The Nebulous Customer Value Proposition (Tradecraft)

A recent blog comment was basically this: I shop at a brick and mortar game store. I spend a lot of money there. I use the game space and have a great time. What is my duty to support this store? When does supporting the store become charity? What do you, as a store owner, expect from customers like me?

The answer is: I don't know.

This is a taboo subject amongst retailers. It's taboo because we're insecure in our belief that we provide a UVP, Unique Value Proposition. We're not sure we offer enough value to customers, so we tend to tread lightly in the area of customer expectations. We try light guilt, subtle suggestion, and the promise of a social good to make the sale. We'll take your card sleeve purchases, even though you bought that $100 board game online (for $60). It's good my friend; no worries. We won't say anything during the Magic pre release when the quarterly pre-release customer, who we only see this one day, sneers in a way that begrudges our existence. It's cool.

We'll take all comers. We're even afraid to offend when being abused. The abused retailer is a common theme in retailer forums. The buy nothing D&D behemoths who comes in with their 2-liter soda bottles and wreck the bathrooms. I mean, that guy might buy a set of dice one day, right? Lets not offend him. Yes, they violate the "no outside drinks" sign, but his buddy, the DM, buys books sometimes!

We're not really sure how many customers are rational actors and how many are acting charitably, possibly against their own interests.  Price is obviously what we're talking about, since our three legged stool of price, service and convenience is a bit wobbly on that first leg. We don't compete there because we can't, yet we fail to properly monetize the services that make us special, because we believe game store customers won't pay for that value. They'll spend $15 for a movie ticket, but many will balk at a nominal fee to use your space. It costs me about $250/day to have game space. Will customers pay for that? The answer for us is they will, to a limited degree. The answer for many stores is probably not. $5/week to some people is a hardship. I say stay the hell home if a fiver is gonna wreck you. The other store owner is afraid of losing them as a customer.

It's also fairly true that we, a) make gamers by introducing them to new games and talking with them about the hobby, and b) many veteran gamers graduate from brick and mortar stores and no longer need us. Somewhere between "a" and "b" are many customers who aren't quite sure they value our unique proposition. As a retailer, this ambiguity is maddening.

I've talked with staff about my magic Wand of GFY. Imagine you're in a relationship where your partner isn't quite sure they want to be with you still. They liked you initially. You had a lot to offer. You're certain they'll leave you eventually. They always do. But you just don't know when. That in between zone is a horrible psychological burden. Heck, going from relationship to relationship like this is pretty much the definition of dysfunctional. Wouldn't you sometimes want to wave a wand to make them decide?

The Wand of Go Fuck Yourself is the retailer fantasy of waving that wand. Customers who see your Unique Value Proposition will stay. Those that are wobbly will leave. Now, nobody is doing you any favors. Everybody is certain about what everyone is offering. The amazing advantage would be we could talk to all those who value us and better tailor our business to satisfy their needs. Customers assume we already know how to do this, but we don't. We do a lot of predictive guesswork.

We wouldn't wave the Wand of GFY out of anger or hatred. We would wave it to better serve customers who value us. To save the village, we must destroy it.  Unfortunately, the number of leaving people would be anywhere from 1-100%. We're uncertain exactly how much charity and how much unique value customers are perceiving.

It's also unlikely customers accurately know how they feel. If you think customers and consumerism is rational, you know nothing about why people buy. That guy on the Internet, who can't fathom why people don't buy everything online? He's a moron. He can't understand because he doesn't understand human behavior.

As retailers, we barely understand people, which is why we'll never wave the Wand of GFY. We simply don't know who would be left, if anyone. But sometimes I want to watch that bridge burn. I'm certain I could build a better bridge, if I only had better design requirements. I'm pretty sure it involves roasting my own beans.

Edit: Retail is basically two steps forward one step back. It's building a satisfied customer base faster than you lose customers from the many variables that cause attrition. Wanting to wave a magic wand is wanting to clear away all the two steps back in the mistaken fantasy that you could somehow freeze reality to serve the one step forwards. You can't stop the process. But wouldn't it be amazing?

Four RPGs

I feel I need a palette cleansing after the last post. Here are the four RPGs that were most influential for me. It's a meme going around #fourRPGs. Rambling and layout atrocities ahead....

My favorite character after
Johnny B. Good who died on
 that gazebo

I think we played Top Secret more than D&D when I was a kid. We started with the original box set and moved to Top Secret/SI later.

Some were happy with the rulebooks, but I recall cutting out photos for my character sheet from the Brigade Quartermaster catalog (Brigade QM still exists) and finding cars to buy in the Auto Trader. We would destroy vehicles in that game like you wouldn't believe.

The Auto trader provided
vehicular fodder

We wanted different firearms too, and I created fake police department letterhead to send to firearms manufacturers, like Heckler & Koch, requesting catalogs for police only weapons, like the MP5 (see the video at the bottom of this post).  I got them too. Kids those days.

It was the more mature D&D of the time for us. Yet, I remember the shame when I ripped up my dead character sheet and pushed it through the slots of the gazebo where we were playing. The gazebo was over a lake, the pieces fanning out as they dispersed. I don't think I ever had that connection with a D&D character.

Baron Mughummlaminarrinarrr

Traveller was a one off for us, and its character creation system, where you could actually die in training, was intriguing. I used to generate random planets just for fun, to satisfy my imagination. I didn't play much Traveller, but it was always memorable.

Like Call of Cthulhu, Traveller usually ended in disaster, blowing the jump drives as the authorities closed in (you would think this was a pirate game). If you don't get why Firefly is a cult favorite, it's partially because it's an envisioning of a sci-fi RPG that may be Traveller. Oh, you know it is.

The Baron's World

My favorite character was Baron Mughummlaminarrinarrr, a lizard alien with an incredibly high metabolism. He would raid ships while his slave pushed a shopping cart full of canned food in his wake. He had to eat constantly or die. That's how strange the Traveller system could be. That's where my teenage imagination went.

Gamma World tapped into the 80's sense of impending nuclear destruction, long before the current zombie meme. Long before memes. It was mostly D&D compatible, so it satisfied our sci-fi itch that Expedition to the Barrier Peaks wouldn't exploit in D&D until a few years later.

Gamma World was a bit quirky, where Traveller seemed to be more serious, probably because of all the sciency things, like calculating distance between planets and attempting to understand space combat. It wasn't nearly as nerdy as Star Fleet Battles. The uber science geeks in school would play that game, calculating ship positions and firing solutions in 3D space. I'm not sure how that's fun, but they enjoyed it. One of those guys showed up to the high school reunion in his new Ferrari. We always knew you were smart, Brando.

Character roster. An "x"
marks a dead character.

Dungeons & Dragons is where it all started for me. I think I must have had the magenta box set under the Christmas tree in 1981. I mostly messed around with it with my younger brother. It wasn't until junior high school that I found a group of friends to play with, guys who are still friends to this day. That group included the older brother playing D&D in the movie E.T. (an acquaintance really) and the guitar player for No Doubt, who I tormented with my lawful evil priest of Asmodeus named Damien (I was a jerk).

My D&D  friends were more serious about school, which led to me being more serious about school, taking a few AP classes, and even choosing colleges together. "D&D got me into college" is a line I've used on more than one curious parent at the store.

We grabbed hold of AD&D as soon as the books were out, occasionally mixing older supplements, as we found them. With only three books available, we could recite the rules by heart and you could thumb to the combat tables, saving throws or treasure tables by feel.

None of my friends played beyond high school, as far as I know, but I moved on to play Oriental Adventures in college (as an Asian Studies major). Later we played AD&D 2nd Edition at a dot com I worked for; Planescape in the board room.

When Third Edition came out, I swore we wouldn't go to it, but I became an evangelist after reading the Player's Handbook. I could go on here, about the disappointment of 4th Edition, the walking in the RPG wilderness for a while before discovering Pathfinder, and how 5th Edition has been a breath of fresh air.  It's what I play now.

Overland map from this week

As for my gaming, I ran an urban, planar campaign for ten years (3rd Edition, then 3.5, then Pathfinder). For the last three years I've been running a sandbox game (Pathfinder, then 5th), mostly because I missed trees and nature. You can read about my sandbox campaign by searching for it on the blog search feature.

Bucket List: Shooting an HK MP5 on full auto

Fixing A Devalued Market (Tradecraft)

I have written much lately about the despair of attempting to sell games in a market where my peers are dumping product online at cost. It was pressuring me to move away from the game trade, to consider investing in things like coffee shops and survival gear stores rather than in the trade I've spent 11 years learning and to some degree, mastering. So it was a Christmas gift of sorts to see the Asmodee Group announce a new retailer program that prohibits sale of their games online.

Asmodee Group, as I've talked about in this blog, is the big player now, comprised of Asmodee, Days of Wonder and Fantasy Flight Games. In my store, that's 36% of all the board and card games I sell. A mature market usually has an unassailable player of over 50% market share. Asmodee is on their way. I wrote about this last May.

Why do this? I'll let Christian Petersen, the new CEO of Asmodee USA explain it from this recent ICV2 post:

“The marketplace has long been distorted by providing one-size-fits-all sales terms to every retail account, regardless of its channel of sale,” he said. “The growth in demand for games over the last decade, in our view, has been fueled not only by fantastic product, but by the support of specialty retailers who incubate personal connections between players, facilitate tournaments and leagues, provide instant product availability, and increasingly provide a ‘third place’ that is instrumental for so many gamers to enjoy and discover our products. The retailer cost of providing such channel services is significant, and so we’re now making policy changes to ensure that the sales terms provided to those retailers, relative to other channels, are positively reflective of the value they add to our distribution chain.”

He gets it. Christian Petersen has decided pure volume of sales, at any price, is not as valuable as thousands of retailers growing their market by building relationships with customers.

This will not end all online sales, but it doesn't have to. What it does is prevent dumping. It ensures that retailers will not speculate, will not over order, will not crap all over the marketplace because they lack the skills to budget, purchase and sell properly. Some retailers won't be happy, because this is their standard business practice. I wanted to come up with a nuanced response to them, so here it goes.

"Fuck you guys."  -- Gary Ray, Black Diamond Games

You may quote me on this. I'm not going to win friends or board elections, but if you're one of these guys, you are the problem. The reason Amazon sells this stuff at near cost is because you, the dumper, have driven the price to the bottom. I wrote about this a couple weeks ago in a post entitled We Have Met The Enemy. With any luck, other companies will follow the Asmodee Group example.

What will the consumer get out of this? Well, if you're just a get the thing at any price consumer, prices will return to normal, or more likely no more than 10-20% off MSRP as we discover the chinks in the Asmodee armor. On the plus side, I'm suddenly much more keen on running X-Wing and other events AND recommending such products when Asmodee Group games are not sold at cost online.

There is a lot to this. It won't go into effect until April, so I expect a lot of dumping before that. It allows for retailers to apply for exemptions to sell online for various reasons, which might undermine this. It ends the exclusive for Days of Wonder with Alliance and it specifies that only five distributors will get access to Asmodee Group products, all large ones we have accounts with. I see this as a victory for brick and mortar stores that do brick and mortar activities and support the community rather than the mercenary activities of faceless online commerce. Now we begin strategizing how to step up our game in supporting Asmodee.

The Game Store Venture

We begin with Jack Turner, game store entrepreneur in the offices of Poplar Capital. Meeting with Mr. Turner today is the founder of Poplar Capital, the often grumpy, Mike Heart, the wild card, Jack Lee and the enigmatic Janet Neapolitan.


Heart: Mr. Turner, I see here you're looking for $50 million to start a chain of hobby game stores.

Turner: Yes, that's right.

Neapolitan: How is that different than Game Stop? They closed thirteen stores this year and their position is uncertain in a digital age.

Turner: Oh, this is hobby gaming. It's completely different than electronic gaming. We won't sell anything electronic.

Lee: You mean like Settlers of Catan? Love that game! We play it with the guys over at Google.  I haven't done the market research on hobby gaming. Tell us more about market size. Half the electronic gaming market? A quarter?

Turner: Well no, it's roughly... uh, slightly less than one percent, maybe approaching a billion dollars? It's hard to say. Nobody in the industry really knows. That's compared to $111 billion for video games. Everybody knows the Gartner numbers. Unfortunately, there's no game trade Gartner.

Heart: Such a tiny market, why should we care?

Turner: Well, it's growing rapidly, 20% a year at last count.

Heart: Look, I'm a really smart guy. I know what people want. I know what sells. So I'm going to tell ya, 20% of nothin' is still nothin'.

Lee: The Internet is tiny in comparison to brick and mortar and we invest heavily in that because of the rapid growth, no?

Heart: The Internet is exciting. It's not wood for sheep!

Neapolitan: I see here that you plan to open 100 stores in markets that we normally consider secondary. Smaller cities with half to three quarters of a million population for the most part. Why these regions? It looks like you're intentionally ignoring the biggest markets.

Turner: Yes, we searched for areas with a proliferation of small, undercapitalized game stores, places with cheap rent, suburban sprawl and low barriers to entry. Our feeling on that is they're priming the pump for us, and we can swoop in with a well capitalized operation and crush them in our orbit. The more game stores per capita, the better.

Neapolitan: And I see you're looking at purchasing real estate?

Turner: Yes, our research shows the biggest barrier and threat to game stores is not the market as much as it is poor property management they're forced to deal with. By avoiding landlords and their skepticism and biases against hobby gaming, as well as the down market locations made available by that bias, we're able to avoid many of the common pitfalls.

Heart: Got something against massage parlors and nail salons? I met my first wife at a massage parlor. Great Chinese lady.

Turner: We've also determined that there's significant savings versus leasing, enough to pay our managers market salaries, which is unheard of in this trade.

Heart: Your market analysis shows small turn rates, like in the three range, compared to eight with big box. How do you plan to manage this operation when you're essentially running dozens of tiny boutiques? Small turns say boutique to me and boutiques are incredibly hands on. I don't get how you'll nail that market fast enough.

Turner: Good question ...

Heart: Of course it's a good question, I asked it.

Turner; Ah yes, well, with savings that come from buying a building rather than renting, as I mentioned, we'll be able to hire store managers at the market rate of around $45,000 to $50,000 a year. That means we can poach all the best store managers from around the country who never dreamed they would be able to own homes or put children through college. These are people with a huge variety of skills who accomplish great things on tiny budgets. They're all guerrilla marketers. In most scouted locations, we've already got our eye on that special guy or gal.  These experts are adept at building customer bases, marketing directly to the consumer and gauging local markets and doing it quickly.

Heart: I like it.

Neapolitan: I'm looking at this $500,000 per store. I see a down payment on buildings for roughly $100,000, then $150,000 in inventory, another $100,000 for what looks like high end FFE (furniture, fixtures and equipment). What's this other $150,000?

Turner: Our market research shows the importance of Third Place Theory, meaning a gathering place that's not work or home where people can congregate, socialize and spend money. It needs to feature concessions, comfortable seating, and a friendly atmosphere.

Heart: I know about Third Place Theory. I practically invented it with my hotels!

Neapolitan: I see here the creation of a holding company. Turner Game Supplies? What is this?

Turner: Oh yes, we plan to create our own distribution company. With our purchasing power, we should get 60% off most games, rather than the industry standard of 50%. We can go direct to publishers and twist arms for a better deal. There's an economy of scale that offsets a lot of the costs associated with a premium boutique operation. The publishers will be begging to get into our stores. Even one copy of a game per store is 100 copies.100 copies might be half a print run!

Heart: Twisting arms. Now you're talking! Twisting arms is how you build a business.

Lee: So whatdya got going on besides just games? Coffee shop? Restaurant?

Turner: Our market research, primarily on the Internet, showed our customers want a full bar with coffee, beer and hot food, so that also includes a kitchen.

Lee: Cool. Cool. And you've seen this done before?

Turner: In various configurations, mostly in the Seattle area. It works if you can get the right people working for you, and I think we've shown we're doing that.

Heart: They're nuts for coffee in Seattle. In fact, I once dated a woman who want me to put my ...

Neapolitan: (sigh) Yes, we've heard your Seattle dating story, Mike. Now what concerns me is your ROI.

Heart: That's Return on Investment.... She wanted me to dunk them right in her coffee!

Turner: Um, yeah, that's where it's a bit rough. The fans know exactly what they want from a game store, but the ROI on that is slightly less than ten years.

Lee: Whoa, that's a long time. Did you look at what a more standard three years looks like?

Turner: Mmmm, it's mostly milk crates and a Keurig machine. Kinda how it is now.

Heart: I think maybe you're wasting our time Mr. Turner.

Turner: But if you look at the plan, in ten years we'll have $3,000,000 in real estate equity and we'll begin to own the market. Jeff Bezos at Amazon relies heavily on real estate to ...

Heart: Turner, I've met Jeff Bezos. Jeff Bezos is a personal friend of mine. You are no Jeff Bezos.

Lee; Yeah man, I'm sorry, ten years is a long time, even to dominate a market, but a billion dollar market? Why bother? Be careful listening to Internet trolls.

Turner: I was afraid the ROI was going to catch me up.

Heart: Also, what's this in your competition analysis? Your competing with your publishers, your distributors and even your customers? What kind of crap is that?

Turner: It's what allows all the fly by night stores to prime the pump for us. The barrier to entry is really just some card tables and folding chairs. Everyone sells to everyone and even the customers sell to customers in the secondary market.

Heart: (speechless, his mouth hanging open)

Neapolitan: I'll tell you what, Jack. You've clearly done a lot of market research in a ... challenging ...  industry. Come back to us with a real estate plan and maybe we can put something together. Your work on that section is top notch. Or tap into that coffee shop trend. I hear roasting your own beans is the competitive advantage.

The Book (Ramblings of Madness)

I have a great respect for books. It's something I learned growing up, where books were expensive, hard to get and often destroyed by my siblings. Before the Internet, books were hidden knowledge, and as a boy, they were a gateway that may or may not get past the gatekeeper (my mother). At one point my mother made me return my copy of Eldritch Wizardry because of the cover. I had to make the bike ride of shame back to the cookware store where I bought it. The distinct smell of cookware stores will always mean Dungeons & Dragons to me.

I still have books on bodyguards and knife fighting (in Japanese) I bought at the martial arts store and hid under a desk drawer in my bedroom, next to a pair of Bruce Lee nunchaku and some shuriken (my juvenile record has been expunged, thank you very much).

Books are also something I learned to venerate from spiritual traditions, growing up Catholic and finding my way to Buddhism. In Buddhism, for example, you don't place books on the floor, step over them, or put them where people sit. It's not just ritual, it's a reminder of the value of the text, basically instructions on how to not have a horrible life. Maybe get that 2,500 year old text up off the floor.

In grad school, my dog ate my Tibetan dictionary. It was my prized Jaschke from India and probably had some tasty animal derived glue on the binding. She basically licked it to death. I kept using it though, carefully opening it with half the binding gone. I felt guilty and the least I could do was continue to employ my dog licked dictionary, a sign of my own carelessness in letting her get to it. I still have it on a shelf, mangled, discolored and smelling of dog mouth and animal glue. Back then, there were three Tibetan dictionaries available (we were told) and you had to know someone who knew someone to acquire one. Teachers were invaluable for this. Today you can get a Kindle edition Jaschke for ninety nine cents.

My gaming history is mostly role playing games, and I still have my original Player's Handbook and Dungeon Master's Guide, covered in tape with the inside cover sporting Wacky Pack stickers, like Hiccups' Milk of Amnesia (respect is learned over time, it seems). My Monster Manual has the line drawing monsters embarrassingly filled in with colored pencils. My son asked me why I kept such beat up books, and it was hard to describe the value of a text to a boy who has a vast amount of human knowledge at his fingertips in a pound and a half electronic tablet, at least the knowledge a ten year old needs. Bootleg AD&D PDFs can be found and downloaded in about 90 seconds, if he so desired.

My veneration of books took a hit shortly after opening the store. The D20 boom led to a glut and I was buying pallets of books from Marcus King by the pound. It came out to something like fifty cents a book, which I then flipped in the store for a few bucks. Great margin and happy customers. Not only did I buy my venerated texts in bulk, but I profited handsomely from it. If I were someone who believed in a soul, this is where the process of losing it would have begun.

We've been buying used RPG books since we opened 11 years ago, and 2015 was the year of the purge. With an expansion or a move in the works (looking more like a move), we needed the space they took up. After our expansion activities, we planned to resume buying them.

The stuff was never inventoried and honestly, if the tax man asked me how much value was there, I would have said zero and carted them to recycling before his eyes. To paraphrase a well known game trade deposition, it's just paper. Because they weren't inventoried, there was a lot of what we ended up calling sludge on those shelves, a decade of unloved crap that nobody wanted and probably was never very good. A full bookshelf of new RPG books is worth approximately $12,000. Used RPG books? The blue can is over there.

We grab books off the shelf, mark them down to the nearest denomination of $1, $5, or $10, and put them in bins. A month later, like turning compost, we re-price them down to the next price point, moving them to the next bucket over. The $1 books get put in recycling. It pains me to do it, but they really have no value. Plus, the most picky, obtuse and irritating customer you'll ever find is the one who comes for free stuff. Can you take a photo? Can you tell me what edition that is? Are you brain damaged? It's free. Free things cost gas and time, unfortunately, so people are picky.

Today, most of what's in the $1 bucket is unpopular White Wolf setting materials, like Vampire: Dark Ages. I would like to think there's a "circle of life" kind of thing going on and all books will one day end up in the dollar bin. There are quite a few venerated texts of the Pathfinder variety in the $5 bucket that may make it there soon.

The boy had been using my iPad far more than me, and on his birthday in March, I walked over to him, took my iPad from his tight grasp, and handed it right back to him. This is yours now. He's now a cyborg with that thing connected to him at all times, including a power brick that he carries in a pocket to handle his range anxiety. He doesn't do as much reading as I would like, but it's not because he doesn't have dozens of books on that thing. They're just competing with so much else.

Me? I'm back to print books. I just finished reading The Golden Compass and I've just started One Second After. Next to my bed is an embarrassing stack of books to read, ranging from fantasy to survival to business. It occurred to me that the stack is a psychological burden and what a relief it will be one day to have it go away, that is, if it doesn't fall over and crush me in my sleep.

We Have Met The Enemy... (Tradecraft)

The game trade is in a massive boom right now, between Magic and board games, so of course, we're prognosticating doom. The usual narrative is that once the trade gets big enough and attracts big box stores, along with a commodification of hobby games on the Internet, there will be a transition to mass marketization, followed by the demise of small stores. The Internet issue is the big one, with a lot of board games selling for close to cost.

On (Cyber) Monday I was buying D&D books on Amazon at cost, to the very penny, the exact price I buy them for from my supplier. Due to an inventory error, I needed them faster than Wizards of the Coast could ship them. That's great if you're a consumer, but as a store owner it has me reading up on coffee roasting, the competitive advantage of small coffee shops. Turning away from the game trade is only natural when it's eating its young. It's too gruesome to watch. But whose to blame? I mean, we like nothing more than to place blame, so who is the culprit in this deepest dasterdliest discount scenario?

It is us. Amazon will always discount to stay price competitive, but their algorithm has a lot to do with their independent sellers. Those independent sellers are none other than our game store owning peers. As game store sellers on Amazon lower their prices, Amazon drops to stay competitive, resulting in the impression that Amazon is the sole bad guy. The reality is the race to the bottom has a lot of participants and the vast majority are game stores.

When we demand the publishers fix this problem, we're really demanding they protect us from ourselves. It's not an entirely unreasonable request, just know the nature of it. Ironically, the counter example that proves this case is Cards Against Humanity. This game has close to zero access to game store owners. There are, I believe, ten authorized sellers.

Without an easy acquisition channel through the game distributors, some of whom, by the way, sell by the pallet to Amazon themselves, there is little to no online price competition with the parent company. Instead, game store owners buy it online and mark it up, leading to the most successful card game, possibly ever, for game stores. It's because of its limited access that it's successful. They've prevented us from fucking it up for ourselves. Once it becomes widely available, CAH will loose the vast majority of its value in the marketplace. Never change Cards Against Humanity.

There is a way to prevent catastrophe and it's a lot like the CAH model. I can't tell publishers how to maintain their brand value, and it turns out it may even be illegal for me to do so, but there are plenty of examples of companies who do this through MAP agreements and similar, legally acceptable, methods for maintaining price controls to preserve value.

I'm confident my store will survive into the future, unless I screw up somehow (we're looking at leases right now, so it could happen). Meanwhile, everyone is looking for their metaphorical coffee roaster, that unique value proposition that will allow them stability in turbulent times.