An Introspective Year

The big news for us this year is we're deciding whether we want to stay in our current location or move to a bigger one with lower costs. We've got a little less than two years left on our lease, so this is the time to start looking around if we plan to move. Some landlords can lock in leases this far in advance, if you can cut a deal, and there are a lot of eager landlords right now. We're leaning heavily towards staying in our current location, if we can get our rent locked down to something reasonable. We just haven't tapped out our existing space yet, as much as we would like to run regional events and mini conventions. Last week saw a flurry of activity on this front as it became clear we were about to commit the store for another term in one form or another. This will be finalized sometime in the next couple of months.

It's a bit like a five year term of office, one which you can't walk away from because you've got bigger plans. Starting the store was a dream job, but it was a dream based in different circumstances. My wife worked, we had no children, and my house was a retirement vehicle rather than just a place to keep my growing miniature collection. I was an oblivious DINK with a business plan. All I had to do was make the mortgage payment and I was set for life, because, you know, housing prices only go up.

The world has changed dramatically in six years, and my life has changed with it, vastly for the better overall, since I'm happy, but with some exceptions. I don't believe I need to ask the question, what do I want to do with my life, because I think that's more malleable nowadays. I do need to ask where I want to be in five years, since I'm not getting any younger. I now measure my life in how old my son will be in five years, rather than just my needs. That's eleven years old, seven years from needing to start his college education. These numbers might seem big to you, but retail is slow and predictable for the most part.

So one of the best things a stable business can do, so they say, is take time to figure out what you, the owner, wants out of all this. A lease will definitely get signed, but I'll be working on long term thinking for myself and the business in 2011. If there's two attributes I would assign myself, it's impatience and narrowly defined ambition. The impatience aspect drives me mad in retail because it's just .... so ... slow. The ambition allows me to occasionally harness my impatience and turn that nervous energy into something cool. More often than not it fails, and that's alright when it's small, and I've learned to take smaller trial and error steps to avoid making big mistakes. I'll be doing a lot of introspection this year reconciling the two. It's mostly an introspection year because we've stopped our rapid growth. We're established, profitable and stable, which for me is a big yawn.

So how to be introspective? Next week I'll be on a retreat, a mini-vacation to try to get centered. That sounds very new agey, but the business has a tendency to take over your thought processes, especially with social media marketing and a business open 100 hours a week. I was originally going to bring business books and materials with me, but instead it will be business free, with no computer, cell phone or any business distractions for four days. Just meditation, exercise, good food and soaking in hot springs. If I was a computer, I would be cleaning up my hard drive and doing a deep de-frag. It should be about as exciting as watching a hard drive de-frag, which is what I'm after.

In March I'll be at the Gama Trade Show. For me trade shows are inspirational. There are always interesting people doing interesting things, or what I'm doing, but better. I've always come away from shows brimming with new ideas and knowledge of new products that always make the shows profitable. Next year I hope to go to New York Toy Fair, to get a larger perspective on the game trade. For now, GTS is what I can afford. I think New York is the better show, but it's a no nonsense affair that's very expensive to attend if you're not local. It's a buying show, and my money would be all spent getting there.

In a perfect world I would do both of these types of refreshes on an annual basis, but I've been hunkered down with bad economy fears and my own issues. My vacations have been stressful Disneyland trips and I haven't hit a trade show in three years. If you're lucky like me, you've got your own plan for some introspection in 2011. What do you have planned?

D&D and Pathfinder Sales

I crunched some numbers comparing last years sales of D&D and Pathfinder. We're somewhat unique in that our store has very strong sales of both lines, with vibrant organized play and a full line of each brand. Just take into account that we're just one store and not indicative of all stores. Here's what we discovered based on 2010 sales:

 

Some key points:

• Pathfinder and D&D rulebook sales are not that different, except that Pathfinder does it with a handful of titles, while D&D does it with many. About 60-65% of each lines sales are rulebooks.
• Individual adventures are weak sellers for both brands, while Pathfinder has pioneered the "adventure path" model, which accelerates sales and folds in supplemental materials. If you included supplements and adventures in the same category for D&D, there wouldn't be that much of a sales difference between the two brands.
• Efficiency seems to be what stands out for Paizo. Fewer, better accessory books accelerate sales. Adventures and supplements, normally slow sellers individually, sell well when combined in adventure paths. Flip mats and tile packs are strongly supported by Paizo, with strong resulting sales, while WOTC intentionally phases out their tile sets. 

Feel free to draw your own conclusions or dispute mine. D&D is still about two thirds of our "D&D-ish" sales, compared to one-third for Pathfinder, but the numbers are narrowing.

Marketing Shift (tradecraft)

It's very easy to get into a marketing rut. Advertisers will regularly tell you the survival of your business depends on their services. The monthly bills seem like insurance policies and the efficacy of marketing is so nebulous that it's difficult to know if your money is well spent. It has a superstitious element to it, where you go through the ritual in fear of what will happen if you don't. Online marketing promised to get away from that, with metrics that are easily measured. With Facebook and Google, you pay per click. You know people are interested when they click, as opposed to impressions (views), which are nebulous and have a success rate far below half a percent.

After a year of marketing on Facebook and spending a bunch of money, I'm suspending our ads. Here's how it worked for us: It gathered over 1,400 interested parties, targeting friends of fans and those interested in our more unique offerings. It's a fantastic medium for preaching to your base, but it showed few signs of actually creating new customers. In marketing parlance, you want to find suspects (those potentially interested in your product), turn them into prospects (those likely to engage) and then into customers (fully engaged). Facebook is brilliant at informing customers and turning suspects into prospects, but it can't close the deal. It can't turn prospects into customers. It doesn't work. I don't know why. So it's one tool in the toolbox, not the holy grail of marketing.

Google, on the other hand, seems to be different. I've only been advertising on Google for a month, but the results are curious. Search terms that get clicks are not the usual Dungeons & Dragons, Magic or 40K, it's Pokemon, Yugioh and Bingo. This is good. This means we're not preaching to the base but actually attracting people who don't know who we are. Honestly, if you've played Dungeons & Dragons long term in Contra Costa County and haven't heard of us in 6 years, you're clearly on a different frequency and there's not much I can do to attract you. However, the bingo crowd consists of the general public and the Pokemon crowd is likely parents researching where to engage with their kids new hobby. I do believe we've gotten some business from this too, as our calls and sales for those top clicked items have gone up slightly.

After a couple years off, we're returning to TV commercials. One of the post-recession trends in marketing is that online advertising and TV have rebounded strongly, while other mediums have waned. That's because TV, despite being an intensely fragmented market, more or less works. What I mean is that if you're in your living room in Concord watching TV, you have your choice of Comcast, Astound, Direct TV, Dish Network, Hulu, Netflix, a legally downloaded iTunes program, an illegally downloaded bit torrent program or a TV network website. Still, rather than focusing on who won't be seeing our TV commercial, we can pretty well target tens of thousands of people who will. Our cable ad will start in February on ScyFy during prime time hours on Comcast.

The key, as I mentioned, is to avoid being superstitious, going through the motion, writing the check each month in hopes of swaying the marketing gods, but instead to keep on top of those mediums and drop them when they stop working. TV is amazing in that people will come in mentioning they saw your ad many months after it aired. There's residual value in TV, although after a couple years going dark, that wears off. So it's time to build up some good TV karma.

Also don't forget the internal marketing we do, such as our Paladin Club which is still in force with existing customers (two-thirds of our sales are logged with a club card) and other "marketing" expenses, such as having staff run various events. These things are easily 1.5% of our gross sales, far more than what most game stores spend on their entire marketing programs.

Steaming Pile

During the peak of our holiday rush in December, an unassuming guy with a clip board was in my store, trying to get my attention while I juggled a long line of customers and an order that just had to go out. He agreed to wait in line, and when he made it to the front introduced himself as being from the Department of Agriculture for the county. I gave him a blank look, the confusion taking control for a moment while my brain tried to comprehend why the hell the county has a department of agriculture and, most importantly, why its representative was standing in front of me.

The agent peered over the counter, performing a cursory examination of my point of sale system, asked about my number of bar code scanners, wondered how I had flown under his radar, took a business card and departed. Meanwhile I was seething, trying to remain patient for what was clearly an insane individual who decided to grace me with his presence. Sometimes the local thrift shop channels them in my direction. But no, he was legit.

Then yesterday the bill arrived. Sure enough, the people of California had enacted a new tax on small business. $205 in my case, including $100 for existing and $105 for having a POS system with one barcode scanner. It's like a tax on progress, only applicable to forward thinking businesses that have migrated away from the inefficiency of the cash register. Want to raise state revenue? Require retail businesses to have a point-of-sale machine or pay a $205/year fine. At least then you'll have capital investments in equipment and services that lead to jobs and more tax revenue. This is like having a tax on wearing shoes or finishing high school, or... marriage.

In any case, the form had conflicting instructions to pay within 60 days to avoid a fine, but fine dates were only 21 days out. I figured my lack of farming experience must have something to do with my confusion.

The bottom line is that politics in this state preclude tax increases and our state is tens of billions of dollars over budget. Conservatives decry tax increases while liberals won't budge on public services. This naturally results in the nickel and diming of small businesses. We don't have a union or trade group to defend us, so watch as our business fees silently rise 20%.

This is something to keep in mind when you see shuttered doors of local businesses. The government is putting the squeeze on, but ultimately it's the people who approve these measures, such as the sales tax  increase in the City of Concord. Someone is going to have to pay for all these fees. Ultimately it's you. Today it's me.

The Middle Men

"About 50% of the human race is middle-men and they don't take kindly to being eliminated..." 
--Malcolm Reynolds

The modern dilemma for all companies that don't actively produce content is how to stay relevant to consumers who increasingly believe they're an unnecessarily evil. Some in the middle go so far as to produce content, including retailers and distributors who find they can open doors, gain industry insight and have a seat at the discussion table if they make something, anything. The rest of us try to focus on what value we can add to the equation beyond a fancy bag and a smile.

When it comes to game distribution, the most obvious of middle men, distributors have been criticized for not adequately stocking product. The distributor acts as the gate keeper of the industry. There's a sense that what comes through their doors is going to have a certain level of quality and relevance that should have application to at least some stores. Occasionally they fail, but most often they get it right, despite the grumbling. Still, they suffer from the lack of information issues that retailers deal with. We're all trying to figure out the fickle whims of the end consumer, and in the game trade fickleness seems far more pronounced than elsewhere. The down side to the distribution model is that a lot of the slow selling, innovative stuff has less of a chance to get into the pipeline. 

The alternative to distribution is for retailers to buy direct. I'll tell you now that you will have to be pretty special as a game designer for that to work. I might go out of my way to buy Apocalypse World direct, but I won't cross the street for Dogs in the Vineyard. Same author, same source, vastly different customer demand for a back list (older) product. There's this feeling from the manufacturers perspective that the distribution system or even IPR isn't worth the cost involved. Perhaps, but this is not the toy industry. Store owners don't have time to contact the thousands of little suppliers out there unless something special percolates to the top (like Apocalypse World). I'll also mention that Dogs in the Vineyard was the driving force to start our IPR account. Unlike the toy industry, we won't sell 50 copies of some indie product, it's more likely to be one or several. Three is a rip roaring success.

Of course the angry response to this is who tapped you on the shoulder and made you gate keeper?  That's the retailers dilemma. To stay in business we must supply our stores according to local demand. Does that mean we only buy top sellers? That would be nice. Comparing notes with another retailer this week, I noted that we sold over 750 different role-playing titles in 2010, and nearly half of those sold only one copy. It was the top 30% of those titles that performed well enough to carry the rest, meaning 70% of our RPGs are getting a free ride. If you buy RPG books from us, thank D&D and Pathfinder, even if you don't play them. This 70/30 scenario is our value as a specialty retailer and our defense against the big box stores who require a much more efficient model (they would only want the top 10% and would dump them when they dropped below that).

Perhaps big-box stores are straw men in this example. Our real challenge is the likes of Amazon and the various online discounters. How do we stay relevant despite the lower prices of online sales? We don't have the luxury of losing a billion dollars to bury our competitors over the last decade like Amazon, so here's where the thousands of dollars each month we spend on game space comes into play, money that I think best represents the higher profits of pre-Internet retail. We provide a play venue to both learn more about a game and a place to play. Some games are especially tied to new opponents, like CCGs and miniature games, while others not so much. Those not so much games, RPGs and board games, is where you hear the loudest argument against brick and mortar retailers.

I want to say that we're also an expert source of information, but it depends on what you ask. There's too much of it out there. We're a better source of logistical information. Where is that game? When is it coming out? We try for expertise, but those 750 role-playing games we sold are only about 15% of our stock. Imagine knowing all about them and then multiply that required knowledge by seven. We do our best and our emphasis is on being knowledgeable about gateway games. We should be able to tell you all day about Settlers of Catan, the 40K starter set or the D&D red box, but if you want to know the details of the latest expansion for Agricola, you probably play more board games than us and you're a better font of knowledge.

Of course, our main job, the part of retail I focus on the most, is having the stuff now. You would think this would be almost all of the job of a retailer. Perhaps in the olden days. It's an increasingly difficult task considering the fragmented gaming community and their diverse tastes. There's probably more product available now than ever before, but the Internet has skewed demand into twisted wreckage from a retailers perspective (such as the long tail, in which everything ever printed is still  available), or a wonderland from an end user perspective. This means we can't be everything to everyone, as much as we would like that; and we would like that. I regularly lament that our local tastes aren't more varied, mostly because the staff likes oddball stuff. At the same time I wish people would stop asking for that obscure stuff and settle into something more mainstream that we can get. It's the nature of this particular beast.

Still, I think we tend to be pretty good at having what most people want most of the time, with our remaining effort on enticing the others to wait for what we could get if they would show a little patience. The patience and continued patronage of our customers says it mostly works.

Mirrodin Besieged Pre-Order Deal

We had so much success with our tiered pricing of Scars of Mirrodin, I wanted to try it again with Mirrodin Besieged.


Mirrodin Besieged
Full MSRP:  $143.64

Pre-Order Pricing:

$104.99 Credit
$99.99  Debit
$94.99  Cash (or multiple boxes via any payment type)

Deadline to Pre-order:  January 22nd
Pre-Release Date: January 29th
Release Date: February 4th

Top 25 Role Playing Games of 2010

Every store is different and has their own unique list of top sellers. Here's what we sold in 2010, listed by quantity and excluding accessories like tile sets.

1. Pathfinder RPG: Core Rules
2. D&D - Player's Handbook 3 
3. Pathfinder Advanced Player's Guide
4. Pathfinder Bestiary
5. Dresden Files RPG: Volume 1 
6. D&D Fantasy RPG Box Set  
7. D&D Dark Sun Campaign Setting
8. D&D Essentials Heroes Of The Fallen Land
9. Dresden Files RPG: Volume 2 
10. D&D Essentials Rules Compendium  
11. Gamma World RPG
12. D&D 4.0 Player's Handbook
13. D&D - Martial Power 2
14. D&D - Psionic Power
15. D&D Essentials: Heroes of the Forgotten Realms
16. Pathfinder Gamemastery Guide
17. D&D Dark Sun Creature Catalog
18. D&D Monster Manual 3
19. Diaspora
20. Warhammer 40k: Deathwatch RPG
21. Legends Of Anglerre
22. D&D 4.0 Dungeon Master's Guide
23. D&D Essentials: Monster Vault
24. Spirit of the Century
25. 40KRPG: Ascension

In the past, D&D would dominate this list, but it shares only half of the top 10 spots (and half the spots overall), with three spots going to Pathfinder and the big hit of the year, Dresden Files, taking two spots. I thought the most interesting stuff was towards the bottom, where we see the success of several more FATE based games.

What can't be ignored is the success of the Pathfinder Core Rulebook. It's our number one best seller, despite being a full color, full sized, hardcover selling for $50 at a time when D&D is moving to a softcover digest for $20.

Selling More for Less (tradecraft)

2010 was the year of the expansion. It was a timid approach to an uncertain economy and there were few blockbuster hits in any department. I expected this of 2009, but I was hoping for more risk taking in 2010. I know I started looking towards the future rather than hunkering down. Then I wondered if perhaps I was missing something. I hadn't gone to a trade show in a few years, although I felt pretty plugged in online. One investment I'm making for 2011 is my first trade show in three years. I have to at least confirm that the game trade is doing what I think it's doing.

The numbers seem to hold a story. During the holiday season I had this distinct feeling that something wasn't quite right. There were no big hits and nothing terribly exciting. For sure there were good games and a ton of new expansions for great games, but it seemed like we were spinning our wheels to some degree. When I looked at the numbers, I found something surprising. We were selling 15% more stuff, yet our sales weren't going up compared to the year before. Our sales were flat, but we were working harder.

Why? The average price of what we were selling had declined by about 10%. This isn't the price of an individual item, there's no deflation here, but instead an average price across a department. This came from a changed marketplace. Not only did game expansions play a bigger role, which are lower priced, but the best selling games in general were less expensive. For example, the San Francisco Chronicle does an annual board game gift guide and their family game recommendations dropped from an average price of $34 in 2009 to $26 in 2010. I wonder if that was intentional. I know there were comments about the "high" prices of their recommended games on their website in past years. Then I looked at the larger picture.

Our average price per item sold overall dropped 10-15% each year for the past two years. That's a cumulative drop, so that the average price of an item sold in 2008 was 25% higher than 2010. It wasn't just board games. Miniature games declined, role-playing games declined, even classic games like chess sets.  What else went up? Our used games were bought at higher prices year over year, probably as trade-downs from new games. Some things didn't go up, like items that had price increases and no in-store alternatives, such as paint, dice and magazines.

Don't get me wrong, our sales each of these years went up and we haven't had a down sales year, it's just that we're selling more stuff at a lower price. It feels a bit like a receding tide, as we only have so many customers and if they don't buy more to make up for their lower priced purchases, it leaves us in a bind. If D&D Essentials knocks the average price of a D&D book from $35 to $20, store owners need to find a way to get that customer to buy twice as many books or they need to find twice as many customers. I hate to say it, but those new customers don't exist. Granted, perhaps more people will buy the books at $20 than $35, but I'll tell you that hasn't happened. D&D sales in 2010 were the worst ever for us, yet I don't feel people are abandoning the game.

This is what instinctively leads me to search for what's next. What else can I sell? Are there untapped markets? So what's on my mind? It's not more 40K and D&D, because there are only so many customers for those, it's things like Legos and coffee bars. It's basically a lack of confidence in the industry to provide. It's the retailers bind. We're middle men after all and only have control over how we sell what we're offered. I've made enough mistakes to know not to buy deep into Legos or build a coffee bar, but in my fantasies these alternatives are more confidence inspiring than yet another miniature game.

Why has this happened? Here's where you can speculate endlessly. The Internet has certainly wreaked havoc in devaluing game products. If you wonder why we don't stock that $70 high end strategy board game (especially war games), it's because many of your peers buy the higher end stuff online and buy the low end stuff from us. We still have over 1,000 board and card games in stock, but we're especially careful at the high price points because of Internet poaching. So the Internet has done some of this. Overall this means we'll stock fewer of those games, and since brick and mortar is still the lions share of retail, it sends a message back to manufacturers to make fewer of these types of products, both in breadth and in quantity printed. Meanwhile, frustrated publishers blame us and attempt to sell direct.

The economy is a big part of it too. Entertainment budgets shrink as income is reduced or appears uncertain. $35 D&D books are a tougher sell and we've seen big declines over the years. Also, with a decline of D&D and a move to Pathfinder in our store, a fun supplement book moves from a $35 D&D hardcover to a $20 Pathfinder softcover. You're not going to switch because of price, but it's reflected in our overall sales. In our miniature ranges, those on limited budgets are less inclined to buy the cooler troop choice in metal when a perfectly adequate one is available in cheaper plastic. I've heard many a conversation over the last couple of years about how to build the cheapest army of a particular type. Junior can play with a less expensive chess set until he shows he's both committed to the game and responsible with his things. I had that conversation half a dozen times this holiday season as parents balked at a nicer, more expensive chess set.

Lower price points are great for the consumer, to be sure. However, it's only a boon for the store owner if it means customers have more money to spend on other hobby games, rather than a new iPad or rent. Sometimes that happens (overall it did), but sometimes it doesn't (look at D&D). Again, my sales are up year over year, so I can't complain -- only worry and ruminate.

Finally, is there an upside? Is there a price barrier that keeps people out of the hobby that's being broken down? You tell me.