Saturday, February 1, 2014

Miniature SKU Creep (Tradecraft)

 Game stores want to support the games they carry as much as possible. The biggest limitation of that support is inventory, a zero sum game, where to carry one game, a piece of the pie must be taken from another. I only have so much money to spend and that number doesn't change. There is only so much pie, and everybody wants some. So how do you determine who gets pie? Performance of inventory can be done a number of ways, but the most common, for those who measure who gets pie, is turn rates.

A solid store will do an overall average of 3-4 turns a year, meaning their inventory will sell, on average, that number of times. If you have $100,000 in inventory, $300,000-400,000 in gross sales is good. Don't get all excited, with a 7% net margin (a bistro math average), that's only $28,000 in profit. That overall turn number can be broken down further, and certain game categories have higher or lower turns.

For example, CCGs have really high turns, probably in the 8-16 range, which is why they're so popular and why so many small stores can survive with them. One box of CCGs sells four times better than the average game trade product. More board games or more CCGs? That's a dumb question if you need more CCGs. A bad Magic product just about outperforms everything else.

When it comes to miniature games, we run into a problem. You can still get your 3-4 turns on a really strong, well supported miniature game, but there comes a point where the system breaks down. That happens with SKU creep. The manufacturer continues to add more and more models without discontinuing old ones. If the store continues to carry all those models, there is no amount of sales that will support that inventory number.

For example, I count 362 Warmachine items available from my distributor, averaging $29 each. Carrying all of them is around $10,500 at retail. Privateer Press puts out models nearly every month for almost a decade while discontinuing very, very few models. To get four turns a year, I need to sell $42,000 in Warmachine. Alas, I get about half that number, so I either flounder along at 2 turns a year on my very popular, absolutely superb, nothing wrong with it Warmachine (close to what I do), or, as a business person, I carry half the Warmachine catalog. Or I get nervous and sell off half my lowest selling inventory to my confused customers who think their game is doing well at the store (it is).

I want to carry it all, but using inventory metrics, it would lead me to the conclusion that Warmachine is broken, and perhaps not viable for my store, for any store maybe. But I know I'm doing well with it, so I pick and choose, but I'm really only offering my customers a paltry 50% of what's available. That makes my store less than great. 50% is a failing grade. It makes my customers shop online or with my competitors; usually both. So great game. I theoretically do well with it, but SKU creep has crippled my ability to serve my customers while maintaining a viable business model.

So what to do? Speaking to manufacturers, cut back your catalog. Let things go out of production permanently, or brought back for special releases. You know who does this really well? Man, I hate to even say it, but Games Workshop. Games Workshop manages their inventory like gods. The beings at Games Workshop are Gods of Inventory. They're rarely out of things they intend to have. They carry what works and they stop selling what doesn't. Things on their core list are meant to sell well and usually aren't there because they add character. Plus they revise their core list regularly to maximize sales. At least that's what GW did in the past, before their core motivation became direct sales.

The down side is customers hate this. Whenever we're talking GW, this is the one place where I go, "Au contraire (because I took French in high school), this is where Games Workshop has it right." But it's true, customers want their models to live on in the rules and on the shelves forever. But you know what? We're running a business here. GW can't produce those models reliably forever, just as Privateer Press can't supply the demand through distribution now. You should hear the frustration on that end.  It's just not happening and hasn't happened for years. Fixing this means obsoleting SKUs before they overwhelm the retailer, while maintaining a happy customer base. How you walk this fine line is your problem, manufacturer. But if you ask me, cut your dead wood, your long tails, and just let that stuff go. Don't write it out of the universe, just stop making it. Oh, and make more combo boxes so I can build twelve different models from a box of plastic bits with one torso.

And this is why game stores would rather focus on CCGs and board games.


36 comments:

  1. Many miniatures gamers worry about SKU creep, although from a different perspective. I have heard commentary from many vocal national Warmachine players who worry that the game is getting two big. Thus far PP has done an excellent job of keeping all of those plates spinning (from a game play to model count ratio). But the aggregate 10 years of miniatures is a little daunting.

    I don't think that all players resist phasing out of miniatures, however it has to be handled well. The best idea I have hear so far is to fix it through the evolution of organized play, like Magic. Magic has three formats: Legacy, Modern, and Standard. If a wargame is going to phase out options it will need to be done at the organized play level. Construct a tournament format which includes details for what books are available to use models from; create a rotation for a years tournament format that includes and excludes particular models. Like it magic, casual games can include whatever the players agree on, but competitive events play with a limited play environment.

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  2. It's tough. With card games, players just invest money. With miniature games, they invest time and talent as well painting and assembling their miniatures. They take much less kindly to being told they can't take something they put hours of work into. And tournament scene standards tend to trickle down to casual play.

    Not to say it can't work, it's just more difficult for miniatures games to use the Magic method. However, it is definitely an issue the industry needs to address.

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  3. The comment on the combo boxes got me to thinking of one possibility that I don't think has been tried yet: releases of individual models that were designed in advance with the potential to eventually combine them into a single combo box.

    Rather than phasing out old models completely, you could simply combine maybe a half dozen older skus into a single combo box. The original models could even have some bits of "flair" that aren't reproduced in the combo box, creating a level of collectability and encouraging purchase of the models as they come out instead of waiting for the eventual combo box.

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  4. Isn't that essentially what GW already does with space marines? The parts are all more or less compatible, so if you want to build (for example) a space marine commander on a bike to lead your biker army you grab some bits from the commander box, some bits from the biker box, mix them together and you're done.


    The problem, of course, is that you can only do this sort of thing with relatively homogeneous forces. It's fine when basically everyone in your army is wearing two or three different styles of armor, but it falls down with a world like you've got with Warmachine/Hordes, where the vast majority of the units are fundamentally different looking. Not to say they can't use the technique in some places (for example the plastic warjack sets that can build 3 different jacks that use the same chassis, and the metal add-on sets that customize one of the plastic sets to make a unique character jack), but it doesn't help with the majority of the models.

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  5. I have to wonder if the eventual solution is for Privateer Press to stop selling some subset of their line through distribution. If you get to the point where only the most obsessive completionist is going to want a copy of a model then move it to direct sales only. The players still get to buy the model if they absolutely want to, no hard feelings for the players who already own the model and want the option to keep playing it and the stores don't accidentally get stuck holding a model in stock that will sell maybe one time a year if they're lucky.


    Privateer Press still has to eat the cost of maintaining the molds and stocking the model, as well as keeping the rules up to date over new versions of the game and making sure that new models and rules change don't break the metagame when combined with the old stuff, but that seems like a relatively tractable problem considering the relatively slow pace of new model introduction (compared to Magic, for example).

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  6. I like the idea, IF retailers can order direct in an efficient manner, which right now they can't. For years we proudly carried every ... single ... 40K item, and some direct items as well (even Forge World). Carrying the entire catalog put us on the same plane as competitors usually ahead of them, even better than GW stores. Customers knew if they wanted something we didn't have, it would need to be ordered from someone anyway, so why not support the store? Back then we had many special orders.


    But it would really irritate the retailers if those items weren't available for them to order. Even GW, in their attempt to drive sales directly to them by doing things like allowing us to stock a core unit but requiring you buy their commander direct, allows us to stock those items if we want.

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  7. Being able to do it with Space Marines happened more or less by accident because of the uniformity of the armor.

    The problems you describe with doing it with less homogeneous armies is why you'd have to plan things in advance such that units shared enough common features that they could later be combined into a single box.

    I think it could be done with some Warmachine/Hordes units, but it would require a redesign of models to give them those common features. The end result would be the elimination of the original models, but not the units they represent, which may or may not be acceptable to players.

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  8. So, it feels like you're sort of in "Have your cake and eat it to" territory there. I mean you want to not have to carry the weird oddball stuff, but still be able to get the weird oddball stuff. Isn't that just what you've written about before, where the vendor provides a list of "core models" that define what stores should be carrying to suit the majority of players? I get that you want a way to differentiate yourself, and either stocking or having access to basically everything right away is a way to do that, but if you really want a company like Privateer Press to "solve" the SKU creep problem, don't they need to get something out of it? If they still need to provide the models to you at a discount that makes them practical to sell in a store and with shipping speed that you can reasonably get the models for special order doesn't that eat up any benefit they'd have gotten by not having them in distribution?

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  9. To be fair, you certainly see Privateer Press doing some of this already. The Silver Line Stormguard and Black Dragon Iron Fang Pikemen are both sold as upgrades to existing units. They're just not at a point where the price of the upgrade is low enough that it's practical to just ship it with the original unit's box. They've also been combining separate blister packs into larger boxed sets that cover units you'd have ended up buying together anyway (for example Boomhowlers, or Stormblade Infantry). I just don't think there's enough room in the line to get the level of consolidation that would be necessary to really make a huge dent beyond what's already been done. Then again, I'm not a huge Warmachine player, so my knowledge of the line is limited.

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  10. I feel the other thing to consider is that wise business practice and game design/maintenance might be antithetical, at least in your example.

    GW managing their inventory from a business standpoint is perceived as flawed design. I hear Warhammer players bemoan the latest book because X model was bad in the last edition, and now look how awesome they are in the new book.


    While I agree that it is very important that manufacturers not have policies that actively hurt FLGS, I think these companies need to not loose sight of there game. I feel that GW has lost sight of their game in favor of the business model.

    PP has poor inventory control, but their community is thriving, which does result in a stronger game. A game with a strong community which sells 2 turns a year is better sales than a game which self implodes and results in .5/0 turns a year....

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  11. Agreed. There are no easy options when we talk about SKU bloat. Organized play seams like the best answer for me. I hear people who played PP before Steamroller became standard for competitive tournaments, and it was chaotic and a little random. Standardization help the game thrive. I think a similar solution could help keep stores involved at a reasonable level.

    At Black Diamond we only carry sets that are (or very recently were) in Standard rotation. Most of our OP is focused on this segment. We also host other formats, but we place less emphasis on it because we don't have much inventory to support the formats.

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  12. On the boardgame side there are games that are beginning to reach this level of craziness. The Game of Thrones LCG has just finished it's 10th series expansion. That's 60 expansion packs not counting the deluxe packs. More are coming. My solution with this product is to carry the last year and a half of product (3 series of 6 packs) and then rotate older series through on a regular basis as sales dictate a need for more product.


    Another game that is getting to this point is Star Trek Attack Wing. Base game and 16 expansion packs are available so far. But there are 20 more ships scheduled through Fall of 2014 and it doesn't look like WizKids is halting production of older models anytime soon like they do with Heroclix. That's a lot of inventory and display space for a single game. You want to keep as much of the line in stock so new players can get into the game and get the product they want but there comes a point where you have to make choices on what to carry and what to drop.


    This brings up another related point. Not only is this expensive in inventory and a headache from an ordering perspective but it's also costly from the point of view of display space. It's nice to have a large inventory in a specific line. You become THE source for that game line. But at some point that also limits your flexibility to expand other lines of product and if sales go south you end up being stuck with a bunch of poorly selling product. That flexibility is a cornerstone of many of our businesses. We need to be able to carry whatever hot in-demand game line comes out of GenCon.

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  13. We're essentially discussing the Games Workshop model, and GW seems to believe it's profitable, based on their continuing to do it.

    I don't necessarily think this is the *best* way to handle the problem, but there is a viable model available to do it that seems to work for both parties and customers.

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  14. I can certainly agree with that. One thing I'll point out is this flaw is something that can be excused when you're selling a lot of the game (I do), but SKU creep becomes pretty devastating when the game begins to flag.


    Your turns begin to plummet and if you take an axe to the inventory, you lose cohesiveness and eventually it's a death spiral. This happened to us with Flames of War. Two turns meant low sales with stupid amounts of inventory (how many Panzer IV's are there???). When we cut the inventory we looked six months later and we were at 1.5 turns. Then a bit later, 1 turn, and then it was all over and it had to go.



    A tighter inventory means you can maintain some line cohesion. Our 40K sales are way down, but the line is still cohesive because their core units are really core units. Not to pick on Privateer Press, but their core unit list is crap. It has a bunch of "flavor" units that are .75-1 turn models, or in player terms, they kinda suck, but are important to the story.

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  15. It's funny that the Living Card Game model has ended up with a SKU creep problem. The same principle that keeps it cheap for players makes it costly for retailers.

    We have this LCG issue with Cardfight Vanguard, a card game where your booster release represents your faction. So we have to have ALL the booster releases and customers buy a few packs of their particular one when they're in. We stock each Vanguard release very thinly, since sales are spread throughout the entire collection. It's the LCG model returning to haunt the CCG model.

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  16. I think the reason it feels different when we talk about Privateer Press doing it as opposed to GW doing it is that GW alters the current "list of viable models that people actually buy and play" by releasing a new codex every few years that introduces new units you'll want to own or increases the power of existing units so you'll want more of them and drops or nerfs other units so you'll stop playing with them because they're either illegal or gone. Privateer Press alters that same list in a slower more organic way, units aren't banned or nerfed, they just have their relative power level altered because new models have been released, and those releases happen to all factions effectively simultaneously, so people feel less screwed when their new model isn't as useful anymore. It's less "man, GW's new codex makes this model illegal" and more "PP gave me this new toy!"


    In the end, what I'm saying is that I think PP could do it and be less bile-inducing than GW tends to be, assuming they could keep stores happy at the same time.

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  17. Seems like an easy partial fix to the LCG model would be to bundle each series into a single package when reprinting, thus eliminating 5 out of every 6 skus. Of course, this assumes that they are reprinting and not just continuing to sell product that they've had since the beginning.

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  18. But bundling eliminates one of the big selling points for the LCGs - $15 per pack of cards. Bundling would result in a $90 product and no one would touch it.


    Yes, they are reprinting - a LOT. The FFG LCG model has been quite successful. Currently there are 126 items on FFGs list of upcoming products. 62 of those are LCG products.

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  19. It's quite successful as a card game, but it doesn't even move the needle compared to a CCG.

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  20. I think the $15 selling point comes in for new product, not so much if you're going back and filling in your collection because you came in late.


    At that point, $90 is $90 and there's a bigger issue with keeping track of which of 60 different products you have and which you still need.


    You'd still have $15 products on the shelf that you can try after you get the core set, because you probably wouldn't want to bundle a series until around the time that the series that followed it was finished.


    I'm thinking of something like the model you have with comics where you can buy individual issues or wait until they're bundled in the annual graphic novel collection.

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  21. It is interesting. What makes it more so is there are very few rules systems around that genuinely give 76 significantly different experiences, by that I mean an army with multiple competitive ways to play it. I would be very surprised if all that variation was adding much tactical value. I know nothing about PP, but is there just half a dozen fractions or are you dealing with 40+ armies? And if there are lots do they all play genuinely differently with multiple strategies possible?


    Of course multiple ways to handle it. Again knowing nothing about PP but most games have weaker/very hard to use armies or ones with limited play styles, having those direct only would seem to make sense, with the most versatile ones being in the shop, giving the most play out of them etc.


    But equally I am amazed at the variety of codes model game companies have. It is insane, okay great for me but they are pretty much ensuring they are online only companies.


    Taking a game I do know - dreadball. Fun game, limited model count, easy to paint, fast playing, etc. Like it, few people at the club have picked it up as well from the local shop that was cajoled into ordering it (I understand not wanting to stock it normally, but when several hairy sweaty men are holding out their money and asking you to order it, wouldn't you give in easily?). But take a look at the number of model packs for a small game. Core box set - 3 options (complete game, or a cut down game and expansion), rulebook if not buying box set, 4 expansion rulebooks/packs - Accessory/odd models/pitches - 28 options, Models - 5 'big guy' packs, 18 mvp singles, 6 packs of mvp's, then 12 team packs and 12 team upgrade packs....


    This is a small game, yet how many codes? And some of it is just padding, the teams should just be one box set, get rid of the duplicate sculpts, have them all in there so maximum variation, one box. Playing humans? Buy the human box. Laughing. They should decide between the big all in one core box or the two step purchase option, but really one or the other. MVp's in 3 packs, 1 corresponding to each of the rulesbooks etc.


    Doesn't seem that appealing to a retailer for a small game of limited appeal.


    Surely going back to companies like PP as well as making things direct only they should also be amalgamated into fewer boxes? I get the attraction of blister packs for impulse buys, but blisters for the popular armies and variety of boxes, then 2/3/4 boxes to complete a less used or worse selling option? The models are still there, just now taking up less space, less hassles in inventory control etc.


    Of course when you write the rules it becomes fairly inexcusable, as well as writing things out you can group stuff together. Take for example Epic orcs where a vehicle with a gun is a guntruk with the same stats, the variety of one to another to minor to try and model rules wise. Then you only have to sell one through the retailers the rest go on your collectors website. Looking at the panzer IV creep, would it have killed the FoW guys to have had 1 popular panzer IV on general sale, the rest as a collectors pack on special order?

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  22. Personally, I have to cut Battlefront some slack on the issue of skus (although I doubt Gary is quite so forgiving). PP and GW have complete control over their games, but BF can't change history.

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  23. $90 is too close to the big price ceiling in boardgames at $100. A $15 purchase is essentially an add-on, anything less than $25 people will usually add on to any sale. Then there is the $50 cutoff for the casual/family game market. The $40 price point for the core LCG products is a good price for what you get. But once you get up near $100 people really start to hesitate on a purchase even if they are going to buy all 6 packs in a series anyway. Sure it makes perfect sense from a practical standpoint. But now you're into the realm of the psychology of sales and there is nothing practical about that!

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  24. Obviously that's true. But if we just sold CCGs we'd all be broke!

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  25. I'm not. The worst part about Battlefront was not only the massive number of variation SKUs, but the quantity needed to field each of those variants. To be ready for one German player to buy their Panzers from you, you would need one of four $58 box sets and 45 blister packs (9 Panzer variants, 5 deep). That's $800 of Panzers. That's if you want to be a one stop shop.

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  26. You would still have $15 packs for those add on purchases in the form of the most recent series. I seriously doubt there are many retailers restocking anything older than the two most recent series anyway.


    As a customer I'd be far more likely to get into an older LCG if I could catch up by buying bundles. The fact that there are 60 skus out there required to catch up makes it a non-starter for me no matter what other interest I might have in the game.

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  27. You should spread the word on that. A lot of newer stores haven't gotten the memo.

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  28. Welcome to the German way of waging war ;-)
    (I'd think that your love of German engineered vehicles would make you more accepting of this...)


    There was probably a better way of bundling those skus, but if they simply denied the existence of all those different vehicles in the German TO&E, then they'd lose the significant portion of their customer base that was in it for the history.

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  29. How about a Panzer IV box with all the bits to make variants? GW learned that lesson.

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  30. Yep, that would be a better way.

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  31. I've considered IPR before, but had cold feet because like with traditional distributors, there's no guarantee IPR will accept my products and there appears to be no marketing support.

    I've kept the notification of your response and am looking into IPR again. Now that I have a local printer where I can more easily do small print runs at a cost that allows retailer discounting, the idea of distribution is coming closer to reality.

    I still need to figure out how to reach game stores to convince them to order from anyone, including IPR if we apply and are accepted.

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  32. Unfortunately not exactly possible without insane amounts of kit engineering. The differences between a Panzer IV F and Panzer IV G are just the top hatches on the main hull and the end of the gun barrel, so already you need to modify the resin base. Then you've got to decide if you're going for Zimmereit coating or not, schurtzen or not, etc etc. TBH Battlefront don't really put out ENOUGH Panzer IVs to cover variety, but in practice: nobody cares, use cheap Zvezda and PSC ones instead.

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  33. Has Privateer Press's consolidation of SKUs not helped at all? I don't see it mentioned, although maybe I glossed over it, but where previously a single unit might be the core box, the extra trooper blisters, and the WA blister, there's not a single box. Likewise, Where previously there'd be 3 different warjacks, plus a character warjack, there's not a single box, and a single upgrade blister (the blister being up cheaper for you to stock than a $50 character model). This seems to be an ever-increasing method by PP to cut down on SKUs. How you not noticed any help?

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  34. It's a step in the right direction, but you can't release models twice a month, every month, for a decade, and expect a little consolidation to make a dent in that.

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  35. What about combining lean manufacturing with a smaller distributed SKU catalog? For instance, PP manufactures the vast majority of their own metal minis. Could PP drop external sales of 5+ year old models they manufacture in hours? Leaving only the externally produced and <5 year old models to the stores to handle?

    The minis would still be legal for play (hurray! from the players) and stores could focus their attention on new releases and core products, which are hopefully your higher turn items anyway.

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  36. Thank you for this blog. Enjoyable read, and it is giving me hope with my own plans to open a game store (in a smaller population base.)

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