.

  • Order Often. It's much better to make many small orders than large orders, provided it's cost effective, such as hitting free freight minimums. This reduces your labor costs if you need help receiving, and it also plays into the customer centric model. If you order daily or near daily, it's not a hassle to throw on one more item. Ordering also works to your advantage in getting new releases. You don't have to plan nearly as much if you've got a constant stream of new orders. You should get new releases on the new release date, every time.
  • Pre-Order, Pre-Order, Pre-Order. I pre-order everything and I'm almost never caught out in the cold. Distributors are running with thin inventories and you take your chances by not pre-ordering in sufficient quantities. I try to pre-order a 30 day supply of obvious evergreen product like D&D, Warhammer and Magic. While on the topic of pre-orders, back-order as well. Some distributors can't handle back-orders; find one that does and make sure you have a loose enough budget to buy this stuff when it arrives. Track this stuff somehow.
The store owners have nothing to lose but their wallets.
  • Avoid Fees. COD fees, shipping charges, freight upcharges, credit card surcharges should all be avoided as much as possible. Credit cards might seem like an excellent idea for purchasing, with their bonus points and benefits, but it takes iron discipline to pay them off in full every month, and inevitably you become a cycle behind. Fees are the enemy and should only be incurred at the risk of customer service.
  • Cheapest Supplier. Planning ahead and buying from the correct supplier is important. It might seem to make sense to throw on a box of Magic cards to round out a free freight order because it's got a special order item, but doing this regularly is a waste of money. Plan ahead and use the cheapest supplier. This will mean keeping deeper stock of some items, so nothing is free. This is my biggest pitfall.
  • Many Suppliers. It costs nothing to open multiple distributor accounts and it provides you many sources for product. It's also a hedge on information. Sales reps are a source of information, but not always a good source. Open up more accounts and more lines of communication to the industry.
overthrow existing inventory conditions
  • Know What to Buy. Know how you expect your inventory to perform. If you want strict inventory performance, ruthlessly prune out games or departments that under-perform. Use performance metrics, like turn rates and costs per square foot. You may let some stock slide because the game is growing or it completes a section, but do it deliberately and not because you like the game or think your store should have it. Game stores should have what sells, not what you think should sell. Throw out the vision of what you think a game store looks like.
  • Know Who You're Buying For. Try picturing the face of the customer who is going to buy that Dog Fart Monopoly game. Have you asked him about DFM? Did he pre-order DFM? Have you made a DFM announcement and sign up sheet? Are there DFM events planned for the store or are customers kind of tired of the whole DFM line? Ordering a game because you think the dog fart crowd might enjoy it is not good enough.
  • Budget Cutting Edge. If you are going to try cutting edge product, budget it carefully. Giving yourself some cutting edge budget means you're also giving yourself permission to be that much more ruthless with regular inventory.
You have a world to win.
  • Purchasing is the Business. The game is won or lost in the purchasing. It's forecasting sales, knowing who exactly will buy your stock before you order it, and knowing the industry so you know what to buy. It's having in depth operational knowledge of the business and it's more important than anything else. It's the last thing to be handed off to an employee and the first thing to be mastered by a new owner.

Profits can be attained only by the forcible overthrow of all existing bad processes.


  1. Gary, this should be given out by GAMA to every prospect, ever.
    Did you post this on the GIN?

  2. Ah, the sweet irony of juxtaposing Marx with a treatise on private free enterprise small businesses!

  3. I might post it to the GIN after getting more feedback. I generally write stuff here *instead* of the GIN.

  4. So, when is Dog Fart Monopoly coming out?

    I think the biggest stumbling block for me would be "order what sells, not what you think should sell."

  5. You get over it after you've been burned a couple dozen times.

  6. Provided your business survives the burning and you are mentally agile enough to actually learn from any mistakes made.

    -The Griffin

  7. Recovering from mistakes is a near art form in retail.

  8. 5,000 Purchase Orders, eh?

    I guess it's a start. ;)

  9. Dog Fart Monopoly? IS that put out by the Dog Fart porn site?

  10. Bad inventory management is what will kill a game retail store. While separating purchasing and the rest of the expenses is a good idea, I'm not sure it's always feasible, esp with a store that has started to go onto the rocks.

    That said, it is *critical* to liquidate poorly performing merchandise ASAP. I was never very good at that, and my balance sheet suffered. All new stores should have a plan in place on day 1 on how they will liquidate slow merchandise. Maybe even Day -1. And then follow through, analyze, and tweak that plan.

    What you say about fees is also critical. Every dollar spent on interest expenses on your short term loans, or on freight, is a dollar not being put into product on the shelves. (although that's not applicable to special orders, as you note).

    For my store as well, special orders was always a weak link. We did our best, but actually our POS hindered our ability to purchase SO's, since it would make some assumptions about our inventory that didn't reflect real life. Particularly in the case of shrinkage, or a misplaced item that would still be reflected in the POS inventory, but wasn't in the store in real-life. This wouldn't come up on the POS "to buy" list.

    I also am an advocate for pre-orders in the hobby game industry. One little wrinkle for me, I was locked into the DIamond cycle, and would order out of Alliance GTM once amonth. Sometimes I missed out on pre-order updates, especially on Rio Grande and other board game items. Do any distributors offer premiums for pre-ordering yet (besides that Magic distributor in Grant's PAss OR - I forget their name, maybe "something Candy?"

    One quibble - I'm not sure about the need for backorders. It seemed to me that when I would have a backorder with one distrib, I would find it somewhere else and order it at distributor B, and then a week later, Distrib A is shipping me the same item. Often, it's an item for a special order, and now I'm stuck with it. Perhaps you would like to clarify more why you feel back-orders are so important.

    I really like your comment about "picture the face of who will buy x game". That's great. Of course, it requires a purchaser who is actually behind the counter, and regularly interacting with customers. Hard to scale if you want to grow...

    Do you mind defining, or providing examples in your store of what you mean by "Cutting Edge"?

  11. Without backorders, it's very easy for product to return to distribution without your knowledge. You have to carefully read the dailies from each distributor, and sometimes they're not terribly clear.

    For example, the ACD Daily today lists that they received a Rio Grande restock. It says:

    "Rio Grande Games – Stone Age, Dominion, Lost Cities the Board Game, and more!"

    And more? What if I'm waiting for a game that's in the "and more" category?

    I actually let my ACD rep track my back-orders and he tells me when they're in. The only issue is budgeting enough flex in the budget to handle returned items.

  12. "Cutting Edge" would be taking chances on fringe games, stuff that you think might be the next big thing or at least fill a small niche. A lot of the stuff we buy from our smaller distributors are in this category, like Uncharted Seas, Alkemy, Army Painter, etc. Anything from Indie Press Revolution falls into this category for us.

    It usually means you're doing some trail blazing and taking chances where you normally wouldn't, but it defines your store as that place that has unusual, cool things. You just have make sure you don't get buried in the stuff and you take a lot of input from customers.

    My metrics for cutting edge are different too. I'm more willing to give it time to sell, for example.

  13. A new miniatures system is a product line that takes a particularly long time to start moving.
    First, your early adopters have to purchase it, then there is the delay while they assemble, paint, and otherwise prepare their armies.
    Once they actually start playing, it generates a bit more interest.
    When one (or more) early adopters has CSPS (Chronic Slow Painting Syndrome) or other issues, this can create quite a lag between the initial interest, and the general interest.
    Add to this the fact that early adopters may need to collect, assemble, organize, and paint two armies in order to get the system to the table, and there is quite a lag.