Reactive

As retail store owners, we are not dinosaurs. We use the Internet for marketing, have sophisticated point of sale machines, and generally keep up on business trends. Yet, we are inescapably middle-men. There are ways we can innovate how we operate our business, but inevitably, we're about providing excellent service and waiting for other people to be innovative so we can extend product to the public.

This leads to some anxiety as the world moves to more digital media. PDFs, mobile applications and distribution methods like Kickstarter regularly make end runs around our tier as producers of work sell directly to customers. Technologies move increasingly fast, like how 3D printers threaten to go from devices owned by universities and large corporations to inexpensive household appliances nearly instantaneously. How many years did it take photocopiers or the Internet to threaten publishing? Well over a decade at least.

The tendency as a retailer is to want to get in on the action. How can I sell PDF products too, perhaps when customers buy print products? How can I create a print kiosk or buy my own 3D printer to better serve my customers and avoid obsolescence? There is no future in historical models, bridge scorepads and jigsaw puzzles, as we see every day. so we want desperately to avoid being left behind.

Publishers tend to hedge too, with their denial of the importance of Internet content (Wizards of the Coast), or an attempt to subvert digital piracy by making their game supremely physical (FFG with Warhammer Fantasy Roleplay). These are all wrong answers to the question. When these technologies threaten the existing paradigm, the answer is elsewhere, in pivoting, in taking a very good model, be it publishing or retailing, and doing something other than riding coattails or ameliorating a terminal problem.

For stores, this might mean a level of diversification so wide that the death of a segment is not a danger to the organization. Most stores nowadays could walk away entirely from role-playing games, and many have, while in decades past such walking away would be unthinkable. We stock tens of thousands of dollars of miniatures on our walls, yet could we conceive of a model where a 3D printer would make them all obsolete? What are we doing right now to prepare for that?

It might mean a business model that pivots to services. Although I don't see a bowling alley model working for game stores, where a significant amount of money is generated from renting game space, I do see the appeal of the coffee shop game store or the cafe game store. I think that's a very dangerous road to go down, as game stores have nothing to do with the hybrid business in question, but I get it.

This pivot is also why I'm constantly on the look out for signs of potential in selling toys, hobby supplies, model trains, Frisbee golf, and as one of my business partners joked one time, women's shoes. When your dominant paradigm is being subverted, the tendency is to think everything is up for grabs, right or wrong.

All this speculation comes from the anxiety about the future and the fact that we're middle-men, and besides doing our existing job better, we're primarily reacting to what a fairly hostile and often resentful trade sends our way. They regularly bite the hand that feeds. I don't have the answers, but I don't see myself selling women's shoes in 10 years or slinging mochas.

Point of Relevancy (Pathfinder and D&D)

There was a point in our sales where Pathfinder, once a minor player in our RPG section, began to outsell D&D more or less permanently. Now Pathfinder has done what I wasn't expecting, which is exceed sales of both brands combined from a few years ago. Part of this is the growth of our store, but a larger part is the elements that support Pathfinder, such as the quality and quantity of releases and the high quality of the organized play.

So on a day where the future of Dungeons & Dragons looked a bit uncertain, I asked if we really needed it. Sure, we want it. Sure, the sales would be nice. However, the actual need, the revenue that Dungeons & Dragons once provided the store, that slack has been taken up by Pathfinder. If a strong D&D does return, it will be that much better for our sales and for our customers. However, a line has been crossed.

Booming Warmachine

A year ago, Warmachine was one of those games on life support that had quite a few problems. First, there was no beginning or end of the range and the creep was overwhelming. Privateer Press never discontinued models, while at the same time putting out a handful each month, every month, for many years. It was one of the things people warned me about Games Workshop when I first got started, a company that does a very, very good job of managing their "SKU creep."

Second, there was no new blood, as our existing Warmachine crowd was rather insular, and informal, and not very aggressive in getting new players into the game. As a retailer, I tended to divert new players to Warhammer 40K instead, a sure thing if you wanted table time. Our primary Warmachine booster was deployed to Iraq, so we were handicapped in that area as well.

Third, Privateer Press was having a heck of a time keeping anything meaningful in production, with long outages of important product and an emphasis on new releases, many of which our insular, small crowd had no interest in purchasing. But all this changed. How?

SKU creep is still a big problem with Privateer Press, with no discontinued product, but they took some advice from retailers, myself included, and included a "core" list of product that every store should carry. The core list isn't perfect, and it contains a lot of "flavorful" models that nobody really wants to play, but by creating this core list, retailers could be assured that within the wide swath of product, they were stocking the important stuff.

Core for me meant a vow to ALWAYS stock and hunt down that product, wherever it could be found, even if it was back-ordered from my primary distributor. This worked wonders and is working well with Reaper Miniatures too, where I created my own core based on their best sellers (now they need to fix their production problems).

Privateer Press addressed their outages by taking a breather and catching up. New product releases stopped for a short time and eventually a deluge of all those core and other models finally made a return, and stayed in distribution, more or less, since then. It is still often a challenge to stock Warmachine, because of distributor outages, but nothing like before.

Finally, David, our Warmachine booster returned from Iraq and jump started our Wamarchine community. We also hired Brendan and Charlotte who play and support Warmachine pretty intensely and are often happy to introduce new customers to the game. Having the people in place to take advantage of the Privateer Press changes have been vital to the games survival in our store. What was once a game on life support recently matched sales with Warhammer 40K.

The Rainbow is the Gold

All business ventures should have an exit strategy, an end goal in which you've accomplished your objectives and are on your way, hopefully with cash in hand. So what can you expect from a game store on your exit? While many businesses might be sold for multiples of their profits, say 3-5 years, a game store is more likely to get a multiple approaching 1-2, which is often not worth the effort. Often its hard to find a buyer outside of your local competitors as most stores are a little more than "buy a job" operations, rather than a turnkey operation where the owner need not be present. I know one of my objectives is to make my "buy a job" as turn key as possible for later flexibility.

Game stores are a lot like classic cars. You can buy one and spend a fortune in time and money restoring it as your labor of love. It makes no sense, as the value of the car isn't likely to ever approach your investment. Then, when you're done, some guy swoops in and buys it for a fraction of what you put into it. Most are just relieved to put the project behind them. That's a common game store sale scenario, too. Some guy, often another store owner, swoops in and takes your store off your hands. Ideally, if you want to start a game store or expand your "empire", be that guy. However, I've seen more game stores just close up and disappear rather than bother with the hassle. You can often get more money from liquidating than selling.

So where is the value in the game store? It's clearly not at the end of the journey. If you're lucky, you work to take your profits along the way. You've built this high performance car that only you want to drive. You're constantly tuning it, listening for misfires, vibrations and other signs of inefficiency. Nobody will ever give you appropriate value for this car of yours, so you need to enjoy it while you have it. So in the case of the game store, you want to take profits when you see them while simultaneously growing the business with the objective of taking larger profits later, rather than some end goal.

It's likely you still have objectives unmet in the business and if you didn't  before, it's likely you add some to justify your new life as a retailer. The danger, I think, is spending all your money on these perpetual objectives rather than taking draws to reward yourself.

My goals involve building the business to a modest, middle class lifestyle that allows for things like a college education for my son and retirement. You would be surprised at how ambitious this requires me to be, and as I've mentioned before, the best asset one can have when owning a game store is a WWGJ (wife with a good job).

My same financial goals could be accomplished with a mediocre day job at a fraction of the struggle. However, in California, at least, such store owner objectives require multiple stores or really big stores. If you figure a modest 5% profit margin plus modest salary, you can quickly figure out what amount of money you would need to be making to qualify for something like a home loan, or the ability to save tens of thousands of dollars for major life events.

On the subjective plus side, if you can make this happen, accomplish all your life goals without a day job, you're likely a very happy person. One thing you notice when you love your job is how few people like theirs. Mondays on Facebook are often hard to stomach with all the moaning. To wake up in the morning happy to go to work while still fulfilling your financial obligations seems like something most people should be able to accomplish, but game store owners are not like most people, as you probably know.

Structural vs. Cyclical

I listen to Bloomberg Radio on my commute rather than the lengthy gaming podcasts I should probably be listening to. It gives me a 30,000 foot view of the world through the eyes of finance. A big debate between economists right now is whether problematic aspects of the economy are structural or cyclical.

Cyclical problems tend to right themselves over time, if the rest of the system is in balance. Structural problems are more serious, and require more severe measures to fix them, or accepting that nothing will. For example, if unemployment is cyclical, it means the natural supply and demand forces will come back around and solve the problem and there are things we can do to nudge it along. If unemployment is structural, such as in the demand for jobs doesn't match the skills of applicants, it means those cyclical forces won't be coming around. The solution then is not to press on the usual levers to fix unemployment or (rarely) to do something more revolutionary.

Game stores and other small businesses (and your personal life) can also be divided  between structural and cyclical. For example, a bad lease or horrible staff is a structural problem. It's unlikely that these problems can be resolved by waiting for outside forces to bring improvement. In fact, one of the disqualifying factors for buying a business is often a bad lease, as it's nearly impossible to dump it and moving loses too much momentum. Staff can be fired and new staff replaced, but it won't happen by itself and requires taking big chances on new people. A bad staff is structural; losing a good employee is cyclical.

Cyclical game store problems aren't nearly as bad. Sometimes they're product slumps. For example, I was looking at Games Workshop recently, trying to determine if we (they) were having a structural problem or a cyclical problem. Most signs point to cyclical. If I was under the impression a product line had structural problems, I would be inclined to dump it. A cyclical problem can be ridden out or better yet, measures taken to to prop it up (although it's often easier to accentuate the positive).

Then there's the big picture. No, not life, which could be argued either way, depending on your beliefs, but the game trade in general. The overall running of a retail store has many structural problems. Some I've alluded to before: resistance to change, messy to manage, difficult to exit, and an industry populated primarily by people with day jobs not in the field. These structural problems create the opportunity for our businesses to survive, rather than spelling its doom, mostly because those who understand business can't be bothered with the intractable structural problems. The game trade is not where rational people choose to be; rational meaning the usual pursuit of getting a solid return of something tangible resulting from hard work.

Other game trade issues are likely cyclical, such as the distributor wars we're seeing now with various exclusives, the edition wars in role-playing, the struggle to find and settle on affordable raw materials in the miniatures trade, the fad in deck building games and the enormous boom in collectible card games. Identifying these things as cyclical prevents you from making big decisions that will likely end poorly, like starting a card shop or building a community around a fad.

One thing to watch out for is how people use these labels to get desired results. Declaring something structural (even when they don't use that language) is a great way to avoid having to fix something. My employees sometimes want to declare problems structural. Declaring something erroneously cyclical can allow you to delude yourself into thinking things will get better with time or more effort. Often more complex problems can be a combination of both. Properly defining a problem as structural or cyclical can be as important as the subsequent action you take to resolve it.  That said, declaring in your mind a problem is one type or another can help you form the resolve to solve the problem, whether it be "wait and see," better promotion or walking away from a terminally structural problem.

Expectation and Reality

The expectation of owning a game store is that we are experts. We know the intricacies of blending paint, possess detailed knowledge of indie role playing games, know the winning card combination of the latest Magic set, and can comment extensively on the deepest strategy board games. We attempt to rise to those expectation, feel inadequate when we don't, and strive to have at least one area in which we've achieved some mastery. Mastery is what it seems like most hobby game customers are looking for, almost like an ex-athlete coach or a master painter who can show the way for budding artists. Product knowledge is at most 10-15% of my job, but when it comes to customer interactions, it's everything.

Unfortunately, this mastery conundrum is not really at the core of the business. Our core job is to cater primarily to hobbyist beginners. Just yesterday I helped a father select a role-playing game for him and his two sons, assisted a customer with choosing primer and teaching basic dry brush technique, recommended a Magic intro pack to a boy who was starting out, and suggested a board game gift for someones sister. This is really what our store is about, but strangely, we're not as prepared as we should be for this type of assistance. When it happens, we have to shift gears and think deeply about what we're actually being asked. It's not as natural a question as it should be.

The issue is we're primarily in contact with experienced gamers, in fact, the most experienced gamers, as they come in most often and spend the most money, usually about once a week. We talk with them constantly about new releases, issues they have with their games (oh god do we discuss this), and cutting edge stuff they want. They reward our experience and knowledge by spending the most money of all customers. Customer interactions of this type are probably around 80-90% of my interaction (and can actually scare away some of the neophytes). However, despite the many questions and the money they spend, these guys don't really need us.

In fact, there are quite a few experienced gamers that have "transcended" our store entirely, as they no longer are getting the value we once provided. Anyone who is deeply serious about their game will likely have more detailed knowledge than anyone on staff and unless they need a place to play, we don't provide much value for them. I figure we stock about half of what they want, the other half being obscure and unique enough that we often can't even get it.

As store owners and employees, we're conditioned daily through customer interactions to chase these transcendent customers, to want them in the store, to adjust the business process in every way to make it more about them, and less about the beginner who walks in the door. For example, our "new arrivals" sections have been changed to at least contain 30 days of new product. For a while we were looking at a 7-day turn around, based on those high frequency customers (beginners are oblivious to this). That beginner is the core of our business, but we forget, both because of the interaction frequency and the Pavlovian effect of big spending regulars.

As gamers ourselves, we want very much to cater to that transcendent gamer, mostly because they are somewhat like us in their desire for that game just over the hill or that ultimate character build. We (often mistakenly) seek out the fringe products that we know we want and that will satisfy the transcendent gamer, but what we should really be doing is focusing on the beginner.

Beginners need more signs (even if we don't think they read them). We need to work on our sales pitch for board games based on customer needs. For example, name three games a beginner can play with seven people. We need to have more game demos, which we rarely do, to be honest. We need to make sure our desire for personal mastery doesn't make us sound arrogant, condescending, or dismissive, a trap that many store owners fall into. In other words, we need to fight our daily conditioning and focus on the folks who will grow our hobby, our business.