Monday, November 30, 2015

The Expansion Paradox (Tradecraft)

Hobby board games have penetrated deep into the mass market. The general public has discovered board games and the hobby is growing quickly. Our own board games sales are up 35% this year. Publishers tell independent stores multiple sales channels are for the greater good. As mass market shoppers discover new games, they'll naturally gravitate towards independent stores to pick up expansions and follow up games, items the mass market stores don't carry. It's a gateway sales channel.

The expansion paradox is this: As board game sales increase for independent retailers and the number of great board games proliferate, why does an independent store want to carry slower turning expansions and secondary games? Inventory being a zero sum game, an independent store owner can cherry pick the good stuff, you know, like the mass market stores.

But doesn't the independent game store have a duty to its customers to carry these games? Absolutely not. Our duty is to our employees and our shareholders (in that order). Customers vote with their wallets and they've shown us they're overwhelmed with good board game options.

It might be a competitive advantage to carry the slower turning expansions and secondary games, but if the market is hot, that advantage is much, much smaller. It's like the advantage of having a wide role-playing selection when role-playing games are 5% of your sales. It sounds good, and you might do it anyway, but that's not how you pay the rent.

The end result should be that the board game market changes. The market matures. Fringe publishers are marginalized further and find a home as perpetual Kickstarters. Or maybe they keep their day jobs, like role playing publishers. Larger publishers work on new games, rather than making half a dozen expansions that can now only be sold through their own sales channels. Dominant publishers emerge in the marketplace, the last frontier of hobby gaming. We're already seeing that begin to happen.

Friday, November 27, 2015

Don't You Wish Your Girlfriend Was Hot Like Me? (Don't You?)

The independent game store has no better friend than Wizards of the Coast. They communicate well. They take our needs into consideration. They value us as partners and work with us authentically in that capacity. There is one thing they do that bugs me though. If I were the kind of person to be easily insulted, their series of articles telling me how I could run my game store better would definitely rub me the wrong way.

First, Wizards of the Coast is the 500 pound gorilla. Having your much larger partner start telling you how to run your business feels a bit, well, like bullying. Hasbro, of which WOTC is a division, is a $4.2 billion dollar company. Most game stores are small, as in the $200K a year model (although some will tell you the average is even less). Having a behemoth tell you how to run your little business feels a bit overbearing, even if it comes from a place of trying to help, which I believe it does.

Second, Wizards of the Coast is not who you want giving you advice on how to run game stores. As you may recall, Wizards of the Coast massively failed at running game stores. They closed all 80 of their stores in 2003, many of which were known for extravagances that demonstrated they had no idea how difficult it was to run such an enterprise, let alone 80 of them. They also took down The Game Keeper, which they acquired, ending what was the only national chain of game stores, with over 100 locations. The game trade hasn't seen a national chain since and probably won't.

Third, and this is a big one, the state of game stores in this country is entirely an expression of Wizards of the Coasts policies in the marketplace. The vast majority of game stores exist because of the success of Magic: The Gathering. The absence of this one game would crater the game trade. If the game trade were the banking system, Wizards of the Coast would be too big to fail.

If Wizards of the Coast would like to see game stores up their game, there are several policy changes they could make that would not only improve the lot of game stores, but up their brand. Here's where I smugly suggest how they could improve their business. These policies are:

Fix Game Store Margins. Wizards of the Coast recently reduced the margin game stores receive on Magic: The Gathering, rather than raising the price. They reasoned that the consumer could not stomach $4.99 Magic booster packs, despite inflation, but retailers could eat a margin decrease without any trouble. That move cost my store $2,000 a year. That $2,000 could go towards new carpet, better fixtures, and more inventory to better serve my customers. Raise the price of boosters to $4.99 and return the margin to 50%. I'll up my game.

Implement MAP Pricing Policy. Specify a Minimum Advertised Price policy that dictates how low Magic products can be sold for. Online and brick and mortar stores regularly undercut the market by selling boxes of Magic for a few dollars over cost. This has greatly devalued the game, forcing game stores to sell Magic for well below what it's worth. Some Magic centric game stores subsist on a 25% or less gross profit margin, barely getting by while stinking up the market place and ghettoizing a good number of metro areas around the country. Do you think those stores have clean bathrooms and nice fixtures? Hell no, they can't afford it. Take this market defining product and restore its value in the marketplace.

While we're at it, put a limit on case purchases by retailers. There's too much incentive to flip cases for a few bucks over cost, perpetuating the devaluation. Tie case sales to organized play participation. WizKids just did this with Heroclix and it put a floor on their incredibly devalued product and reinvigorated the game in a number of game stores. Adjust supply, put a floor on minimum advertised price, and you'll see game stores make more money and up their game (if not, the ones that do will run them out of town, also a good thing).

Enforce Street Dates. Start penalizing big box stores and their suppliers for selling product early and undermining independent stores. Cut off a Target if you have to. Penalize a Wal Mart. It's such a regular occurrence, there's a series of Facebook threads with photos every ... single ... release. Also, beat down the independents who break the rules and cut off the ones who do so repeatedly. You know who they are. Why do you allow this to continue?

So there you have it, coming from a failed publisher of role playing games (our expensive to produce Pathfinder adventure netted us tens of dollars) to a failed game store chain owner. Again, I'm sure they're just trying to be helpful, but it's awfully condescending.

Thursday, November 26, 2015

Top Board Games

We're starting to see holiday board game articles online. Some articles have a lot of junk on them. Some show some solid, top selling games. Here's our list of top sellers at Black Diamond Games for the last six months.

Rather than just list a bunch of games, I'm putting an asterisk next to a game if it shows up in a holiday board game article or a top games of 2015 article, along with games featured on Tabletop. More asterisks means it's on more lists. Games with asterisks are definitely games worth checking out.

This is an interesting year for board game sales, as we're seeing a huge variety of games sold; lots of breadth and not the usual amount of depth. Some highly reviewed games have sold zero copies for us, so don't make our list. Other games are just hugely popular everywhere, like Codenames and Mysterium. Some evergreen games fell of the map as well, partly, I think, because of their strong appearance in big box stores.

Here's our list:

Cards Against Humanity *
Sushi Go! *
Star Wars X-Wing *
Coup *
Boss Monster 
Codenames *****
Betrayal at House on the Hill *
Boss Monster 2
Dead of Winter ***
Pandemic: New Edition *
Love Letter *
Gloom Card Game
Ultimate Werewolf: One Night
Star Realms: Deckbuilding Game
Catan 5th Edition ***
Love Letter: Batman
A Game of Thrones Card Game (2E)
Star Wars: Imperial Assault
Smash Up *
Mysterium ****
Munchkin: Nightmare Before Christmas
Gloom: Fairytale
Marvel Legendary DBG *
Epic Card Game *
Horus Heresy: Betrayal at Calth**

Monday, November 23, 2015

Amazon Price Matching and the Angry Beaver (Tradecraft)

We don't price match with Amazon. We don't do this because we like the finer things in life, like food and shelter. Also, our investors would like us to one day make a consistent profit, unlike Amazon. I'm the primary investor and I can vouch for that. I understand some customers would like us to price match Amazon. It's the season when they come in and get angry that we don't. This getting angry I find interesting. What is that about?

I'm going to apply a little Buddhist psychology here. If you don't want a dose of Buddhist psychology,  you should move on. Buddhism is all about human suffering: coming up with causes and conditions, defining your particular type, and prescribing some spiritual medicine. It's all in your head, but there's so much of it. I just want to know what this Amazon anger is all about. What is the psychology of getting angry in this bizarre way?

It's a stew of ego of course (what isn't?). Primarily it's the category of being separated from what you desire. You really want this box of cardboard, or more accurately, you yearn for the experience that the board game promises. As I explain to staff, don't sell a colorful box, sell the experience the box promises. Sell the sizzle, not the steak. A board game promises connection with friends and family, intellectual stimulation, and the ego boost of victory, shared or by yourself. As you get older, most of us don't get too many victories in life. How wonderful you can buy that in a box.

I will not price match, so they can't have it, which causes suffering, even though they could theoretically buy it right now. This is the easier part to understand. Their desire for the game is in conflict with their desire to keep more money in their pocket. But we deal with thwarted desire all the time and we simply move on. If gas is too high, we go to another gas station, we don't yell at the gas station owner. Rational people don't do that. That brings us to the second part of our stew.

The second type of suffering is being forced to be with what you don't like. This is where it gets interesting. The price on the box is full emm ess arr pee! Outrageous! Have these Luddites not heard of the Internet? Are they unaware of Amazon's lasting testament of the slow-burn model of sustaining a business? We are clearly infuriating because, and this is a big thing, they want to support us from a gut level, but their head won't let them. We are convenient, we're polite, we're reasonably knowledgeable. In fact, the nicer we are, the angrier they get.

Nobody is forcing them to be in the store. Nobody is forcing them to buy from us. We don't sell diapers and cigarettes, we sell a luxury product. Why don't they go to another store? It's because they greatly desire the store to work within their parameters and it is refusing to do so. Their ego vision of the store is not matching the reality of the store. It's promises, well beyond colorful boxes, appear unattainable in its current configuration. This is a frustrating thing. If only the world were not like it is, things would be great. The store angers them, yet the desire for the game forces them to be there. Being there makes them angry. The circle goes around and around.

There are other types of suffering that play into this equation, the usual stuff like the crushing baseline dissatisfaction of being alive, old age, sickness, and impending doom. Insert Monty Python quote about people not wearing enough hats. So with all this suffering, how do we provide a solution? How do we come to a cathartic conclusion that brings happiness to our deeply conflicted customer, wracked with an endless loop of suffering?

We demonstrate what we provide has value connected with their life. We bridge the gap of their desired price and their perceived value. Although it may appear we sell the same thing as Amazon, we sell something different; more. We show them buying from us supports the local community where they live, not just the community of like minded gamers, but by supporting us, they help provide for the roads, schools, police and services that sustain them every day.

We demonstrate that the convenience they find maddeningly attractive is not without its costs and it's worth paying a little extra for that. The tables and chairs that allow for the community to grow and provide enjoyment has a cost. The extra rent on that open space has value, even if we don't expect them to pay for it like every other entertainment venue in their lives. We explain that right now, they can take that game home or in the back and satisfy their game related desires.

We make them realize that we are real people, living among them in their community, not NPCs or cogs in their machine, or as Amazon employs, hapless location tagged warehouse runners, timed and measured in their ability to find your discounted item in a sweltering warehouse while being short changed on their pay. We are real people.

In reality, we'll never end suffering by selling boxes of things, but we can turn an angry situation into a pleasant one, and hopefully win over a new customer.

Tuesday, November 17, 2015

Some RPG Numbers (Tradecraft)

We've been selling role playing games for 11 years now. About 75% of what we sell is D&D and Pathfinder with the other 25% being the top dozen game systems and a smattering of indie games. Just a smattering. I think we're fairly normative when it comes to RPG stock. We're not an RPG powerhouse, but we do sell an above average amount for an "alpha" store. Take that with a grain of salt.

We have had 4,005 titles in stock over the years. We currently have 498 titles. If you've been working feverishly on that RPG for years until it's perfect, know we've already dumped 88% of everything that has come our way. It comes in. We sell it. The market is saturated. We dump it and move on. Just put out your book already. We spent thousands of dollars professionally developing an RPG adventure for our Kickstarter capaign. You can buy it on the Paizo website right now. We've sold 15 copies since March. It's pretty much tapped out now. Moving on.

A successful product in the game trade reaches and maintains a turn rate of three or more per year. That means, in a year, we sell three or more copies. More accurately, we divide the sales by the number of copies on the shelf. Usually that's one copy, but in the case of a very popular book, it can be 3-8 copies. We'll get to that at the end.

The 3,507 RPG titles we no longer carry couldn't maintain that "3" sell through rate. That's just a fact of retail life. If you've ever wondered why a Wal-Mart or a Target doesn't carry RPGs or at least more than a reasonable selection, it's because they need eight or more turns on each product. Less than 10% of our titles achieve that.

Looking at our existing 498 titles, here's how they're fairing with their turn rates:

352 titles, or 71% of our RPGs, sell less than 3 turns a year. The vast majority of RPG products under perform. You might wonder why we bother carrying them with such poor performance metrics. The reason is the top 29% round out the numbers, bringing the overall total to an acceptable level, usually around 3 turns total. You can't just carry the top 29% and expect to accomplish this, and you can't even sell those without a lot of specialized knowledge, organized play and hand selling.

That's why game stores exist, to provide those services to make the unworkable majority of RPGs workable. If this sounds like a lot of work, it is, and it's why many new stores don't even bother carrying RPGs. We love them, so we do the work.

So the take away numbers:
  • 88% of RPGs get cycled pretty quickly.
  • 71% of RPGs underperform
  • 29% of RPGs sell so well that they prevent the system from crashing
  • The only way to make it work is specialized promotion
  • Many game stores are abandoning this model because there are more profitable ways to make a living.
Also, because I know you guys like lists, here are our top 10 titles with the extremely high 17-40 turn rates:
  1. D&D Next: Dungeon Master's Screen
  2. D&D Next RPG: Dungeon Masters Guide
  3. Pathfinder RPG: Strategy Guide
  4. Unframed: The Art of Improvisation for Game Masters
  5. Star Wars: Edge of the Empire Dice
  6. Fate RPG: The Secrets of Cats
  7. Pathfinder RPG: Ranged Tactics Toolbox
  8. Dungeons and Dragons RPG: Druid Spell Deck (110 cards)
  9. Dungeons and Dragons RPG: Arcane Spell Deck (230 cards)
  10. Dungeons and Dragons RPG: Cleric Spell Deck (106 cards)
  11. 5th Ed. Fantasy #2 The Fey Sisters Fate
Alright, so 11 titles because I wanted to show off Goodman Game's D&D 5e adventure, Fey Sister's Fate. You'll notice no D&D 5 Player's Handbook. That's because we're talking turns and having to stock deeply on this title (8 in stock at all times) means it has a turn rate of  only 10.

Wizards of the Coast has created a bit of anxiety with the D&D 5 release and early shortages mean we stock deeper which hurts our performance. The 5E Player's Handbook is actually the best selling RPG title in the store (119 copies sold in the last year). The Pathfinder Core Rulebook used to be number one and it's now number fifteen. It once sold as many as 90 copies a year, but sold a sad 18 copies over the previous 12 months.

Enjoy the crunch.

Thursday, November 12, 2015

Shoplifters and Thieves

I'm not a violent person.

If shoplifters knew how close I was to bashing them with a bat, rolling them in a carpet and burying them in the desert, they might think twice. I would never do that. I'm almost certain of this. Like 99% certain. Maybe 98%. Well, the situation could escalate out of my control, lets just say that. If you ever do it and I'm on your jury, I don't think I could convict.

How can I possibly joke about killing another human being, who by definition, committed a petty crime? It's the little things in life. If you talk to a loss prevention specialist, they'll tell you that 10% of your customers and employees will always try to steal from you, even with cameras, security gates and guys with guns. They like the challenge. They'll do it until caught, and then apologize, and if you let them, do it some more. 10% would never steal from you. Don't pretend you know who they are. 80% of your customers and employees will steal if given the opportunity. This is where you put all your effort, attempting to dissuade the vast majority of people not to rip you off.

So imagine you work in a field in which 90% of your co-workers and customers will steal from you, if given the chance. They'll take food from the mouths of your children and shrug when you chain up your front door. Business is hard and full of unexpected challenges, they'll say. Imagine watching it happen again and again, proving the ratios more or less true.

Imagine not knowing if a friend at work is in the 10% never or the 90% maybe, or perhaps they're stealing from you right now. Imagine finding out the dark truth, again and again. Betrayal as a matter of course. More than one retailer has talked to me about losing their soul over this. Losing your soul, crushing your spirit, leads to burying bodies in the desert. It at least leads to contemplating it. Also, nobody will understand this, except other retailers. Not your wife, your kids other non-retailer business owners. There's just that fraternity of bat wielding retailers who understand.

There is no justice here, by the way. The police are not interested in your petty crimes. We had a shoplifter on site and the cop showed up (an hour later) and asked me what I wanted to do about it. By the way, he said, nobody is going to jail. In other words, he would mediate a solution that did not involve him using his law enforcement capacity. When society decides victimization is the cost of doing business, well, you buy a shovel.

Don't take this personally, people will tell you. It's the cost of doing business. I don't agree. Those are just some words people say to keep you out of the hardware store. With more of retail going towards big, corporate owned stores, many people believe it's just the cost of doing business. Thieves like to think that. It's why people don't take shoplifting seriously. They'll joke with me about the stuff they stole as kids, as if I would find that amusing. It's sticking it to the man. Yeah, Wal Mart and Target have 3% profit margins, but those CEOs! They make millions! Stick it to the man. It's the cost of doing business. Then they'll post their outrage to Facebook when the line employees of those stores get laid off.

I'm really not a violent person, but the threat of violence is a necessity to running an independent store. Professional thieves have visited and asked about our affiliation, whether we're part of a larger chain of stores. Why? Larger chains of stores have clear policies regarding bashing shoplifters with bats, rolling them in carpets and dumping them in the desert. I've had them ask that question while they were actively shoplifting. Is my stealing from you the cost of doing business or will I end up in a shallow grave? It's important they know the bat is on the table. Or the counter, if you will.

But this is all just talk. I'm not a violent person.