Thursday, September 23, 2010

Success Cycle

I'm going to throw a formula for success out here, as if I'm some expert or that what I say applies to everyone. Let's give it a shot. Let's play pretend. Feel free to rip it apart. Ready?

I think the secret to a successful game store is in two parts. The first part is operations. It's paying rent, utilities, and ensuring that sales are high enough to cover expenses. It means managing events, appropriate marketing, and understanding the business cycle. It's probably what most game store owners consider 75% of their job. Easy enough, right?

The second part, which I believe should be as divorced as possible from the first part, is ordering and inventory management. Most stores integrate operations with inventory management to an unhealthy degree. When do you order product? When there is money left over. When does it come in? Whenever that time comes. When do you satisfy customers? Whenever they happen to roam in and find the shiny. I think this is failure incarnate.

So here are the four steps to how I think it works:
  1. Knowing what they want
  2. Having the budget
  3. Receiving on time
  4. Satisfying demand

Sounds easy, right? Let's look at it more closely.
  1. Knowing what they want. This means understanding what your customers want. It means hitting the street date so that they're trained to come in at the right time and buy the stuff. It means buying the appropriate quantity so that it is all sold and your money is back in your bank account before the bill is due.
  2. Having the budget. This goes back to Open to Buy, a separate budget that is independent of operations. The store has low sales? It's a slow time of year? The rent is due? It doesn't matter. It means you have enough capital to have this separate budget always. Sometimes the budget is stretched. Sometimes you are over budget. However, by having this budget, you are free to order what you need, when you need it. 
  3. Receiving on time. This means hitting the street date as close as possible. I try to hit every street date, always. Sometimes I miss it, but it's usually a logistical problem not a budgetary problem. This means my customers know exactly what to expect from me, which means they can rely on me to get what they want. So they tell me what they want. Then I get it. Then they buy it. Sounds pretty simple, eh? It's only possible by knowing what they want, having the budget to get it, and getting it when it's expected. I also make sure to handle special orders promptly, which means I can get anything you want in a timely manner.
  4. Satisfying demand. Getting the first three parts down means you have knowledge of not only what they want, but how many, and for how long. You don't get this information without consistently performing steps one through three. Your data is useless if you don't hit the dates, as your understanding of demand is flawed. Stores wonder why their customers aren't buying the new stuff, but many miss street date or have a high level of out-of-stock items. Open to Buy also means you always have high performing items in stock. This goes back to Turn Rate Analysis or whatever metric you use to determine sales performance. It's all integrated. Satisfy demand consistently and customers will go out of their way to tell you what they want, completing the circle.

This takes capital to make sure your Open to Buy budget is available. It takes discipline to maintain the budget and buy even when you're unsure or when your operations expenses are coming due. It takes patience and social skills to listen carefully to what your customers want. It takes time and effort to communicate what you will be getting and when it will arrive. If you find yourself at the end of the year with a little extra money, consider implementing this.

You too can work long hours with a medium income if you just follow these four steps.

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