Privateer Press Core

Privateer Press just announced a new program to focus on keeping "core" models in stock. This has been my biggest complaint with the company, along with rampant SKU creep. They're also slowing down releases so they can catch up on back stock production. Here's what they just sent out:

Finally, in order to assist retailers and support player growth we will be implementing a new order system this fall that will ensure the core items for each faction will be readily and easily available. The new order system will provide faster fulfillment on the essential products for both WARMACHINE and HORDES, meaning retailers and players will have access to everything they need to build a complete army and begin playing these exciting miniatures games right away. Items that are not part of the core list will continue to be available but will be subject to longer fulfillment times until our manufacturing capacity can be expanded to handle the high demand.

What this means is we should be able to keep promoting the game and attracting new players. There's a retailer mental aversion to pushing a game where the core is out of stock, since it inevitably pushes new players to buy online or at competing stores. Thanks Privateer Press!

Amazon and Us

I've been with the Amazon associate program since the beginning, although I haven't sold anything in years. Like everyone else in the program, I got the email stating the program was terminated for those in California, due to the new law that requires Amazon to collect sales tax if they have a presence in the state. I am that presence, so I must go. Amazon blames the governor directly for this, not the legislators or the broke counties and cities that desperately need revenue, and of course they don't blame their tax evading customers:

Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned before today will be processed and paid in full in accordance with the regular payment schedule.

As you may know, if you buy something taxable, you must always pay sales tax. If it's in a store, it's done whether you like it or not at the register. If it's done online by a California retailer, it's likewise done automatically as you check out. But what about when the tax is not collected, like from an out of state business? You're still liable for the sales tax and are legally required to report it on your taxes. Almost nobody does this.

You could argue that there should be a federal law that taxes online sales to fix this. You could argue, quite unpopularity, we should have a new state division of the franchise tax board to track down this money. You could also argue quite successfully that states are on weak constitutional grounds for playing these kinds of games with online retailers like Amazon. The bottom line, however, is that the tax is being evaded, the states need the money, and the online retailers are the biggest targets. It's them or you.

What most people online are complaining about is the requirement that they comply with the law. There's a messianic fervor about the Internet that defies logic and practical considerations and those who preach the loudest are upset about having to play by meat-space rules. A good example of this was an interview this week on The Daily Show by the New York Times media desk editor, Bruce Headlam. Speaking about one of his messianic reporters:

"Brian urges all of us to embrace Twitter," Headlam said. "I encourage Brian to send his expenses to Twitter. That doesn't seem to have taken hold yet."

This is not just geek culture, or an inter-generational divide. The dark side of the Internet has real world consequences.  The taxation issue deepens our income divide, as those with education, money and access, including online access, continue to accumulate wealth at the expense of those without it.

Whatever scheme we can come up with to collect lost sales tax is one more step towards a level playing field for brick and mortar retailers, and a re-funding of our cities, counties and states. It's not an enormous amount of money, but it's a step in the right direction. Online retailers got a free pass in the early days, a kind of nod for fledgling e-commerce. Unfortunately, monsters were created and none is bigger than Amazon, destroyer of worlds and loser of a billion dollars of their own capital. But hey, it's an Internet company, we're willing to look the other way for a decade or so while the new world order manifests. It's time to level the playing field and make everyone play by the same rules.

Summer Customers

During most of the year, our clientele is primarily gamers. This is not to say we don't get our fair share of non-gamers, muggles as I affectionately call them, it's just that we have a destination location, off the beaten path with close to zero foot traffic. In fact, the biggest challenge I have is making a store that attracts more of these muggles despite the location. There are hundreds of local gamers, but there are hundreds of thousands of local muggles. It's an uphill battle. Summer is when we see most of the muggles, and their muggle shopping patterns are quite different than during the holidays.

During the holidays, muggles are shopping for others. It is alright that our store seems alien and a bit wondrous because this is not their store.  Medieval banners hang from the wall, fantasy music wafts through the air, and the products are unlike anything they've seen before. This is not a store for them they decide, it's a store where their gift recipient would feel more comfortable. In reality, our store is carefully designed to make them feel comfortable while still serving our hobbyist community.

Our decompression zone, the first ten feet into the store is filled with comfort games, classic games like chess sets and party games. Most American consumers turn to the right, so our right hand wall has jigsaw puzzles, and the front quarter of the store is stocked with children's games starting at age two, and classic games that sell rather poorly for us, but are regular muggle requests. In fact, the entire front of the store is muggle friendly enough that you'll never see Warhammer, Dungeons & Dragons or nasty glues and paints unless you actually walk past the counter and tour the store. The game center is through a set of double doors that only the most curious ask about. As we've joked, it's a cradle to grave approach, with toys for toddlers in the front right and out-of-print roleplaying books in the back left.

Back to the point of this post, Summer muggles are shopping for themselves, for their own entertainment, and our store is certainly not what they're used to. First, customers are greeted. Greeting someone used to be customary in stores, but now you're either ignored when you enter a store (the preferred option it seems), or you're greeted by a paid greeter, whose sole job is to welcome you in some sinister corporate plan involving charts and graphs designed to extract the maximum amount of money from you. So the greeter is about as welcome as a used car salesman as you walk onto the lot. Irritating greeter, if you weren't ancient I would sneer at you. At our store, we gently greet them anyway, and hopefully follow up once they've gotten their bearings. Try getting a follow-up at Wal-Mart.

That follow-up is crucial, as most muggles shopping for themselves are going to be completely lost in our store. It's not that it's laid out poorly, it's that we've got so much stuff they've never seen before. Most stay in the board and card game section, which is by design. We've got 1,000 of them, of which, perhaps 50 are recognizable. They're arranged by theme, but likely a theme that only a gamer would recognize. The customer wanders around a bit confused, like someone visiting a zoo on a foreign planet. The animals look familiar, but they're somehow all wrong.  A rare few will look excited, while most will find it threatening. We'll begin to see that dazed look on their faces. Unlike board game hobbyists, most muggle customers are not enamored by new games. They really don't want to learn new rules. They don't follow gaming newsgroups or desire a new way to look at problems. So what are they looking for?

Most muggles, I'll postulate, are looking to repeat a social experience from their past with the help of a game. The sales person is key to helping them with this. The salesperson could do the easiest thing possible and direct them to the muggle games. Let me be honest here: muggle games suuuuuuuuuuuuck. Monopoly, Uno and Go to the Head of the Class don't hold a candle to Settlers, Guillotine and Carcassonne. They just don't compare in any sort of reasonable metric of funness. Even the venerable Risk kinda sucks by modern standards. Worse, our prices aren't great on these mass market craptastic games, so it's a potential instant turn off to the naturally suspicious muggle with their inward greeter sneer. If their touchstone is a Hasbro game and that game is 20% more expensive than Target, that tells their brain that the whole store is likely a trap.

Rather than direct them to muggle dreck, do your best to point them to better happy memory inducing games. This is where a sold salesperson will spring into action. What is it about the suggested game that has muggle appeal? If you use the word "mechanics," the muggle will think you're talking about cars and their eyes will continue that glazing process. In this case, you want to stress the social experience. Carcassonne, for example, is a lovely game because you can play it like a hand of cards, holding a conversation with each other rather than intently focusing on your next move. Forbidden Island is cooperative, so if you've got that one person who doesn't like games (nodding to the scowling customer on the left) or that one person who always wins (looking to the grinning fool on the right), this game is great because you'll be working together as a team to beat the game. Competitiveness is alright? Settlers of Catan is fantastic because you're still trying to win, but you have to compromise to do so, like in the real world.

Sell the experience, not the game. This is a variant of selling the sizzle, not the steak. Muggles don't care that the box contains 252 pieces (Conquest of Nerath) or that the game has a clever economic system for resource pricing (Power Grid). The muggle customer, more than any other, needs to be sold on the experience. What will it be like? Will Uncle John run away with the game? Will little Joey be playing X-box when he's out early? Will there be tears? Will we be able to play this with a glass of wine in hand?

There's also the attributes of the store itself. Can I trust this guy? Am I paying too much? How can a board game cost $42? There are a bunch of cues to watch for and variables to keep in mind. In reality, everyone wants to be sold the sizzle, this group just needs it a bit more.

Blew a Fuse

We blew a fuse this week, leaving one wall of our office without power and perplexing an electrician. If you found a refrigerator in a restroom yesterday, well, that's why. Blowing a fuse is also how I've felt in the store lately. This has been a very strong June, our first Summer since the recession where we've had a deluge of customers the moment the kids got out of school. I've had a hard time keeping up, to be honest, and that deer in the headlights look you might have noticed is one of astonishment and a little amusement.

Every store has items they never want to be out of stock on. I want to always have demand +1, even if that seems inefficient. I want to be able to arrogantly say on the phone in a snotty French accent: "But of course monsieur. What kind of game store do you think we run here?"  For us that list consists of:

1. D&D Player's Handbook (and now Pathfinder Core Rulebook)
2. Space Marine Tactical Squad
3. Games Workshop Black Spray Primer
4. Settlers of Catan
5. Munchkin
6. The latest Magic booster

Alas, failure. I would like to think that running out of 4 of 6 in the last week week says more about our unexpectedly high Summer sales volume than our lackluster inventory management. This is year four in our "new" location, although new is hard to pin on the place at this point. We've been here longer than our last place and once again we're into some new territory. I've never ran a store in year four in one location. I kinda like it.

We're definitely feeling some growing pains and issues like deeper stock and higher staffing levels are on my mind. One of the guys came in to clean this week and I grabbed him during a particularly busy part of the day. Five hours later he was still helping me and the bathrooms hadn't been touched (they have since). The staff is thankfully very competent and self reliant, so when I ask them if we should add more shifts, they often need to be prodded into admitting the answer is yes. So if you've found the service to be a little lacking lately, please let me know and also know we're watching it carefully.

I hate to post anything that says we're doing well, since it invites competition, despite my various disclaimers. How hard could it be?

1,000,000 Square Feet

Fred Hicks has an excellent article about making a living in the game trade from the publisher side of things, so I thought I would springboard it into what it takes from the retail side, the man in the middle. I'm going to start from the position that I'm doing it. I'm making a living running my store. It's not a great living and it's helped, but not propped up by, my wife who has a second income. I could do it on one income and still make house payments and own cars, but it would be a challenge. I expect to make more money over time, but it's an aspiration not shared by most store owners.

In the beginning.... there was capital. To start a game store requires a large amount of capital, usually $50,000-100,000. More is better. It's possible to do it with less if you have a lot of experience. I sucked my home equity dry to come up with my capital and tapped four investors. The investors were a good decision, the home equity, not so much. Often the capital is a windfall, like an insurance settlement, lawsuit gone your way, or your great uncle kicking the bucket. These windfall stores are often poorly planned and short lived.

Rarely does the capital come from the guy who saved up over the years, working as a clerk in a game store, and finally leaving the nest to start his own business. That would be ideal. In fact, consider vacuuming some floors at a game store for a while and earn interest on your nest egg instead. I vacuumed over 1,000,000 square feet of game store in my first three years. It's a humbling experience. How many times do you think I mumbled "I have a master's degree!" to myself before I could vacuum with a quiet mind? It's a bit like Tibetan Buddhist prostrations as a preliminary practice. It's a gut check. If I had $50,000-100,000 to give you as a grant (pretend I'm your great uncle), I would first insist you vacuum 1,000,000 square feet. Game store preliminary practices.

Then there is the capital paradox. Those who are savvy enough to run a business, to manage a $50,000-100,000 investment, know it's absolutely foolish to drop it into a game store. Heck, I did it, but have a hard time imagining doing it again. This is the hard lesson and inside joke of veteran store owners, the realization that they started from a position of financial ignorance. I'm contemplating a second store, so this has been on my mind lately. If I had accumulated this nest egg, I would be more likely to save it for my kids college, for retirement, perform some real estate jujitsu, or just sit on it, banking the $5,000-10,000 a year in interest. Heck, that's driving a new car for the rest of my life. But I'm not here to discourage you, I'm here to suggest how it's possible.

Let's take a step back. Before we discuss capital, lets look at the compensation plan. Most stores start from scratch, paying the owner nothing or very little, or promising to pay at some future mythical Middle-Earth calendar date. Screw that. Screw that hard. Before a penny was spent, loans signed or partners sought, I figured out how much I needed to live on and built a cocoon of a business plan around that number. That number was inviolate. It was the seed from which all things grew, including the financing. It was the end all, be all of agricultural metaphors. Nothing happened without that seed being nourished. If the plan couldn't support that number, then the plan was wrong. So how much money was that?  It was X. X is whatever you want it to be, provided your plan supports it and you have enough capital to support your plan.

X, your salary, is best understood as what you would pay someone else to run your store. If you can't afford this number from the start, you've already failed. Your plan is bad. You don't have enough capital.  X for me was in the low 30's and has grown to the high 30's over the years with heated discussions over cost of living adjustments. Profit distributions make up my income beyond that and only recently, after about 5 years of struggle. I don't get benefits, but I'm healthy. I don't get any fringe tax write-off type bonuses, like a cell phone or car allowance. I do the job. I get paid. That's because I have investors and investors don't like schemes to reduce profit, of which they get a percentage.

So what kind of attitude do you have to have to run a game store? You have to be both passionate and dispassionate about games at the same time. I don't have a lot of time for sentimentality. As my primary source of income, the store is run like a business, not a club house, hobby, relaxing second income, or place to spend my twilight years. It has to be successful. It must grow or die. We're not talking about inflation level, one step ahead of The Reaper growth, we're talking about double digit intelligent growth. High growth puts my kid through college and saves for my retirement. This is a key difference between my store and many other stores. There are games I love. Then there are widgets I must move. If your personality allows it, love your widgets.

In exchange for this meager compensation, this average store manager salary, plus potential future profits, you will never put it down. It will always be on your mind. You will work long hours, even when you're not there. Perhaps you have a day off over time or weekends eventually, but even then, you'll be thinking store, checking mail, watching Facebook. You are on call 24-hours a day.

Some will find this exhilarating and will integrate it into their personal lives successfully. Others will chafe at the leash (noose), find no rest and see little reward. They will seek escape and shortcuts that don't exist. There is a line of lazy business books that teach you how to blow off your business for success and profit. There is no shortcut. Oh, and this is your best case scenario, assuming that you succeed. There was a period of about 2 years when I wished my store would either break out and be successful or just fail. The purgatory period was excruciating.

So yes, I do it. You can do it. Do you want to do it? Do you have to do it? Is it in your blood? Is it all you can imagine doing? Are you clear it's about cleaning bathrooms and selling widgets and only rarely playing games you love? Is there anything else you could possibly do to support yourself? Most importantly, have you vacuumed your 1,000,000 square feet?

Top Game Companies

We all know generally what games are hot, but what about what game companies? Most fans don't care, but I've never actually crunched the numbers to check the relevance of the companies I deal with on a daily basis. The top 20 companies below comprise 75% of our sales. I can tell you that roughly half of what we buy only sells one copy, which shows tremendous diversity, but this 75% number consolidates "who makes what" to an extent I hadn't imagined. We deal with hundreds of companies, so 20 is a very small number.

In the top tier, there is Wizards of the Coast and Games Workshop. We have special relationships with both of those top companies, as partner or premiere stores (or whatever WOTC calls us this month). I think my store would flat out fall down and fail without one of these companies and if both ran into trouble, comprising a third of my sales, there would be no doubt. Those two companies comprise more sales than the bottom 17 of this list.

For the second tier companies, like Konami and FFG, we have direct accounts and cordial relationships. I talk to people in those companies on a semi-regular basis. After that, things get a little murky. I know some of the people at Paizo, but there's no real business relationship available to retailers. Further down the chain, most companies we know only through their products and the occasional trade show meeting, or perhaps vague rumors of past eccentricities.

Notice that I included Coca Cola on the list, a company that outsells three of our top 20 game companies, including the likes of Bandai and Asmodee. I would like to draw some sort of lesson or benchmark from that fact, like, if when a company falls below the Coke Benchmark, perhaps some sales resuscitation is necessary. 

Despite the Coke Benchmark, I still consider every one of these top 20 game companies to be key to our success and I seek out their products when I can't find them. In a sense, this is also a kind of game industry index of sorts, albeit one very specific to my business. It would behoove me to read the emails and follow the news of index companies more carefully than others. If they were publicly traded, I would have news alerts sent to my cell phone.

Cars!! (Off Topic)

 

Each Summer I get the urge to hit the open road, which usually results in talking incessantly about cars. It's kind of in my blood from my childhood in Southern California. If your 12 year old has a subscription to Road & Track, you may be in for trouble down the road. Consider early financial counseling as a necessary intervention.

I think it started with Top Secret characters, and the horrible system of allowing players to buy anything they could find for sale. Road & Track was not just something you daydreamed about, it was a rules manual, with 0-60 times, top speeds, and cool automobile diagrams that were as gamy as anything put out at that time. The Auto Trader was our equipment list. Remember, we wouldn't be driving for another few years, so what did we know? Put a Corvette engine in a Ford Fairmont? Why not? Still, today I wouldn't consider driving a car that one of my Top Secret characters couldn't at least grudgingly accept as kinda cool. Sad? Immature? Absolutely.
 
In my past life, the desire for a new car would result in something approaching instant gratification. Nowadays, it means saving money first, which I began to do recently with my trusty marble jars, used previously for paying down debt and now for saving up for a down payment. For every $100 I save, a marble is moved from the full jar to the empty jar. It's a visual reminder that I'm working towards a goal, making progress and need to be patient. I get my son involved too, to help teach the lesson I never quite grasped.

Then Saturday hit, so to speak. My wife's car was smashed pretty good by a hit and run driver. She was alright, as was my son, but by the next day, with everyone safe and sound, I was car shopping in earnest. Her car might be repairable, but, you know, it pays to do some research. With only four marbles in my jar, rather than the fifty I had set as a minimum, my day dreaming was given up for the sober reality that I would need to make a more spartan purchase.

The car would need to be new. I'm the kind of person that gets irritated with other peoples cars pretty easily, plus I meticulously care for my cars, which helps if I get them from day one. Otherwise I'm out there replacing trim pieces and repainting door panels.

I've given up on wagons, which was where I was headed last June. I don't think the family is getting any bigger and my son just gave up his car seat for a booster seat.  Factors like fuel economy play a bigger role, with the requirement that it has to be fun to drive. The magic engine for such things seems to be the turbo four cylinder, as much as I like to hype diesel. I looked at the new Buick (which I blogged about), can't stand the boy racer MazdaSpeed 3, and generally despise Japanese appliance cars like Honda or Toyota. After a while, the field narrowed to the Volkswagen GTI.


Yes, you probably had a cousin who had terrible problems with VW or perhaps you were burned. Personally I've had a couple of Jettas and they were fantastic and reliable. They were gateway drugs to harder German autos. Consumer Reports recommends the GTI and it's constantly on top 10 lists of all sorts, so perhaps their shaky reputation has been somewhat redeemed of late. So a base, four door GTI is what I'm waiting to buy if the the insurance company can get their butts moving and declare my wife's car dead or alive. I'm hoping for dead, despite my four marbles.

P= < PITA

Game stores are stupidly inefficient. We just had a record month at the store and the major concern going forward is how to scale up the necessary infrastructure to meet future demand without self destructing. For example, at a certain point, additional staff and additional inventory are necessary to keep up with demand, but the timing of those two variables is crucial, as they often add costs far in excess of their benefits.

There is no clear economy of scale. When you go out and talk to shop owners with significantly larger operations, their eyes will glaze over and they'll fall into nostalgia about the better times, the easier days of owning a smaller store. You see, their lives are far more complicated and fret with risk than the smaller store owner, often with little more to show for it. Payroll is larger, the credit card bill is enough to consider leaving for Tahiti and never coming back, and the balls in the air seem only to get more numerous and heavier.

This is my way of leading into one of (if not the) key variable for how I run my business:

Profit equals lessening pains in the ass

We're constantly on the look out for new ideas that are secretly hiding the fact that they'll be a major pain in the ass, or even a minor pain in the ass upon implementation. For example, selling Magic singles is something every self-respecting game store owner does if they're big into Magic, but it's a major PITA. We recently doubled our Magic singles sales thanks to more aggressive buying and a rise in interest in EDH, but it still means Magic singles are far less than half of 1% of our overall sales. In exchange, we have buy lists that need updating, cards that need sorting, customers that need watching for hours at a time and micro-purchases that distract us from the big picture. Why do we put up with such a major PITA? Because Magic singles are a major key to selling packaged Magic product, which unlike less than half of 1% of our sales, is in fact our best selling game in the store.

Game space and organized play is clearly the largest PITA ever for a game store, but with sales increases of between 40-60%, it's a PITA that's crucial to the business. Some PITA items that have us scratching our heads: the coffee shop idea. How much of a PITA would it be for everyone on staff to have to divert their time between selling games and making mocha frapawhatevers? Adding Warhammer novels: How much of a PITA would it be to have to shrink wrap every novel so our gamer crowd doesn't turn the place into a reading room? Some products, very few, are clearly a PITA based on their inability to be secured against theft or because they break, so we don't carry them.

Of course, there are examples where we weighed the PITA factor and went for it anyway. For example, the Yugioh Duel Terminals are huge for us, despite the enormous initial investment and threat of mayhem in the store. Lines of people blocking the door and electronic noises were considered a potentially unacceptable PITA, that have thankfully been minimized.  The $1000 in product required to get the Fantasy Flight Media Center was a risk and a potential huge PITA as we added potentially distracting and mood altering multimedia presentations to the store. Selling snacks outside of a vending machine is far more profitable, despite it being a big PITA, as I interrupt important business for the occasional Pop Tart or Snickers bar, so we continue to do it.

In general, the PITA factor plays a significant role in any financial analysis, creating a kind of PITA offset or variable that takes clearly profitable ideas and knocks them down a few pegs, or kills them entirely. Some stores find the very basis of running a successful game store a PITA and sabotage themselves accordingly. Having clean restrooms, odor free game rooms, and organized shelves is apparently a PITA for a significant segment of retailers. In a sense, they've decided that having children and moms (muggles for the most part) in their store is a huge PITA. They make their decisions accordingly.

Note that I have not put customers into the PITA category or even a particular game. That's what we do. That's our core competency. There are clearly games and groups that are a PITA to be sure, but that's the kind of PITA we signed up for. We don't whine about making money by selling games while it says "games" on the sign out front.

The advantage of factoring in the PITA factor is we can be much more efficient. We aren't sorting cards, making mochas, or worrying about lounging readers instead of doing our core jobs, selling games and making money. If you figure a game store is already on the edge of inefficiency, even when it's wildly successful, eliminating the PITA is essential, not some luxury.