Friday, April 7, 2017

Magic Formula vs. Pump & Dump

There is a magic formula to board game sales. It assumes you do everything right as a retailer. It goes something like this. You become the primary source on what's good in board games. That means playing these games before most of the public, attending shows, reading forums and knowing, not just hearing, that a board game is solid before release. This is the traditional role of game store taste maker. You will figure out first hand what is good and you will provide that to your customers.

Next, you go deep. You have properly capitalized your game store because you're a damn professional. You don't buy one and wait and see if it sells. You buy fifty or a hundred. You're not going to stock it and hope people notice it. No, you will demo this game. You will own this experience and sell it with you and your employees with the enthusiasm that comes with being a true believer. You know it's good because you did the work to gain the knowledge. This will result in selling all those copies. Maybe not right away, and that's OK, because we're not buying in hopes of clearing inventory by the bill due date. No, we're in this game for the long haul. Just in time is for chumps. One and done is for chumps. Wait and see? Yes, for chumps.

The problem with this model is the pump and dump. Not only are you being pro active in your choice of games, but online retailers are also out there, possibly standing next to you, with dollar signs in their eyes. They have deep pockets, often enough to achieve discount levels undreamed of by retailers. They will buy deep too, just like you. That's where their work ends, however. They'll discount that game on release and sell it deep, way deeper than dozens of game stores combined could manage. That's the pump.

Next comes the dump. Once sales begin to slow and they need to regain that capital, they dump that game hard. The market price plummets (or spirals) and it's now a game of hot potato. Stores not using the magic formula watch sales dry up. I might order six copies and when the dump occurs, I might sit on two for an extra few months or even a year. Those using the magic formula? Oh man, are they in trouble. They've got twenty five or fifty or more of this hot game. They've done everything right. They're model retailers. They're also screwed.

The pump and dump online folks are clear cutting the forest. Rather than evergreens, we have rotten stumps. The publisher suffers. The other retailers suffer. The distributors? They feel it as a weakened ecosystem, but there are known suppliers to the pump and dumpers. When we talk pump and dump, we're talking a deliberate strategy involving new games. We know many retailers accidentally over order. We know online retailers are stuck with large quantities of end of life stock. That's not what we're talking about. I'm talking about pump and dump as a business model. It's legal. It's also reprehensible.

Now lets look at a retailer like myself. I sell hundreds of thousands of dollars of board games a year. I'm a prime candidate for the magic formula. Will I drink the potion? Hell, no. The risk is too high. The opportunity costs are far more expensive than other, easier to deploy options. The formula is beautiful in that it requires me to be a model retailer. It requires I do so many things right. By it's nature I'm growing the hobby! The problem is the handful of pump and dumpers who ruin it for everyone else. It's going to be up to publishers to decide they want a future, some evergreens rather than rotten stumps.