Monday, June 11, 2018

Photo Contest

As you may have heard, I have written a book called Friendly Local Game Store. We've sold hundreds of copies the first couple months and it has eight, 5-star reviews on Amazon. Yeah!

I thought I would do a bit of creative promotion of the book. Post a photo of you with the book, either the print copy or the book on your electronic device to my Gary Ray, Author Facebook Page. On August 10th, we'll declare a winner random (probably via some dice rolling method).

What do you win? Why more books, of course! The winner can give me the names and addresses of two people they think could use this book (a $50 value). I'll sign and inscribe them, and send them off. It could be a copy for you, a potential new business partner, your staff or even your local store owner. Heck, send one to your competition as a gift! I won't judge (that's a lie, I'm always judging).

I leave for vacation to Central America on Friday, so I look forward to seeing a bunch of happy photos when I login, lonesome for home.

Sunday, June 10, 2018

Five Lessons

The first lesson of small business is you've got nobody to blame but yourself. When my staff make mistakes, it's my fault. When an employee turns out to be a bad apple and steals from me? Still my fault, because I hired them. When the world collapses and my community has become cannibals? My fault for not anticipating the demand for food. All my fault, today and every day. This first lesson is what separates us from the general population and creates an informal fraternity of small business owners. Our culture plays the blame game, but it's the only game we won't sell.

The second lesson is: Life is unfair. It's entirely possible to do everything right and still fail (which is your fault, see lesson one). It's possible you have the same business model, with the same gray areas as everyone else, but someone decides to make an example of you. Talk to a store owner who opened right after 9/11 and you'll hear a story of perseverance or unfair circumstances that led to failure. We did really well during the recession, but some communities in the exurbs simply disappeared, their inhabitants moving out in the middle of the night and their retailers left with no customers. Terribly unfair. And still your fault.

If I had to propose a third lesson, it's this: Nobody cares. You're on your own. This third lesson is important because new small business owners forget the first two lessons and constantly complain. Because the trade is small and you may have only dealt with big institutions (schools, corporations, etc), you may be unaware of your ability to effect change by simply asking. Nobody cares, but you have some power to effect change. In every circumstance of my life before owning a business, if I was failing, someone would step in to help. Not small business. We're working without a net and nobody cares.

The fourth lesson is a corollary of lesson three, which is: Everyone is here to make money. What they need to do to make that money, may or may not align with your desire to make money. When their needs don't align with your needs, the phrase we tend to use is "That's none of your business." Making money is extremely hard, with retailers in the 5-10% net profit range. Look at how hard it is to juggle your personal income without going into debt or going hungry. Now multiply that complexity by ten. That's what it's like for me to run a store. If you aren't doing it to make money, you better not have a lot of money on the table. That's usually the case.

The fifth lesson is Everyone is here because they love their hobby. It's not always true and there are a few exceptions I can think of, but everyone got into this because they love hobby games and everyone stays because that passion gets them through the hard times. Sometimes they love their hobby more than they love making money, and sometimes it's the opposite. A big lesson I've learned from observation is a great company, be it a publisher or retailer, balances these two opposing forces in equal measure.

Those who understand these five rules tend to be successful. They're not wealthy. They're not always happy. They are successful in their own ways and their like minded peers wish to associate with them. Those that don't follow the rules are left to scream into the wilderness until they understand it's all their fault, life is unfair, nobody cares, and it's time to get their act together and focus on their motivation and their bottom line.

Wednesday, June 6, 2018

Neutrality in the Culture Wars

I just want to run a hobby game store in the suburbs. My store does not take political sides, make political statements or support political causes. In fact, pinning me down personally would be pretty hard, with my pseudo libertarian views. My investors range from very liberal to very conservative, and we've had the discussion early on about the role of politics and small business, with our decision being to let investors make their own stands with their own money.

This is a position I thought was reasonable, but one that has upset some of my friends, who believe change at this stage can only come from the private sector. Still, you won't find a political sign in our window and we don't donate to political causes. When we donate to charity in the name of the business, it's to help children via Toys for Tots, California fire victims, or the occasional donations to local schools. We are neutral in the culture wars.

Or at least that's what I thought. One thing to keep in mind is we are culture. Game stores are bastions of the gaming subculture, which is part of the general culture. As such, store owners are ambassadors to not only members of the subculture, but also the public. We've known this pretty much forever, with the biggest threat being the occasional Bible Belt picketing for promoting devil worship, laughable in California but a real concern elsewhere. Nowadays, we're less concerned with church groups and more concerned with maintaining credibility and a thread of leadership within our subculture.

However, as politics in general has infiltrated every level of society, small businesses of all sort are being called out for not toeing someone else's political line. Politics has gained a foot hold in geek culture, by those who want to stir up trouble and maintain their antiquated status quo. The main issue regards women playing a bigger role in the subculture and the men who support them. It's a welcome revolution, not only from my personal perspective, because what a wonderful breath of fresh air and introduction of new perspectives, but it's great for anyone who has something to sell.

As a store owner, I wouldn't be very successful if 90% of my customers were men, as it was when I started nearly 15 years ago. Much of our success is about creating a welcoming environment for all the public. This is apparently a divisive position. Our tolerance a form of intolerance to the alt right folks, who want to make every cultural arena their battleground, game stores included.

This is what happened at my store and others in the San Francisco Bay Area. In our case, our veil of neutrality was pierced when we asked a disruptive customer to leave, causing an online firestorm and real threats to life and property. The customer, a conservative white supremacist was bothering people playing games with his political rants and difficult attitude, a shit disturber in our little Switzerland. We showed him to the door and became his new cause. That this has publicly happened to other local stores, by other conservative shit disturbers, shows neutrality is hard to maintain. These people have a literal handbook for stirring up controversy, and it has moved from university campuses to main street.

The culture wars are not waged only by one side. The most recent example, the most infuriating really, was a Portland case where two employees were fired for not serving a customer after the store had closed. As will happen in an eating establishment, there's a cut off time when the kitchen is closed, but customers remain to finish their meals. The customer in question was a black woman, a firestorm ensued, and in a pretty profound act of cowardice, the owners fired the employees involved under political pressure:

"In the statement "Back To Eden" says the employees were fired because the woman and the "clamoring public" demanded they be fired.
In one statement, the bakery admitted that the employees did not necessarily do anything wrong, "this is more about how a black woman was made to feel" at the business.
That statements have since been deleted."
In radically liberal Portland, the threat of boycott and review slamming for not towing the political line is enough for a store owner to not have their employees backs due to a misunderstanding. Backing employees is what you do as an owner. If you've got a procedural or training problem in your business, you own that problem, it is your fault. The buck stops with you, which is the big lesson in owning a business.

As cowardly as this act was, you have to remember that such a business problem is an existential threat to the livelihood of this owner, whose purpose in life is just to serve you their hand made granola. Really, they make hand made granola. That's not to excuse their cowardice but more to offer an explanation.

Imagine if you, as an individual, expressed your political views on Facebook, and a group of people came to your business, camped in your lobby and demanded you be fired. Take it a step further and imagine they went to your bank and demanded your branch manager close your accounts and cancel your mortgage, destroying your net worth. That's the threat to a small business. Your kids will go hungry and all you want to do is sell games or granola, and since we're not culture warriors, you won't always see acts of heroism. Being a Switzerland in the culture wars is a tricky proposition.

Tuesday, June 5, 2018

Weird, Unwieldy Wonderful, Kickstarter

I was for it before I was against it but I came around again and have supported it for years now. I'm talking about Kickstarter. When games began emerging on Kickstarter, they were so unique and unicorny that I bought every one. Big mistake. Besides the duds, many didn't ship, taking my money which as a retailer, was often in the hundreds of dollars. I'm still owed money by the Wizard Nystul and an extra from the Walking Dead.

The old guard got their shot early on, including the undelivered Nystul's Infinite Dungeon.
It's kind of ironic considering how the spell works.

Kickstarter is a distribution method, not a design studio, so there's no reason to believe they're any better than traditionally funded games. The consensus is they're overall a little worse, actually. What they often tend to be are things that wouldn't make it through normal channels, the weird, the unwieldy, the wonderful. For that reason, I'm interested.

Backing the right Kickstarter derived games gives my store a unique flair other stores don't have. This is especially true if I have to buy deep into a Kickstarter and I get the game early or it's only available through this method. I can use my size as a competitive advantage, a differentiator.

Waiting on my Pencil Dice with Ken Whitman
However, what game designers need to understand is my goals are different than theirs. Their goal is to capture sales from as many end user customers as possible. I say end user customers, because I'm technically their customer too, but they would prefer to avoid me when possible. Game stores are the marketing arm and low margin distribution channel to get their game to those who may have missed their campaign. We're gravy, not the meat.

My goal, as a supporter of their game, is to capture those customers from them, before they do. If I do it wrong, and announce a game offering a poor value proposition, I just used my efforts to drive customers to the designer. This obviously means that I'm trying to capture sales at the same time as them, while the campaign is going on. That's because I don't actually know if I want to back that game if I don't have customer interest, and with backer kits asking my to commit for more copies or thousands of dollars of add ons at the end, my ability to capture customers right now, before the game arrives, is incredibly important.

We compete for customers, while also acting as partners. That's as new economy as it gets! It's also a terrible business model for the game trade. The game trade is a poster child for bad business models. As a retailer, if you see some new technology, Print on Demand, 3D Printing, Kickstarter, and you immediately think how this will enhance your business, you're doing it wrong. New technologies disintermediate the middle men. Consumers make the same mistake. These same technologies won't create books printed in your living room or 40K armies banged out on your printer, they'll provide small press publishers the ability to create cottage industries where they sell you the weird, the unwieldy, and the wonderful when they couldn't have before.

So how do I make it work? When I sign on to a Kickstarter as a retailer, I don't sit back and watch my money work for someone else for a year (or forever) and then tell customers about it once my far too many copies show up on some random day. What I do is promote that Kickstarter while the campaign is going on. I announce it to my customer group on Facebook. I let them know a pre order with me is safer than with you, the publisher. I offer a 10% discount to offset the rampant, wink wink nudge nudge, tax evasion that is the Kickstarter pre order system. Then I get to watch that pre order money work for me, while staying up at night wondering if the stretch goals for Dark Souls will ever arrive and what exactly my liability is if they don't.

The publisher needs to understand we are at cross purposes. We are competing for the same customers. Their organized play or other attempts to get me to promote their game is so far off the mark to be laughable when I've got legitimate partners, without cross purposes. I will help you sell your game to my customers, but we are at odds with each other beyond that. Keep this in mind. Know that pimping your game with the word Kickstarter just tells me you're part of this special relationship that's only worth it for a tiny number of stores. For everyone else, the small stores, the distributors, and for a growing number of disillusioned customers, Kickstarter is the mark of death. But don't get all pouty about it. I may end up being your last friend in this equation.

Friday, June 1, 2018

Prognosticating (Tradecraft)

In a previous incarnation, I was an IT manager in a failing technology company where the blame would shift on a weekly basis, resulting in layoffs. This week it was the marketing manager, last week it was the head of development. Eventually the founder and CEO ran out of people to fire and the board fired him.

In such an environment, with shifting loyalties, regular vocational executions, and no real consequences, morality tended to get a bit compromised. That's how I found myself rooting around on the HR directors laptop over the network. "Holy crap, she has the RIF list in an Excel spreadsheet called RIF List!"

I became known as the guy who "knew things." People would come to me and try to wheedle out whether they would be alright or not. Or in the case of the company attorney, he would visit talking about cars and I would advise him now is not the best time to buy that Mercedes. Eventually my name appeared on that list, which meant my days were numbered. By the time I was laid off, I had been searching for weeks and already had a job lined up. When it comes to the game trade, I don't have a magical list pilfered from a laptop, but I do predict trouble. I feel a disturbance in my cash flow.

As a potential new store owner, I would plot a trajectory. I would visit the next several distributor trade shows as well as GAMA. Is the industry doing better, worse, or about the same? Ask retailers at these shows what's exciting, if anything. If they aren't excited, that's a sign. Plot a game trade trajectory over your shows. The game trade is recession proof, assuming customers have jobs, but it has its own cycles you need to be aware of. The economy could crash during this research period. Doesn't matter, and in fact may help you with future lease negotiations. What's the trajectory of the game trade? That's what you want to discern.

Ask 50 store owners, are you doing better, worse or about the same? Some successful stores are stalling out and looking around for ways to diversify. Other stores are circling the drain and talking about changing their formats, moving to small locations or closing entirely. It's hard to tell, on the whole, whether we're seeing more stores or fewer. New stores, undercapitalized, under researched, are still popping up quicker than the old guard stores are closing.

While you do all this, raise more capital, perfect your business plan, figure out more details of your operation and what you really want out of all this. Take some community college classes to save money on skills you need. I recommend: Excel and spreadsheets, Quickbooks and accounting, small business management, website design, Photoshop and graphic design, and video editing. If you're handy, learn basic carpentry and home electrical. You'll need all of this. This is what I tell my 13 year old to learn, as he'll always have some extra cash if he knows how to do these things.

If you've got a solid business plan, a six figure investment and a ton fo research under your belt, there is nothing that can stop you really. Even if you start in a down environment, everything is up for you. However, if you have no plan, a shoestring start up budget, and you're relying on some optimistic numbers to get you through your first year, and YOU ALL ARE, you need to time it right. It's like the stock market. You want to get in while things are going up. You can't predict the bottom, so don't think you can jump in then. You certainly don't want to be going down, because you really don't know how far down it will go.

Right now I think we're heading into a down cycle, but don't trust me. I'm one of your fifty retailers. We're down about the same as last year, in a period when my business should be growing by double digits. I'm not looking for advice, thanks, I'm stating facts. If I am wrong, and I often am, you will have taken a year to raise money, educate yourself, acquire skills, and shake the hands of 50 game store retailers. You won't have the chance to to this again, so you win whether I'm right or not.

Wednesday, May 30, 2018

How to Order Games (Tradecraft)

This week I'm handing off the ordering process to my manager for the next three months. I'll be on vacation in Central America for seven weeks, so this includes a couple weeks of practice and a week after I get back. If you're trying to hand off this process to someone, this might be useful. It could also be useful if you're new to ordering. Trips like this are an excellent opportunity to check your policies and procedures. Last time I was gone for a month, it took me about four hours to get the store back up to speed when I returned. That's what I want to see.

In the beginning, there were pre-orders. These have been placed in the past and will arrive throughout this period on a schedule of their choosing. I don't track them because they're unpredictable and our revenue levels can easily absorb them. My store pre orders absolutely everything and nothing is ordered last minute other than special orders and the Games Workshop weekly surprises. I don't read dailies. Although I'm handing off ordering, a critical part of this process is buying of new goods, and that's not getting handed off. So really I'm handing off restock ordering and purchase budget management.

My primary distributor is ACD and I get a full list of all pre orders every Saturday morning.
I have an almost equal amount of work to with Alliance, especially for Asmodee.

If I had no budget controls, there would be around $10,000 of stock that could be ordered at the moment. This is accomplished by generating purchase orders from our point of sale machine. To keep on budget, we use Open to Buy. You can download a sample Open to Buy spreadsheet here.

Open to Buy is how we know how much we can spend. Cost of goods are added, product purchases subtracted, and the total subtracted from the available balance, leaving a balance hopefully near zero. I'm currently over budget by almost $4,000, so there's no spending right now. Or is there?

Open to Buy with a negative starting balance

Pre orders will show up regardless of budget and although we can vaguely plan for the big ones, the small ones hit us by surprise and we tend to adjust purchasing after the fact. It's alright to go over budget, but it's not alright to keep buying once you're there. I do have exceptions though. I don't run the kind of store that doesn't have product on the shelves when Magic is released, so some categories get to exceed the budget.

These are my Top of Mind departments. It's alright to top off these departments even when over budget. They include the top performer in each department:

  • Dungeons & Dragons
  • Warhammer 40K (especially Space Marines)
  • Chessex dice
  • Magic: The Gathering
  • Asmodee Family
I would like not to be out of any of these products we've determined to be worthy of carrying, regardless of budget. Most of them are also exempt from strict inventory metrics. Chessex is a "product pyramid" where we don't perform metrics, although Asmodee regularly gets looked at since the line is so vast. 

A long term buyer would be required to do inventory analysis on their potential purchasing to see what to continue ordering and what to drop. I would like to say we're training for that this week, but we're going to focus on budget for that filtering mechanism for now. Long term inventory analysis would be critical for success.

The next step is communication. All my sales reps need to understand that from this point forward, my manager is buying until further notice. Email communication goes to and from them and they have permission to buy. The manager also needs to ensure they have access to all the various web portals for orders, including logins and passwords.

Ordering schedule with notes

From here it's a matter of keeping on schedule, knowing when to order. Pre-orders will auto ship, if they hit enough freight, but restocks need to be manually placed, budget permitting, Top of Mind overriding. My schedule is particular to our circumstances with warehouses being next day ship and Games Workshop slapping penalties for more than one order a week. GW is by far the most painful to manage here and I'm often scrambling to make sure I have all the new releases. They could really use a pre order mechanism.

At this point I'll be out of the ordering loop, focusing instead on daily receipt totals I receive from staff. My job is now finance and continuing to place pre orders. My primary job is to make sure we don't run out of cash, but being out of the country, I have limits on what's possible, especially with new online banking which locks down my bills a week in advance. Ideally I would have checks ready from backup accounts, a big cash cushion, or overdraft protection on my account.

The last bit of this puzzle, for trips over my distributor terms (30 days) is a Google Sheets document with the bills. If I were going for a couple weeks, I could just pay my bills when I returned, but I'll exceed my store terms, along with various credit cards and utilities that often give me 2-3 weeks to pay.

My manager enters each bill into this sheet so I can use online banking to schedule payments. My biggest problem with this from my last trip was enjoying myself and forgetting to pay the bills. I woke up one morning and realized a bunch of stuff was due and just missed having the electricity cut off. Not for the first time, the weakest link in my system was me.

Monday, May 28, 2018

Medium is the Message (Tradecraft)

I went with my son to watch Solo yesterday. We made a day of it with lunch at the theater and comic books afterwards. This movie has been brutally attacked by the fan community, but I mostly went to see what I could salvage from Donald Glover's performance as Lando. Instead, I found an entertaining movie, a compelling if predictable storyline, and strong character development. I think it was the best of the recent crop of rebooted Star Wars films.

Most importantly, my 13 year old son, who is more the target audience than myself, was completely engaged and barely able to contain himself. He grabbed me when I got up to use the restroom during a bit of dialogue, "You're going to miss the best part!" It was all the best part for him. He was also happy at the end because they didn't murder the main characters, which left him upset and less likely to want to see a movie after Infinity War, Rogue One and The Last Jedi. So why is everyone so down on this movie?

This movie is tanking at the box office, mostly because fans watched the sausage being made. They read about changes of directors, how one actor was so bad they had to hire an acting couch, how we were brutally putting to bed the past by killing off our beloved characters and now a prequel! Robots calling for equal rights!!!??? How dare they! We shall show them the power of the force of geekery! Damn Social Justice Warriors! SJW! Other acronyms!

The medium had become the message, to bring in Marshall McCluhan. The story of Solo was about corporate greed and milking Solo until he became an empty husk of a character. Next chapter, Solo the Lich King. Why would anyone want to see that? The final product was fantastic, but it didn't matter.

When I think of The Last Jedi, I think of this shot, not even in the movie.
Mark Hamill realizing the fate of Luke Skywalker.

Your medium becoming your message can happen to any business. When you let go of a beloved employee, cancel a popular event, drop a product line, all things that will need to happen at some point, the customers will begin to associate the quality of your store with the behind the scenes activities that should have nothing to do with their shopping experience. Your authenticity comes into question.

We are not just their shopping experience, we are their cultural touchstone. Our authenticity, our ability to confirm their place in the tribe, our ability to commiserate with the perpetual lack of plastic Battle Sisters, that's what we do. They reward us, while they're engaging in culture, by buying something. The buying is often incidental, especially nowadays. By the way, customers will think this is overblown and deny this, as they deny much of their instinctual behavior that we just barely understand. That's fine, but we know it to be true.

We are the medium. It is our message. However, because it's such a fuzzy concept, much like Top of Mind or Word of Mouth, it's something we rarely consider in the brutal world of retail. It's a subjective and fuzzy thing. A great game store, like a great game publisher, will have equal business sense with equal amounts of authenticity mojo.

We can do a lot of damage when we don't maintain our medium. We can lose our message without even knowing it. Most game stores are by their nature not professional operations, so most are at risk at any time of having their message get away from them. The only saving grace for unprofessional small stores is their undeniable passion. In passion there is forgiveness.

The bigger threat may be for the larger stores. Management naturally grows farther away from day to day operations and their authentic message. I rarely work the sales floor. If my business hits the next stage of development, my manager will rarely work the sales floor -- something I'll add, management is well aware of and not interested in doing. That's because they love the customers, and if they wanted to work a corporate desk job, they could go make a lot more money doing it somewhere else. You can become so big, people stop going there, to paraphrase Yogi Berra.

Anyway, great movie. You are the message. Just don't get cocky, kid.

Saturday, May 26, 2018

About the Book

25 yesterday, 10 today, yeah!
Book sales are going great! If you bought a copy, first of all, thank you! Second, I would like to request that if you bought my book, please leave a review. You can do it on Amazon or Goodreads or wherever you got it.

This sounds weird, but review quantities are actually more important than review ratings, when it comes to search rankings. Even if you thought it was just alright, please say it was just alright. One sentence is enough.

This is a small press book, so this process is a bit of an academic exercise for me. I'm under no illusion the book will become something big, but I greatly enjoy learning the process of how all this publishing stuff works, and it would be foolish for me to not engage fully. I get emails now from store owners telling me this book has been helpful, so I do believe it's getting to the audience that needs it.

As a retailer, I'm overly critical of how the sausage is made, and making a thing is a great way for a retailer to get a more holistic view of the trade. I recommend it. Make a thing.

If you still want a copy of the book, but don't have one yet, consider a few options. Please go to Goodreads and put it on your Want to Read list. The Want to Read list generates buzz, and you can help me without spending money.

If you're a retailer, ACD's Wisconsin warehouse just got 25 copies this week (down to 10 as I write this), hand delivered by my publisher. Getting a tour of the warehouse yesterday and finding my book was an Indiana Jones level of warehouse fun. Everything at the warehouse is sorted by (semi) random code to prevent mis picks, so you look the item up in a computer and hunt the shelves. My store has sold over 30 copies, and I've been able to restock through normal channels throughout the release cycle. I have no back room deal or garage full of books.

I was under the paranoid impression distributors sold out on release and ignored my book, but it turns out distributors are on second and third orders, but they sell out the day they're received. Game distributors don't do books. It's something my publisher explained before I wrote it. I was told I would sell most of my books, you guessed it, on Amazon. Anyway, if you can't get a copy from ACD, GTS now has them in their SoCal, Washington and St. Louis warehouses and Indie Press Revolution is down to just three.

If you're a consumer or prospective store owner, you can of course buy a print copy on Amazon. Even better, now that there's a small amount of supply, ask your friendly local game store to order you a copy of Friendly Local Game Store. This book outsells most of my D&D books in store, without most customers knowing I wrote it, so it's certainly something a store should at least stock once.


Climbing the Indie Press Revolution chart (it has since cooled).
As a friend set, OMG! You're beating No Country For Old Kobolds.

ACD Games Day

I'm back from a whirlwind trip to Wisconsin for ACD Games Day, having left California on Wednesday and returned Friday. I got off the plane in Madison thinking this is just too much effort for such a short show, but then I was overwhelmed with the greenery and the clear skies. It reminded me it has been too long since I've spent time outdoors, having fallen victim to the trap of working too much on my Jeep without taking time to actually use it.

I've only ever visited Madison in spring and summer, the last time being on my cross country road trip in July. It's an allergy free paradise of beautiful scenery, Bavarian levels of great food, and because it's a college town, a lot of youthful energy. I need to visit when it's ten degrees with a foot of snow on the ground. At one point I was planning to sell my house and move to Madison to start my store, but that's a long story. Suffice it to say, it's a fantasy I don't think would have been a mistake.

Having just gone to the GAMA Trade Show a couple months ago, I think I can say the consensus on 2018 is it's a bit cool. There are no must have hits, no great new games everyone is excited about, and the winners tend to be 2017 hold overs or stuff that quickly went out of stock. Magic: Dominaria is a clear hit, but lack of stock has limited success. 2018 appears to be a year when everyone is catching their breath, so I wouldn't describe it as a down year or a bad year, just a more of the same year, but an alarming year if your business is front list driven.  Of course, I have this strong confirmation bias as my sales are flat from a spectacular 2017. This has retailers scrambling to look harder at diversification.

ACD Distribution, who is hosting this show, and has diversified heavily into toys, including Hasbro. This is a smart and natural move since Asmodee and others have sought predictability with exclusive distribution outside of ACD. You gotta sell something, as one of the seminars teaches, so toys is one of those areas.

I spoke with the Hasbro rep this week, and with the death of Toys R Us, there's a scramble to fill the hole in the marketplace. He confirmed that Target and Wal Mart are certainly stepping up, but there's plenty of room for independent retailers to fill that gap. It doesn't need to be straight toys though, there's likely room to turn some of those merchandised mass market games, used for decoration. For example, with the discontinuation of the Winning Moves classic Monopoly, I haven't carried the most popular board game in the world for a year or so now. Hasbro can help me there via ACD, and I don't need to buy cases of it.

My own presentations went fine. My Open to Buy and Inventory Management presentation is a nuts and bolts presentation that I know connects with many new store owners trying to get a grip on inventory. My new Finding Your Unique Value Proposition will get some work done on it, as it essentially says what you do now won't be enough for the future, here are examples of how to future proof your business, and thank you for listening, go back to your doomed existence. It needs some action items to help people get from "you're doomed" to "here's how you plan your future."

Saturday, May 19, 2018

Nothing Special (Tradecraft)

Some of my friends have been kicking around an article from the Harvard Business Review entitled The Five Stages of Small Business Growth. There are summaries of this article online, but if you own a business, you should download the PDF with all the details, especially the impact on owners. It was published in 1987, but it could have been published today. It's relevant.

The article discusses the stages of small business growth and most importantly the role and motivations of the owner during each stage. If you've felt like an NPC, Non Player Character, through your tenure as small business owner, this article helps you gain some perspective. You are the hero of this journey, at least in this article. This is important for small business owners because as you grow, the owner tends to fade into the background, a natural, as it turns out, but disconcerting development.

Your role is increasingly in the background, and your personal needs, what you want from this, are not usually part of the discussion. So you develop feelings of alienation and loss, which can lead to erratic grasping behavior or some odd expressions of disengagement (my experience, not the article). This article helps put your role into perspective so none of these stages come as a surprise. Or as one of my Buddhist teachers once told me after I complained about travel making me feel disoriented: "Well, don't get oriented."

As technical and wonky as this article may be, it draws observations about the role and motivations of owners at each stage of development. I felt like I must be the only one suffering through the Survival phase, that living like a pauper and just hoping it would fail or succeed already, was unique to my experience. Nope. Happens to every small business owner.

How about the alienation that comes from delegation in the Success phase, where I'm increasingly disengaged and money is suddenly an issue, with demands from new hobbies and the business? Happens to everyone at this stage. It's the Success-Disengagement substage, otherwise known as III-D (D is for Disengagement) with our recent expansion an attempt to move to III-G (G is for Growth), the painful and often scary, success-growth substage. That's where I am now, classification III-G, which I have to admit, makes it a little less formidable.

So I must have it all down and there are no more surprises, right? When I look at Stage IV, Take Off, I realize I may never get there. I may never get my III-G attempts to launch into a full on IV. Stage IV is incredibly rare in the game trade, but don't let the field fool you, as only 12% of small businesses ever get there.

There is no wrong answer in the stages of growth and you can languish in Survival for your entire existence, as most mom and pop stores do (according to the article). Or you can buy your house in Maui and remotely manage while chugging along in the III-G Success phase (according to the article). When you look at the staggering requirements for Stage IV, buying someone else's II at the Survival stage or a healthy III-D seems so much more palatable.

I do know of business owners in Stage IV, but they tend to be too busy to chat most of the time, with their large enterprises and high finance. I'm not sure I want to be that busy again, especially now that I'm older with a family and more to lose, and thus III-D, with occasional launches into III-G, is where I'll end up for the long term. It's where 57.9% of companies end up. Nothing special.

Thursday, May 17, 2018

The Law of Six Dudes (Tradecraft)

I love miniature games. I love everything about them, the beautiful sculpts, the creativity in painting, thinking up various ways to trounce my foes. Because I love them, I want to carry all of them. However, not every store is cut out for this, or more accurately not every demographic is capable of supporting this. I've discovered The Law of Six Dudes.

The Law of Six Dudes says I may sell a ton of starter sets for any given miniature game, but there will be a limited number of customers who engage with that game beyond that initial surge. It's six dudes. They're not all dudes, and the number six is my arbitrary number. It's not really a law, more a rule of thumb, but you get my gist.

So what do you do when faced with the Law of Six Dudes? This comes down to your very retail philosophy. Do you demo games, run events, and promote these games to break the Law of Six Dudes? You can spend an infinite amount of energy attempting to create a community where there is none. You may get some of those starter set people to re-engage and you'll suddenly have Eight Dudes, or Ten Dudes. That's an awful lot of work for not a lot of return. Is that your job as a retailer?

You may decide to drop miniatures entirely. Certainly no reasonable mass market retailer would continue supporting a product line that appealed to Six Dudes. But we're specialty retail. We're where you go where everybody knows your name. I've carried RPG product lines for over a decade for TWO dudes. The problem is miniature games are really expensive to carry. The opportunity cost to carry a wall of plastic (once lead) for the potential for a Seventh Dude is far higher than one of each book in the RPG department. It would not be unreasonable to declare your store not a miniatures store and stop letting your love of pretty models get in your way. That's not unreasonable at all.

Our solution has been one of accommodation. I accept that there may but one successful miniature game, and thouest name is Warhammer 40K. However, I also accept that there are strategies to accommodate those six dudes. This means miniature product is carefully curated and cycled through. When the six dudes have had their fill, I don't wait for dude seven to wander in. We also don't clog our event nights with these six dudes, but instead have a catch-all day where all the army men from the beginning of time can be fielded. We've dabbled with nearly every major miniature game over the last 14 years, and you may play them all on Sunday.

Accept your Law of Six Dudes. You are not all things to all people. If you can grow beyond the six, that's great. If you wish to declare you are really not a miniatures store, and drop them entirely, that is perfectly fine and reflects your wisdom not your foolishness. If you want to accommodate as we've done with a curated experience, that's a potentially profitable position that makes most (but not all) customers happy. What you really don't want to do, and I did it for years, is delude yourself about your demographics and your position in the market. It's a painful way to lose money, catering to six dudes, pretending there may be twelve or a hundred. It ties up capital, makes you sad, and shows everyone you're the fool.

The upside of the Fool is it's the card of renewal and new beginnings. 
Start embracing The Law of Six Dudes with a clearance sale.

Wednesday, May 16, 2018

Shifting Value Propositions (Tradecraft)

When you open a hobby game store, you have no idea what kind of store you'll be. If you're starting with a giant Magic collection and you're a Magic maven, sure, Magic will be a big part of your mix. However, you really don't know if you'll be big into board games or miniature games until you figure out the needs of your customer. Your store inventory reflects their needs. Likewise, business models are being shown to shift over time as well, and you need to be just as flexible in this arena as you are with inventory.

In the beginning, there was the Traditional Value Proposition, the pretty good price, with pretty good service, with pretty good selection. Tap 80% of the population and you could safely ignore the other 20%, their poor reviews and all (also known as word of mouth). That has given way to a more Useful Value Proposition, where you find ways to make your retail operation sticky to attract and keep customers, usually through concepts like Third Place Theory. Third Place Theory builds community, and communities are resilient and defy common retail considerations. Finally, you have the future proofing of a Unique Value Proposition, the special sauce in your operation, which might be the building you bought to bend the price curve, community outreach, or supercharged demos that make you the source of demand, rather than attempting to predict supply.

The problem is the Traditional Value Proposition is obsolete, and stores relying on it are closing. The Useful Value Proposition, relying on Third Place Theory, was indeed useful 7-10 years ago, but is now becoming ... wait for it ... traditional. Most game stores are in the useful category, and as useful becomes traditional, their mojo declines and they're at risk. At one point, the early movers of Third Place Theory were unique with their value proposition, so they've slid all the way from Unique to Traditional. Like the shifting whims of customers that determine your inventory mix, your entire retail operation is also built on shifting sands, and you need to be prepared to adapt.

You may think you will run a particular type of store when you begin, but in fact, you absolutely will need to change over time, provided you succeed and you're around long enough. This is not news to more dynamic businesses. Retail didn't change much for a hundred years up until around 1991, when the technology began to intervene. Sears was Amazon for nearly a century, selling everything from wrist watches to houses through catalogs (Sears emerged from the big innovation of that day, catalog sales made viable by the railroad). Sears was so wildly successful they opened brick and mortar stores, much like Amazon is doing today. In 1991 they were the unassailable king of retail. Then the web happened and online shopping provided a Unique alternative.

The key to retail success is coming up with your Unique Value Proposition, but what's even more important is keeping nimble for when your Unique proposition becomes merely Useful, and hopefully before it becomes Traditional. I once ran a profitable BBS system, that relied on technology with multiple phone lines and crazy looking octopus cards. When the web emerged, we invested in new technology to link our BBS to the Internet. Before the loans were paid back, the model shifted again to websites and portals, and we simply couldn't adapt fast enough, while some BBS system could, and became Internet Service Providers. A critical part of having the Unique Value Proposition is being nimble enough to shift your model as you become Useful and then Traditional. When you look at the Traditional Value Proposition losers in retail, the big stores, you'll find the Internet didn't kill them. Almost universally, their lack of dexterity to change did them in. You may be one thing now, but in the future, you'll be another.

Sunday, May 13, 2018

GMROI Checkup (Tradecraft)

You may find yourself with higher sales but that sinking feeling something is wrong with your store. It's like the money is coming in, but there's still no cash at the end of the day to pay bills. It's not that people are stealing from you, but you've seen an increase in sales of corrosive products that erode your margin. Or perhaps you run poorly thought out events under the umbrella of a "marketing expense." Marketing expenses are where bad ideas go to die. This is when you need a GMROI checkup.

We work on a lot of assumptions about how our stores work. We do the work, we hit sales targets, things are well. When you invest in low margin product, or low margin activities, assumptions are no longer enough to keep you afloat. Some examples of this are Ultra Pro with their "net" pricing that leaves you with a 35% margin. For a long time, CCGs like Pokemon and Yugioh were at a 40% margin, although you can boost that with the right distributor.

The proper functioning of a traditional game store historically required a 50% gross margin, but that has been slipping for years. My impression is it hovers around 45% for a diversified store and perhaps down to 40% for a more card centric model.  Besides product problems, you may also be running "customer appreciation" events that rewards "butts in seats" but erode your margin. The margin of your traditional $15 Friday Night Magic event is pretty poor if you're in a state with sales tax and you're including it in your event fee. Our FNM hovers around 25%.

The solution to this is fewer customer appreciation events. If you have to have them, boost your game center sales by monetizing space. We do this by requiring a buy in to play, a $5 for $5 of store credit model. Every scheduled event uses this model, with free play only when nothing is scheduled. This won't change your margins, but it will increase your sales as freeloaders are now required to become customers. Your event won't support pay to play? Appreciation goes both ways and it sounds like you are the one not being appreciated. Drop the event. You don't owe them anything.

When it comes to inventory, you have several options. First, use just in time inventory for low margin items. An extra box of Pokemon or a month supply of Ultra Pro sleeves is an opportunity cost you can't afford. Go lean on these products. Order more often if need be, provided you can avoid freight. Also be ruthless with these inventory categories. We used to carry every play mat. I never met a play mat I didn't like. Just last week I decided there were just too many low performers to treat it like the "product pyramid" as we do with dice, especially at low margins. As Magic had tanked over the last year, so had play mats. It turned out a third weren't performing to my liking. Goodbye.

You can also mark up low margin items. Many stores see CCG supplies as a profit center making up for lower prices on their cards. If you've got low CCG prices and low CCG supply prices, you should definitely be balancing this out. Even if you aren't in the balancing game, who is Ultra Pro to decide you will carry their stuff at the worst margin in the game trade? Mark it up.

Finally, get out of some of these lines altogether by diversifying. If you have more than three lines of card sleeves, you probably have too many. Drop the lowest performer. Card players have a tendency to fetishize their sleeves and they need to get over it.  Of course, if you raise the price, you can have a wall of card sleeves a mile long. An Ultra Pro example would be to lean out your stock, raise your prices and take that money and invest it in just about anything else. If you have the market for high margin items, go there.

Our jigsaw puzzles aren't great sellers but they're the highest margin item in the store. If you're going into board games, seek the brand value protected product. Look to Asmodee right now as they've changed their MAP on their core line to no more than a 10% discount. Seek value with product over 50% margin.

There are also categories that have price elasticity that will allow you to go over MSRP, such as dice, miniatures, and even some of those aforementioned card supplies. An extra quarter for a miniature won't be noticed by the customer, but it might keep you in business. Take advantage of any opportunity to balance your margins by exceeding that 50% line in the sand. Look for sales of things you actually need. Buy direct from China. Embrace publishers who provide such opportunities.

Thursday, May 3, 2018

The Best Damn Clubhouse Store (Tradecraft)

Let's build one. Yeah, the model is broken, but let's make one that works.

Location: We want a Class C retail location, right on the edge of hospitable. It needs to have enough square feet for huge events, seating for 200, but it also has to be presentable to moms and their children. It also needs to include a multi year lease, which makes it potentially a unicorn of a location. Don't go light industrial, go marginal retail.

Concessions: While most full spectrum stores might have half and half retail to game space, you're going two thirds game space to one third retail. You are also going to put in a full snack bar with prepared drinks, either coffee or some sort of funky soda shop. You'll have sandwiches brought in, but you won't prepare them, at least at first. In general, you need to supplement your income with prepared food and drink. You will personally make sure every prepared drink is better than everyone within ten miles and you will master the machine.

Concessions Alternative: You don't like drinking liquids? Alright, you now conquer the secondary market. You buy used games, including used video games. You wheel and deal and sell power cords for X-boxes and tap that market in your community. You now bring in the general public who get angry and swear at you because you won't give them top dollar on Madden 2025. It's cheaper than concessions permits though.

Product Load: Oh dear lord do you have a lot of CCGs. You have every box of Magic obtainable, sold at stupid pack prices. It's alright, even poor selling Magic sells better than every other thing in the game trade. Your single collection is vast, is also sold online at TCGPlayerPro, and you've got a ten grand bankroll in the safe for buying deeper. You are nuts and collect full play sets of absolutely everything ever. You crack 6-10 cases of everything new. This is your "top of mind" experience. You have Towers of Power, searchable collections of singles in boxes around your store, so tall they make the gods in Heaven jealous. You shake your fist at them. Young men tell their families they're looking for a job, but they're worshipping at the Tower of Power all friggin' day long.

You have Pokemon cards and singles as well. You carry a core set of Yugioh singles that everyone recognizes. Anus of Exodia? Yeah, we got that. You dabble with fringe Japanese card games and hopefully you've got someone who cares and can break the habit of this garbage sold at cost online. Good luck with that. Ganbatte!

You carry Asmodee, everything from every line. And that's all when it comes to board games. You make a point of never getting rid of a game until Asmodee themselves gets rid of it. If this segment takes off, perhaps you dabble in other brand value protected board game lines, but you deal in publisher lines not individual games. For now, you become an expert in all things Asmodee: Catan, Star Wars games, Ticket to Ride, you name it. Nobody else gets in. You are an Asmodee company store.

You also carry the Games Workshop stockist line of 40K, the basics of GW, along with their paint line. Again, you buy the new stuff to small degrees, but you don't meander into other miniature games or deeper into this line. You take the low hanging fruit and let the high hanging fruit rot on the ground as it falls. Don't eat that rotten fruit. If this really explodes, go for it. It's all brand value protected. But I warned you about the fruit.

Finally, Dungeons & Dragons, the full line and no more. Spine out. Grudgingly. In the back corner. Maybe with dice in a case. You don't need this line, but it will make you money. If it doesn't work, drop it like its hot. Wizards of the Coast lets Amazon sell this below cost, and they don't provide organized play, so you have no friends here.

Events: Your event coordinators are all employees. Lets get that straight. They work for you, even the Magic judges. Yeah, you'll bribe an L2 when you need one, which hopefully is often, but quality of events is your bag, and this is what's required. Notice how Wizards of the Coast both judges you on your event quality AND demands to be in charge of judges, WHILE telling you judges aren't their responsibility. Play the game.

You run Magic as often as people will show up, and you'll incentivize attendance to make it happen, but you'll also do it profitably. All events are pay to play. All events are professionally managed too. You'll also run Pokemon and Yugioh, with Pokemon players groomed to be future Magic players. This is a major reason why your store needs to be above average, as you are including children in the mix and their justifiably judgmental mothers. When you lose Pokemon, your days are numbered. If you ever find a game to graduate to from Magic, run that too. Bridge? Mah Jong? Why yes!

You buy every organized play kit from Asmodee and you make that shit work. Management bonuses depend on it. You hold regionals for Legend of the Throne Wars and people come from hours away.

With the slack in your schedule, a bad thing I might ad, you run events for your Asmodee and Games Workshop events, but be incredibly reluctant to give up space for D&D or other games that aren't directly adding revenue OR aren't brand value protected. WOTC gets away with Magic because Magic is huge. D&D? Less so.

Staff: You are a CCG maven. You've been playing for years. You compete. You write or make videos, and if not you try it before you start the store. You hire like minded individuals who will both run the store, run events, and make the occasional caramel mariachi. You will endeavor to have a well rounded staff that attempts to have a balance between men and women, as you have a hole to dig out of with a clubhouse style store.

There are no volunteers. There are no crappy events either. You run events you can monetize, and if you can't monetize them, they don't get run. You demo games on the half dozen tables around the store, primarily Asmodee offerings. This structure works better in low wage states, unlike California and Washington, but it can be done there too.

This clubhouse is amazing. Give me a couple hundred grand and I'm all in.

Find Your Niche (Tradecraft)

I like the auto industry, and I would in that business if it didn't rank in seediness up there with pornography and social media analytics. Ford is on my mind after announcing they would stop making cars, other than the Mustang. There's a lesson here for every business.

This lesson comes from the old Ries and Trout book, the 22 Immutable Laws of Marketing.  I love this book, although it's a little dated nowadays. I loved it so much, I used it for the last chapter of my masters thesis describing how 14th Century Japanese Buddhist philosophy evolved new theories of enlightenment to fill open niches of thought. It was a real page turner. The lesson I have in mind is called The Law of the Category. Being first in a category is everything. Everything.  If you can't be the category winner, which usually takes half of the market share in a mature market (why I thought board games were ripe for the picking by somebody), then dominate a new category.

In the case of Ford, they're the number five auto marker in what is absolutely not a mature market. It's a market where millions of vehicles a year are made by companies you've probably never heard of. If you feel overwhelmed by pop up competitors, the auto industry is hardly any better. It's a dangerous market and Ford is losing.

Where Ford is winning is trucks. They sell nearly twice as many trucks as their nearest competitor, the sign of a mature market. Ford has one truck product line, the F-Series that outsells all their non Mustang cars combined. Trucks are also more profitable than cars. Ford is a winning truck company and a losing overall vehicle manufacturer.  So they chose to follow the Law of the Category and be a winning truck manufacturer (with an iconic sporty car).

This is a lesson any mature business, including game stores, can apply to their situation, and one I've applied a time or two. I say mature because newer businesses, assuming they're diversified, try to be all things to all people. They either don't know how to run the numbers to see where they're making and losing money, or they refuse to cede market segments to competitors because of fear the competitor will grow and dominate them (because they lack a Unique Value Proposition).

The reality is focusing on what you do best, what makes you the most money, dominating your segment and not attempting to spread out to conquer the market, is where success lies. Trying to starve competitors doesn't help you or them, and it doesn't stop a new competitor from coming along later. I'm always ready to pivot, I'm always expanding and contracting.

When a new store came along and started deep discounting miniatures, I fought. However, when customers followed price, I pivoted and stopped fighting, putting that money elsewhere. When that store inevitably went out of businesses, I pivoted back and now miniatures are a top selling department. When my competitors attempt to specialize in Japanese card games, which are rounding errors on my balance sheet and difficult to source, I left it to them. Maybe I'll be back one day. What nobody sees is how that capital is shifted to strengths. I chase strengths rather than shore up weaknesses, you know, like Ford.

Wednesday, May 2, 2018


Friendly Local Game Store is sold out at game distributors. I always chide publishers who declare victory on selling out, since my job as a store owner is primarily about successfully predicting demand. It's like starving to death and declaring victory on your grocery budget.

This highlights the trouble small publishers face with the distribution system. You make a thing, you beat the drum, you tell suppliers about the drum beating, they gauge demand but hear only quiet drums in the distance, and then they sell out and publishers question why they didn't pick up the saxophone instead. Drumming is hard, and thus we have Kickstarter, direct sales to consumers, and the increasingly popular and always available, electronic copies.

Speaking of electronic copies, Amazon has a big order of physical copies still on the way (showing the evil empire isn't omniscient either), but they did go live with the Kindle edition. You can also get PDF, EPUB and Kindle formats from DriveThruRPG. Upcoming outlets include Indie Press Revolution and iBook. Finally, you can bypass the nonsense and go direct. Atlas Games offers a 50% margin and free shipping on six copies to established retailers. Black Diamond Games has sold 25 copies to date with our early release orders.

Those 25 copies are to consumers, I shall point out, most of whom have no idea who I am. Yesterday I was interviewed by Edward Uhler of the Heavy Cardboard podcast and one thing we discussed he also noticed was how gamers are intensely curious about how the sausage is made. Gamers are intrigued by complex systems and win conditions, and the game trade certainly has complex systems. Friendly Local Game Store pulls back the curtain while also trying to be entertaining, a book a curious gamer is likely to find interesting, not just game store owners, and based on the large initial Amazon order, they agree.

My interview with Heavy Cardboard goes live May 17th and Edward asked a lot of insightful questions. It should be fun. Meanwhile, if you're a store owner and you didn't get your pre orders in, which is most store owners, please back order copies so distributors can hear the drum beat again.

Friday, April 27, 2018

Mexican Coke and You (Tradecraft)

The joke is I don't need to sell a lot of games because I'll make it up in snacks. But what if that was true?

Mexican Coke is often cited as the big seller, and we sell a lot of it, over 775 bottles in the last year. 58,000 calories or enough to power a human for a month, albeit with severe diabetes and malnourishment. That might sound like a lot of Mexican Coke, but concessions are only 3% of my sales. However, for some stores, that percentage is a LOT higher.

That's because concessions are sold during events, and event space has a narrow range based on event sizes, which is constrained by the hard costs of real estate. My estimate is between 50 and 100 seats for events is a normal range in the industry, 50 being the Magic number where you hit the WOTC top tier. If you haven't built for 50, you researched poorly. This means concession sales have a limitation regardless of how many other things sell in the front of the store.

A million dollar a year store is likely to sell roughly the same amount of Mexican Coke as a two hundred thousand dollar a year store. The percentage of sales for those concessions will obviously be much higher for the smaller store. Concessions is no joke, and in fact, serious business, when it's a huge part of your business.

This is likely to be perceived by customers. If you shop at a small store, and most stores are small, you rightly perceive your Mexican Coke purchase is significant. When Internet trolls give supposedly bad game store advice about concessions, their observations may not be wrong.

This might also be the cause of friction between those focused on events and those of us, like me, who see it as a marketing expense. Events are necessary for me, critical for my success, but I don't actually sell significant amounts of stuff at events. It's what I often refer to as "the tail wagging the dog," when event policy begins to dictate store policy, the marketing department telling the CEO what's up. When stores become afraid of offending event participants as an existential issue.

Well, if Mexican Coke pays the rent, it IS an existential issue. If events are the store, and concessions are more like 15% of your sales rather than 3%, then I can certainly see why that's critically important to you. So much of this trade seems to be about event management versus selling stuff, and this might be because of the scale of most of the stores. So bottom line is the joke is on us. Maybe selling snacks to keep the lights on is a more viable strategy than we first thought.

Thursday, April 26, 2018

Small Ponds, Mastery and Imposter Syndrome (Tradecraft)

I've talked about this before, but a couple thoughts come to mind about Imposter Syndrome. The term describes how:
...people doubt their accomplishments and have a persistent, often internalized fear of being exposed as a "fraud".
First, anybody in the game trade suffering from imposter syndrome should note how very small our trade is. You shouldn't really have imposter syndrome in a trade so small it doesn't have an insurance classification. The pond is tiny. Keep that in mind when you feel fraudulent about being a big fish. Game trade delusions of grandeur lack the usual trappings of success.

Second, mastery is complicated and in this field it's neither automatic nor shown recognition. If you read and internalized Malcolm Gladwell's Outliers, you might expect the 10,000 hour rule to kick in. You do the work, around five years worth, and you obtain mastery, right? Nope. A new study shows that's partially true in some areas, but in professional work, that time only accounts for 1% of mastery.

So in the game trade, you could be just as much a fool in year ten as year one, or what's more likely, an even bigger fool! In small business, your chance of failure never really declines after the first few years. Your chance of failure in year five is the same as year fifteen. Mastery in retail does not come from time served.

This means there's little recognition in small business about mastery. There are no master level stores, or special categories for the top tier stores from Wizards of the Coast. Got enough folding tables for fifty people? You're top tier at Wizards of the Coast. Butts in seats baby.

Recognition instead comes from like minded peers, and if you aren't networked with like minded peers, you're likely to have a bad case of imposter syndrome. Also, in this small pond, mastery is not a well defined category. I know some brilliant store owners whose opinion I greatly respect who make a very small amount of money. I judge them on their ideas, not their income. A million dollar club certainly wouldn't demonstrate mastery in this field, although there are useful commonalities that could be helpful.

Tuesday, April 24, 2018

Tale of a Loan

I write in the book about the story of how I financed the business, primarily through a home equity loan. Over the first six years of owning the store, my home value soared to amazing heights, enough so that just making mortgage payments was enough to justify anything I was doing. Then the market crashed in 2008 and by 2010, my house had plummeted well below what I had bought it for, leaving me, as they say, underwater.

Having survived the financial crisis with the business intact, I knew everything was negotiable, including blood sworn contracts. We had re-negotiated our store lease because of a downturn in the economy. Financial institutions like Capital One were canceling business credit cards left and right, entirely based on "economic conditions." That made finances even tighter. I like to bring them up as a fair weather lender, because I have no doubt they'll do it again.

Everyone was making a deal and the companies that had done the most damage with their collateralized debt obligations were getting bailed out by the government. The homeowner? Oh yeah, screw them. Helping a home owner would be "moral hazard," otherwise known as allowing them to play by the same screwed up rules as financial institutions. We couldn't have that.

So I took it upon myself, much as I did with my lease, to renegotiate my mortgage. They wouldn't talk to me until I was far behind, so I got far behind. I stopped paying my mortgage for eleven months, with otherwise stellar credit. There were eleven months of threats, but I was willing to walk, a key point in negotiating. I offered to send them the keys; jingle mail was the term that was coined. Eventually they blinked on my first mortgage, and while I was at it, I renegotiated my second, leaving me with zero equity (which has since grown by a few hundred thousand dollars).

That was eight years ago, and what I found trying to refinance for our construction loan was I was poison. There were two parts to this. First, no underwriter knew of a homeowner who essentially "short sold" their house while keeping it. They didn't know what to do with me. There was no check box on a form to handle my situation. That meant risk, which meant they wouldn't even return my brokers phone calls.

The second problem was Citimortgage refused to formally finalize the settlement on the second mortgage. If you tried to call them, they wouldn't talk to you because you weren't their customer, yet they continuously reported payments as late. If you claimed the mortgage was paid off, they wouldn't confirm. They held me hostage out of spite. Eventually they sold off my loan, as they often do, which opened my up to the possibility of a new lender.

And that's where we are today. I just closed on a small home loan from my local credit union to pay off one of our construction lenders and put much needed cash into the business. With Citimortgage in the rear view mirror, they could no longer hold me back, and with 7 years of good credit since the re-negotiations, it was far enough in the past to not matter.

And yes, I'm both proud and a little ashamed of this whole endeavor. I have stared moral hazard in the face and in a way it has turned me into a shrewd dirtbag, much like the bankers I negotiated with. Everything is negotiable in a pinch. I'm not a serial dirtbag, burning bridges for financing on my way to the top, like some powerful people in the news, but it's in my bag of tricks. What I truly value are personal relationships, and those I can't imagine burning unless my life depended on it. My survival over the last decade has been very much about those personal relationships.

Friday, April 13, 2018

Consultants and Preparation (Tradecraft)

"A consultant is someone you ask the time and they take your watch as payment."

I learned this saying as a teenager and found it amusing, but there's a kernel of truth to it. You want to know the time, you have the tools at your disposal, but you don't know how. My free advice, because I'm not a paid consultant, is learn to use the tools. Here's where to start:

Write a business plan. What, you've never written a business plan? What a great education! It's a research project, one where everything you learn will have a direct impact on years of your life. You can't spend too much time writing a business plan. Write it from scratch and get feedback. Find a SCORE member to vet your plan and share it with people who know more than you. It's like your first script in the movie business; try to get it in front of people who can help you make it happen. I talk a lot about the business plan in my book, without actually writing a plan, because that exercise is something you should do yourself.

Also write a marketing plan. Budget money for marketing based on a percentage of your expected gross sales. Nowadays, with social media and online advertising, as little as 1% can make a huge difference. When I started it was recommended you spend 2-3% of your gross on ads, but that included a lot of cable TV, radio ads, print ads, and the dreaded Yellow Pages. My advertising last year was .76%, and I have a hard time justifying spending more. My advertising budget my first year in business, 15 years ago, was 4% of my gross. I actually paid more in marketing my first year in business than I did last year with four times the revenue. Create a plan, try to make it more diverse than just Facebook, which is a boat filling with water, and create a schedule. Spend more money when you think sales will occur.

Network with peers. Facebook is key nowadays, while 15 years ago it was Delphi forums. A good group to start is Opening A Tabletop Game Store. From there you can branch out into many other places, where more than likely the signal to noise ratio won't be as good for you. Find like minded individuals. Compare notes and triangulate when given advice. There is good advice you can use, good advice that doesn't apply to your situation, and bad advice. Two out of three things you hear will be useless. Note the people giving you good advice and pay attention to them. They are your spirit animal.

Read a lot. I have a blog post here with resources. My advice, which almost nobody does, is delve into reading about retail and not just the game trade. Some of the stuff I lecture on at trade shows is right out of retailing books, illuminating rocket science to most people in the game trade. Many older retail books have the details wrong for today, but the strategies are generally solid. I also keep up on retail news by getting Retail Dive in my inbox, which covers retail trends. Get out of the game trade bubble and remember you're now a retailer. Diversify away from distributors early.

Consultants? If you do all of these things, you'll probably be able to tell time. It's unlikely you'll need a consultant. If you're like me, a completist who's never satisfied until they know every angle, you might find peace of mind by budgeting a little money to bring in outside help. I spent a thousand dollars on a feasibility study when I first started, a gut check with the goal of making sure the numbers in my business plan were likely to work in my proposed locations. Since we're making up revenue projections, it's good to have some clarity on whether that's feasible. One of your final questions is: Can I do THIS, HERE. Worst case scenario is your consultant tells you the time you already knew and you're out a grand, which nowadays isn't even a lot for a nice watch.

Thursday, April 12, 2018

Rules of the Game (Tradecraft)

My shifts at the store start at 10am and I'm out before events start. I like my days to be quiet, and most of my customer interactions are the lunch crowd, a group of regulars I've enjoyed for over a decade. There are people who shop at my store who have no idea who I am or remember me fondly from olden days. Events, and the vast majority of sales, occur in the evening so when I started noticing new signs in the store, I knew what that meant. That particular behavior or policy confusion was happening.

While in grad school in Buddhist studies, we briefly touched on the Vinaya, which included the code of conduct for Buddhist monks and nuns. These were not top down, high concept, engraved on stone tablets, but rather hundreds of rules created as needed to tweak behavior. These are rules to allow people to do their spiritual business without being distracted or disrupted by the unruly, which might be other monks or perhaps their own tendencies. It's stuff as granular as not leaving a chair outside after you've used it. This kind of stuff might seem granular, but 2,500 years later, it offers a historical insight into what people were actually doing, since only crazy people create rules for problems that don't exist (a singularly modern American problem).

I run my store much like this. Part of Third Place Theory is creating a welcoming place where common activities can be engaged in without it being overly restrictive. There is no promise people will get along and the fact they won't get along with everyone is part of the deal. You will play games with people you don't care for, whose politics you disagree with, whose culture is not your own. Mission accomplished. Civilized society shall continue as we break down tribal barriers.

Our code of conduct is the unwritten and unspoken, "Don't be a dick." This does require staff to occasionally tell people, "Hey, you're being a dick," but it's rare when people show shock there's not a sign banning their dickish behavior. This did require some training of staff early on, and some staff were getting steamrolled back in the day. New staff can occasionally panic a bit and get a little too animated when people break the rules. Assertiveness training is a thing. Calling people out for bad behavior is not something we teach people nowadays. It's a damn shame.

What you will learn from reading the Vinaya or running a game store is people will generally skirt right up to the edge of the rules, and then take a step or two over. A Vinaya example is "Not to purchase another floor carpet as long as the former is not six years old yet." Imagine the conversation: "Joe, we told you when you started with us you could have a floor carpet and replace it when it's worn out, but your desire for fancy stuff is getting in the way of your goals, so now everyone has to give away new carpets if they're less than six years old. Joe, you're literally why we can't have nice things. No Joe, I used literally correctly this time." We have the same issue with policies where we need to finally put up a sign because there are those who will abuse the system otherwise. My guess is Joe the Monk wasn't the only one with new carpets, just as we don't create new rules for that one guy who brings product from the retail space into our Game Center.

Saturday, April 7, 2018

Wages (Tradecraft)

I was messing around in Excel, thinking about how many employees a store could reasonably expect to have at various sizes. My store is in the reasonable range of staffing, but I have mostly part time people I would love to transition into full time. They don't quite fit this model as California minimum wage is 45% higher than the national rate (plus they tend to make over even that). Still, I wanted a model that would fit the nation.

Below is what I came up, a model that's more something you would find in a player's handbook than a business plan. It's not exactly how a business would operate, but it's a baseline. It assumes some things:

12-15% labor costs. As a percentage of gross sales, a range of 12-15% is optimal so I included both 12% and 15%. I tend to skew lower.

Manager salary of $40,000 a year. That is a pretty low number, but this is a low earning trade, so I went with this number at the bottom of the curve. For California, a non exempt employee would make around $44K salary, so it's even higher here.

Note that at $200K-$300K, the manager can't even earn $40K without taking profits, which assumes these stores are always owner-operated buy-a-jobs. This model also assumes a multi million dollar store is still paying managers $40K, which probably won't happen, as we see a stratified management structure.

FTE Compensation. This assumes a full time minimum wage salary of $15,080 a year. Again, not an ideal compensation rate and in California it would be $22,880, but it's a place to start.

1:8 Manager Ratio. Another number from the retail trade which may not track exactly with what we're doing is having one manager for every eight line employees. For the vast majority of stores, this will never be a problem, as it kicks in at well over a million dollars a year in revenue (perhaps 5% of stores).

Profit Margin. Ask the general public what they think a retail store nets and they'll be wildly optimistic. When I made a post showing how my 10% net profit broke down across my business, the response was willful disbelief. Game stores make in the 5-10% net profit range. One year I mentioned in a trade show presentation I had an 11% net the year before and the audience broke out into applause. This number is only useful for imagining total compensation (below).

Total Compensation. Assuming the owner is also the (first) manager, you can figure out what a business owner is likely making by adding that $40K salary to profit. Pew Research says the range for middle class tops out at $125K, which could be a king's ransom in the Midwest but is pinching pennies in a big coastal city. You can play games with this, such as realizing a store owner needs to make $1.25 million dollars a year with an average (7%) net profit rate to break the middle class ceiling. Good luck with that. I think the average store nationwide is probably in the $350K range, which is just barely middle class, which means half of store owners are likely living in poverty.

Feel free to nitpick. It's a model. Remember that level 10 game store owners need to seek out and challenge the Master of the Broken Wind in mortal combat to proceed to level 11.

Thursday, April 5, 2018

Hedonic Goods and Your UVP (Tradecraft)

I'm brainstorming for an upcoming presentation, so here are some thoughts about game stores and the UVP:

Game retailers are in the business of selling "hedonic" goods. That's a fancy way of saying we sell crap you don't need. We're not in the need game, we're in the want game. Hedonic goods are products that provide pleasure, fun and enjoyment. Because we're in the want game, we can't operate a store like we're in the need game, selling utilitarian goods.

We have to provide something special that ties into that pleasure, fun and enjoyment. We are part of the product experience and we need to provide a level of value that enhances that experience through our value proposition. We can't run a traditional store with a traditional value proposition and we're in danger if we simply rely on a Useful Value Proposition. What we need is a Unique Value Proposition.

The traditional value proposition in retail, the one you still see with utilitarian goods, is the three legged stool. You've got reasonably good service, reasonably good selection, at a reasonably good price. When was the last time you chatted about a new brand of potato chips to the cashier at Wal Mart? How many special orders a day do you think they take at the grocery store? How often do you think people say "I'll just buy that cheaper online" at the gas station? The biggest mistake you can make running a hedonic store is to running it like a utilitarian store, although plenty of utilitarian stores attempt to go beyond the traditional model to make shopping with them special.

When I first opened my store 2004, I ran it using this traditional model. I focused on customer service, I stocked every game I thought anyone could possibly want (more than was smart), and although I held the line at MSRP, I would regularly buy liquidated goods to offer the occasional great deal. I had no events, no game space, and although I worked many hours a week, I was home by 6 each night. My traditional value proposition in a hedonic market was an extremely limiting model. I had to master every traditional metric to stay afloat. It worked, but it was not the future of retail and I didn't want it to be my future.

Every game store owner intuitively know the traditional value proposition is not an effective model for them. My traditional value proposition worked because I was running a traditional retail establishment with proper capitalization. Most new game stores tend to be undercapitalized and utilize new tools to squeeze profitability out of nearly nothing. They've got a useful value proposition, and although it's a brittle model, it works with enough sweat.

A useful value proposition offers something important to the hedonic customer beyond the traditional three legged stool of the traditional value proposition that's so easily replicated on the Internet. The most common useful value proposition is in store events and a fairly tight focus of inventory and knowledge in one well understood arena: Magic: The Gathering. Even today, a good percentage of game store owner chatter is about what's happening right now with Magic: The Gathering. Those who aren't completely reliant on this useful value proposition right now likely started with it, so it's deeply ingrained in store owner culture.

There are other areas of the Useful Value Proposition that the average game store engages in. This is stuff I still talk about on my website, since my marketing presence hasn't gone beyond this level:

  • Engaging displays
  • Multimedia wonders
  • Clean-Well Lit-Friendly
  • Demo game library
  • That guy/gal
Developing a Useful Value Proposition is why game stores exist, but it's also a baseline for retail survival in this age. Stores like Sears and Toys R Us failed to be useful. They barely managed to maintain a traditional value proposition, yet alone providing a useful service, and unique was beyond their wildest dreams. With enough money and momentum, such as with giant corporate retailers, a traditional model is still sustainable for a while longer. For the rest of us, developing at least a Useful Value Proposition is basic survival. But is it enough?

As giant retailers struggle to define UVP as Useful Value Proposition, top game trade retailers are struggling to find their Unique Value Proposition. As we lack money and momentum, we need to find safety in a rapidly changing retail landscape. We not only fight against Internet retailers, who sell things, our core business, as a loss leader, but the Useful Value Proposition store is constantly fighting against new game trade competitors. The barrier to entry for new stores is incredibly low and it doesn't take more than some folding chairs and a magic binder for them to suddenly become useful.  Some retail markets see a steady stream of pop ups, in a tug of war with their customer community. Useful simply doesn't cut it any more. 

It should also be noted that a true Unique Value Proposition is built on shifting sands. What's unique today may be only useful tomorrow. My first business was running a BBS system with hundreds of subscribers. This was before the Internet. We had a captive audience. We were unique. When the Internet began opening up to the public, we spent thousands of dollars becoming a hybrid BBS, with Internet access, our own domain with email and for a time it worked and we maintained our UVP. 

The next change was customer direct access to the Internet and many BBS systems became Internet service providers. However, we were still paying off debt from our last investment in our UVP. The shifting sands buried us and we weren't able to adapt fast enough. Most of those ISPs are gone now, as their entire business model became a commodity offered by the telephone and cable providers. The value of a Unique Value Proposition is only as difficult as it is to replicate by competitors. However, investing in a Unique Value Proposition is treacherous, but worthwhile, as you are at least miles ahead of the Useful Value Proposition businesses. While you're trying desperately to adapt and grow to new trends, the Useful retailers will be left in the dust (which is what I believe will happen).

So what's a Unique Value Proposition for hobby game stores? It's something a pop up store can't replicate without resources or money. It lives in the philosophy of Third Place Theory, providing a social outlet in a cold world. It's embracing "experiential retail" as their unique model. Examples of a UVP:
  • The coffee shop, bar, restaurant
  • The mega event center
  • The vertically integrated store
  • The liquidation king
  • The taste maker (supercharged demos)
Some of these examples are self explanatory and many are uniquely positioned, but the one I want to mention, because it doesn't require a bunch of capital or connections, is the taste maker. This is an area pioneered and talked about by game retailers Steve Ellis and Travis Severance and it basically requires a strong emphasis on demoing games at a very high level. 

Imagine what would happen if you had 3-10 demo tables and every month you taught customers the games on those tables, rotating them every 30 days to keep them fresh. Several things occur: 

First, you've created a unique experience in your store and the ripple effect of your sales efforts creates demand in your community. Rather than sitting back and waiting for customers to come in, you are creating the demand by showing off a pleasurable, fun and enjoyable product. 

Second, you have turbocharged employee knowledge, which puts you well beyond the traditional value proposition in retail. If you have three tables of demo games a month, it means every staff member has learned 36 new games that year. Increase the number of tables and you increase the power of this model.

Third, and the biggest reason to give this a chance if you're on the fence or dubious, is the massive increase in sales. Sales skyrocket upwards of 400%. You start focusing on finding new product for the hopper. You take larger stakes in games you know from experience you can sell. You stop dabbling with product and focusing on a system, rather than a stream of board games, ten a day at the current rate. You have created a Unique Value Proposition in your hedonic arena.

The taste maker model requires a staffing level and management expertise most stores will struggle to obtain, and thus it's unique and not simply useful. A general rule of thumb is if it's easy and cheap, it's simply useful. If it's hard or expensive, it's likely unique. The key is to not find yourself tapped out of resources with your unique value proposition when the next shift occurs, or you could find yourself running a BBS in the age of the Internet.