Monday, November 11, 2013

How Much is Enough? (Tradecraft)

When stocking shelves with product, how much do you need? There used to be this concept of a "full line" game store, where a store would carry everything from every line they had. This was pre-Internet and I see the appeal, but it's not a reasonable expectation in a modern store with modern inventory management that demands high turns. It's inefficient.

Anybody can keep buying stuff until the shelves are full. Keeping metrics strong, at around 3-5 turns a year, is how we stay profitable and alive. If you don't do this, your inventory will be rich, and you will be poor, and in extreme examples, your busting at the seams inventory will sink you as you can't pay the bills.

The term I use is "full spectrum," as in we carry a wide variety of brands, best of breeds, with a wide selection, sometimes full line, across the store. My exception to full spectrum is I like to carry the full line of the leader in each department. For example, I carry the full line of Pathfinder, I used to carry the full line of Warhammer 40K, including bits, and there are key board games that I carry everything that has that word in the title: Munchkin, Catan, Carcassonne, and many others that make up our 1,000 or so board games, which itself is about 10%, or what I consider the "best of breed" that our customers buy (it's different for every store).  Not having everything available for Magic is kind of dumb as well; even a slow selling Magic item outsells 90% of my stock.

There is also a retailer rule of seven to consider. The thinking here is if you have less than seven of a particular type of item, say your Shadowrun collection, you don't have a coherent, psychological assortment. You just have some random things. This generally means you need to step up and create a product presence, rather than a simple, shotgun approach. If you're starting out with a new line, you need to take a risk that includes at least seven items. If you have a perpetual selection of less than seven of a mediocre seller, drop it.

When it comes to games like miniatures, the rule of seven doesn't come close to being a reasonable standard, and you need a much wider assortment of product. Companies like Privateer Press and Games Workshop have core lists that they think represent best sellers and best flavor models from their lines. I recommend stocking core as a minimum, supplemented going forward with new releases. You might try seven as a conversation starter, but don't even go there unless you've got money in reserve for core (or have a plan, like if there is interest, we'll go deep after the holidays).

When you decide to go full line, you're deciding you want to be "top of mind" in your customers perception of your store and their game. When your customers think, say, Pathfinder, you want them to think of you first. You want them to know that if they walk into your store, you will have what they want, or will at least most likely have that item.

Being top of mind with a hot product will lead to extremely strong sales, including many impulse purchases. Full line will mean there will be hot performers and there will be duds that are dragged along by their betters. In the case of Pathfinder, the hardcover books represent less than 5% of the product line, but account for 75% of sales. I've learned this is how the line works for most. However, you won't get those high sales if you don't stock the slower 95% of the line. If you begin to run metrics on the slow stuff and cull the herd, you'll lose top of mind.

The reality is most product lines are going to be an assortment because most product lines are not strong enough to get you that top of mind effect. So for me, top of mind is special immunity from prosecution. These lines get a free pass from ruthless inventory metrics, such as turn rates and sales per square foot.

What you'll sometimes see in my store is a drastic fall from grace, like when Warhammer 40K lost its top of mind status, its special immunity from prosecution and one day had to perform like everything else. The game had soured because of price increases and competition and online sales bit hard into "full price, full line" selection. When our regulars either stopped coming or came with models they didn't buy from us, a change was in order. Huge swaths of the line were dumped overnight as they couldn't comply with performance metrics. Boxes that had been immune were found not to have sold for a year or more. You can also tell you have a structural problem and not a demand problem when you see discounted product fly off the shelves. People wanted 40K, they just didn't want to pay full price.

Some products don't need the full line but benefit greatly from a wide selection. These are usually lines without particular titles, like paint, food, fantasy miniatures and dice. Most people are looking for a dwarf with a hammer, not Darnit Deepdamage, model REM03030. Most people have a favorite drink, but have a couple others they'll consider. Dice too are about coming to find a red set or perhaps red and blue. Having a wide, yet not complete selection is important. Cull the herd too much and there's a perception of a lack of variety, and sales fall hard. Like full line, you may have to put up with some slower sellers for some moderate top of mind.

When it comes to commodity items, consider no more than three price points. We used to have a glue problem. We used to carry seven cyaonocrylic glue lines. There was P3 glue and Citadel glue in thick and thin, and GF9 glue and Zap a Gap glue and Army Painter glue and Testors glue. This makes little sense, especially when you run the metrics and discover only a couple of these glues, which are essentially all the same, sell well. There will be the glue enthusiast who has to have a particular nozzle style, but most people just want some damn glue. Save money by limiting your selection of commodity items. If you really have that customer that comes in and must have a particular brand, hey it's the game trade, stock one bottle. But generally, cheap, standard and premium pricing is a good start, or if you have metrics, your best three sellers. Then learn how to upsell them.

Finally, if you've got an established store and are looking to increase inventory, STOP. Rather than back filling with older lines, consider using your money to bring in new product going forward. The game trade is front list driven, rather than back list, meaning most of our sales are coming from new things. Old things are better off as things you have that were once new, as opposed to things you think people may want that you don't offer. If you're going to go full line, or wide selection, by all means back fill. Overall though, new releases are what sells like mad in the game trade. Half of what we bring into the store is one copy that sells and isn't re-ordered, so back filling is dangerous without a strategy.

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