Thursday, May 21, 2015

Can You Take It? (Tradecraft)

Yesterday was the most expensive purchasing day since I opened my store. Modern Masters II shipped, with $15,000 of invoices. Many stores are scrambling to pay for this order. Some have been pre-selling it like mad, at prices lower than necessary, because they don't have the money. Many stores don't buy on credit, so this $15,000 or larger hit (some stores claim orders easily twice as big), needs to be paid up front.

In the long run, this is losing them money. This is a product that has a current street value 30% higher than the MSRP. That's based on retailers opening boxes they received early and valuing cards. Although speculators will try to lowball estimates so they can buy low from fools, retailers now know better.

Yet, many retailers still sell below MSRP.  I will admit, we sold a small amount of ours early at a small discount while we gauged demand, but now? Now this is a limited product with a known high value with a pretty final supply number. Our main concern now is selling it too quickly. If I show up Monday morning and it's all gone, I've made a different mistake.

So what do you do if you don't have enough credit? Ask for it.

Call your distributors and ask for terms. Get a credit application and take what they'll give you. I've got 30 day terms with every supplier who offers them. Some started at 7 day terms, the financial equivalent of training wheels. Some started with ridiculously low credit limits (which we mutually ignored). Over time you can boost the term period or the limit.

Once you get them, pay invoices religiously. Getting terms gives you time to sell things appropriately. You can make sales projections, instead of hoarding cash and starving your store for something that hasn't been released yet. Then, if your projections are wrong, you can liquidate unsold product at the tail of the market, rather than gumming up the works and devaluing it in the beginning. This is to everyones benefit as you act like a business person and less like a scavenger.

Rather than scrambling to pre sell enough product at a discount to come up with a COD order, you now order enough to sell through your finance period. Can I sell $15,000 worth of Modern Masters II in the next 30 days? Can I ever! The best thing is I only need to sell a little over half to pay the invoice. The rest can be sold over time, the store supported by other products that were bought on time.

If you've got a credit card, ask for a credit limit increase. They can only say no. If they say yes, your credit score is likely to go up as your utilization rate drops. You're penalized on the percentage of credit you're using, so using a lower overall percentage of that type of credit only helps you.

"Businessman, see? Roots in the community. 
You're just a scavenger."
If you don't believe credit cards are good things and you can't possibly be responsible enough, I invite you to reconsider. You are a business person now. You are a professional. Roots in the community.  If you're in year three or year five of your retail business, you have grown as a person. You have proven yourself responsible. Business is managed risk and maybe it's time you step up and manage it.

You will make more money this way. If you get 100 boxes of Modern Masters II and you have to sell half to raise cash for your COD order at an 8% discount (the current Ebay discount), you've lost nearly $1,000 by not selling in store at MSRP.  You've lost a whopping $4,500 based on projected street values.

You want to be treated like a professional and not a scavenger. Here's where you live up to your side of the bargain. Step up, get your finances straightened out, make the money. Diamonds the size of testicles.

Monday, May 11, 2015

Inventory Categories (Tradecraft)

Managing inventory is a difficult process. It's a mix of objective criteria with your subjective feel for your store. It's what happens after purchasing, and as you know, purchasing is about being able to predict the future. So it's no wonder subjectivity plays a role in inventory.

Most of my posts about inventory management are about nuts and bolts, tactical deployment for finding value and recycling capital. Turn rates, sales per square foot, and similar metrics are about squeezing out value. But what about inventory strategy? Inventory strategy tells you when to apply those tactical tools. We're attempting to win the war (making money), by picking our battles. 

That led me to inventory categories, a classification that allows me to pick and choose where to deploy metrics. Not every game or game system gets inventory tactics applied to it. Here are my inventory categories. You can see there are many exceptions to the rules. The solution is to build rules about exceptions.

Full Line Exempt: Games in this category are exempt from the rules. Inventory metrics are ignored. If it's in print, I have it. I reserve this category for the top game in a department, like Pathfinder, 40K or Chessex dice. There are large, psychological advantages, "top of mind" marketing, to exempt categories that go beyond metrics. 

In the mind of the customer, I want them to associate these top brands with my store. In the case of a game like Pathfinder, that means I'm going head to head with Paizo direct for customer sales, so I have their novels, every flip mat and map pack, and all those fiddly little card packs that nobody ever buys. I want customers to know that if it's in print, we've got it.

Full Line Managed: Similar to full line exempt, except I take a very liberal view of inventory metrics. For example, Pathfinder recently moved from full line exempt to full line managed, meaning I drop products that haven't sold in a long time, even though they are still in print. In our case, it was 18 months. Our overall Pathfinder turns are around 5 a year, so an item that sells every 18 months is at .75 turns. Garbage. Moving from full line exempt to full line managed usually represents a major shift in customer behavior.

Managed: Inventory metrics are applied, usually with a minimum of 3 turns a year. The vast majority of items are in this category. Very rarely I'll move a Full Line category into managed, often talking to staff about how it lost its "amnesty." Sometimes this is jarring to customers. D&D 4 went from full line exempt to Managed overnight with a slash and burn approach to poor sellers, some of which hadn't sold in years. Some of which still reside on our clearance shelf today

Exempt: Inventory metrics don't apply. This is reserved for games deemed "merchandising" or the rare game that I carry for personal reasons. This category has gotten smaller over time. Exempt also includes new lines that you're testing out or building up. A new miniature game, for example, requires a critical mass of inventory before it begins to turn. You give that game an exemption, at least for a while. How long is up to you and hotly debated.

As an aside, living in earthquake country, everyone is encouraged to have a 72-hour bag, in case you have to get out of Dodge in a hurry. These carefully crafted bags contain enough food, shelter and equipment to keep you alive for three days, but most experts recommend you bring one comfort item. It might be a Bible, a deck of cards, or your favorite book. That is your one exempt item. If you're going to have a personal exempt item for your store, try to limit it to one, if you can. 

Seasonal: This is a tough one to manage in our field, but we definitely have seasonal items. For example, we sell the vast majority of jigsaw puzzles between November and March. We still sell puzzles throughout the year, but we make sure we stock up strongly for the season, and let inventory draw down towards the end. Classic games, toys, and holiday themed items also fall into this category. During the Summer we try to stock up on travel games. Before big Magic releases, we stock up on card supplies. Seasonal inventory gets a pass as you build it up and generally doesn't get scrutiny until the season is over. Then it gets dumped as fast as possible. Our store on December 24th only vaguely resembles our store on December 26th.

There you have it. Thanks to Jim Crocker and Ryan Johnson for pointing out areas I overlooked.

Thursday, May 7, 2015

That Cards Against Humanity Game

My general take on this game:

It's in bad taste, it's simplistic, and kind of dull as a game, other than trying to gauge the depravity of your friends (which can be amusing). I've played it once.

Why is it popular? It's an artifact of our times. We're deeply attached to identity politics, how lacking much else, many people (especially young people, it's argued) have taken their self identities as concrete and irrefutable, looking for offense and hoping to pillory anyone who disagrees, whether it's a web article or a coffee shop that serves the wrong type of bagel.

We live in a culture of perpetual outrage, and increasing fear of giving offense. You can have your business or your job taken from you with the wrong tweet or when someone has been slighted by your employee. Lacking strong cultural ties, we make up new identity constructs, and man, do we grow attached to them. We not only spend all our time immersed in our new identities, but we take great offense when that identity is questioned. 20 years ago, Cards Against Humanity would have gone nowhere. It would have been simply, offensive. 

It's popular because Cards Against Humanity offers up an evening of offensiveness as a way to step back from self identities and closely protected beliefs that are ultimately bullshit and empty of meaning. It's more a therapy tool than an actual game. Personally, I find that kind of boring, but if your life is a rigid, oppressive self identity paradigm, or you've been forced to live within one, it might let you take a step back, possibly providing some empty space to find some much needed humor.

It's hard to explain this game without coming off as an apologist. Does this make light of real oppression? Real racism? Real homophobia? Does it scratch all the isms? Most certainly. Does it justify oppression? I suppose it depends on which of the infinite number of self identities you're bringing to the table. Oh, and I'm not saying your self identity is bullshit. I'm saying all self identities are ultimately full of crap. That glimmer of humor provided by Cards Against Humanity, that brief open space, might just give you a taste of that. 

Or maybe I'm entirely wrong and it's as bad as people say. Maybe I'm standing on a soapbox of privilege, defending an instrument of evil while the world burns. I can't decide.