Tuesday, December 11, 2018

Inconsistency of Commodity Experiences

When I look out the window of my store, I'm reminded of a story. I accompanied a friend to buy a new BMW at the dealership across the street. He did a Euro delivery deal and walked away with a date to pick up his new car in Munich. I went with him on that trip and it was a wonderful time and the car was fantastic. My own BMW, a higher end model with lots of problems, was costing me a fortune. I went to that same dealer, met with the same salesman and requested the identical car, with the identical deal. Nope.

The salesman insisted I pay another $700 for a delivery fee that wasn't required on European Delivery. But what about my friends deal? Nope. Can't have it for that price. To give you an idea of how car dealerships work, each dealer gets an allocation of cars each year, say 100, and they need to maximize the profit on each of those vehicles, which is why there's so much haggling and an attempt to get you to pay full price in a market segment where almost nobody pays full price. It's the poster child for dumpster fire retail. European Delivery, offered by a handful of manufacturers, is outside the dealer allocation, so they can sell as many of those cars as they want and it's essentially "free" money. Turning me down for $700 was turning down free money, in my mind at least.

I drove over to another dealer and I swear I've never seen a car dealer so overjoyed to work with me. I handed him a complete deal, with all the details, for an imaginary car in a foreign country and he would make $1,000 for his efforts that day. He would never see me again. I swore I would never step foot in that first dealer and it left a bad taste in my mouth. It's a taste I encounter daily, just by looking through my store window at that same dealership across the street.

Driving through France in my perfectly configured dream car (I ended up really hating it)

What's the relevance of this story? We sold a box of Magic the Gathering: Ultimate Masters to a customer. The clerk was unclear on the price, as it has been like shifting sands with us. This product was in fact, allocated, meaning, in theory at least, we are only getting so many and we needed to maximize profit based on market conditions. Even though the price was clearly stated in our point of sale system, the clerk sold it for 10% off.

Later, his buddy came into the store, and asked for an Ultimate Masters box like his buddy bought, with no sales tax. Pfft. That wasn't going to happen. No sales tax? That sounds like his buddy went to a competitor.  We rang him up and he was rightfully upset his box was 10% more expensive than his friends. He was angry, he swore he would never be back and said some mean things, and I lost a customer. He probably went and told all his friends as well. Nine friends more than likely. Or maybe he'll write a blog post.

Too much ketchup on your burger? Not at McDonalds.

There's two ways to lose a customer, one is treating them poorly through bad customer service. The other way is the irritation and anger that comes from inconsistency of experience. It's why people give in and just go to McDonalds even though the independent burger joint is often better. It's not always better, just often. Often is the enemy of consistent experience, and McDonalds may be kind of mediocre, but it's always mediocre in its consistent mediocrity. In any case, there is often a sliding scale of bulk CCG product, but there is only one game where we have this chaos of allocations and commodity pricing, Magic: The Gathering.

The shifting scale of commodity pricing and allocations adds a level of unprofessionalism to the game trade. It makes us all car dealers, makes everything negotiable in the eyes of customers, and lowers overall customer service. Every retailer thrives for consistency of experience. Wizards of the Coast believes these allocated products are a type of halo product that accentuates the brand, and they incentive their entire retailer marketing scheme so retailers chase these allocated products. The joke is they only care about "butts in seats," with their WPN program, but as retailers, we chase butts in seats in order to get these commoditized products. Everything about that program is designed to devalue the product while spreading the reach of Wizards of the Coast. It's great for them, but a terrible, inconsistent experience for everyone else. The halo has morphed into horns, trampling consistency of experience, and I think it's time to be discarded.


Monday, December 3, 2018

Fickle Store Owner

As a store owner, what really drives me nuts more than anything else, are comments like, "That's ok, I'll just buy it on Amazon," or "Amazon is out, so I'm here." These comments make me a little sick to my stomach and they're the worst thing ever.

Oh wait, that's not it.

As a store owner, what really drives me nuts more than anything else, is not knowing. When I accidentally order an expansion for a game I've never carried and it becomes a best seller. When a $25 map pack for a $50 D&D book outsells the book. When I can't figure out if Amazon is eating a quarter or a half or three quarters of a market segment, or whether it's actually Amazon racing to the bottom, or my friends who own game stores. When a long time customer simply disappears. When a group simply stops playing a game. When nobody comes.

Yeah, that's what drives me nuts more than anything.

Or...

Maybe what really drives me nuts is the apathy that develops over time because caring is so painful. Seeking the unknowable is an act of faith, and you can throw yourself off that cliff of faith or you can live in an agnostic world of gray. Deciding not to care is psychologically protecting yourself from heartbreak. It's building a retaining wall against the slow erosion of peace of mind. It's going through the rituals of retail never sure if They will come.

No, it's definitely the first one.

Saturday, November 24, 2018

The Falling Sky (Tradecraft)

There is the perception and certainly some anecdotal evidence that there's a correction taking place in the board game market. Publishers are feeling it and stores are certainly feeling it. It's not that there isn't a huge plethora of great games, because  there is A HUGE PLETHORA OF GREAT GAMES. Oh dear lord are there an awful lot of great board games right now. The games are great, but there are simply too many. Or in economic terms, there is too much supply for the existing customer demand, with the modern caveat of from me, and at full price.

As retailers, we are always on the look out for great games and we are trained to order deeply when we find them. Otherwise, the game is gone in moments and those with the deepest pockets make the most money. Some would say this is the only way to make money selling board games. You buy deep or you go home. So we buy for the duration. How many titles do we buy? We buy the good ones. How many is not a question we normally ask.

There is no simple mechanism for managing inventory for a department, keeping it in its lane. I use and evangelize the retail tool, Open to Buy. I budget for the entire store with Open to Buy. The complexity of budgeting by department is something better handled by software. That's not to say I won't attempt to make such a spreadsheet, only that it's near impossible to get small hobby retailers to use a basic OTB spreadsheet and most are certainly not going to divide up purchasing by department. That's like preaching pivot tables to cave men (note I don't know how to use pivot tables).

That leaves us where we are now, with many retailers deeply overstocked on product that will never be bought at full price. How deep depends on the other thing I like to preach about, performance metrics. I am certainly one of those retailers beset by fantastic games nobody is buying, but my quarterly inventory performance analysis, usually related to turn rate metrics (or sales per square foot or GMROI), means my problem is a Q4 problem, rather than a 2018 problem. A lot of retailers are using Black Friday to exhaust port stuff I haven't seen in my store for many moons, and it's frankly too late. Good for them, but the crisis could be averted by a regular culling of the herd.

My point in all this is we have tools to keep our stores running smoothly in both the buying (Open to Buy) and inventory management (turn rate analysis). Now all you have to do is thread the needle and master the the rare independent game store skill.... selling. Buy smarter, manage better, sell the hell out of that cardboard.

Sunday, November 18, 2018

5 Thoughts on Hiring

I'm pretty sure I've written an article similar to this before, but with the holidays coming, I've been involved in the hiring process of late. For the first time, I've used professional tools to seek candidates outside of our network of customers and fans, notably Zip Recruiter, which I recommend.

In plain talk, it means rather than trying to recruit gamers to be game store employees, I've sought out expertise with hopes of finding some hobby gaming experience. With hobby gaming permeating society as never before, some say at exponential rates, it doesn't take long before you find a regular joe or jane who doesn't consider themselves a gamer, but nevertheless knows a dozen different games.

This is one of those cases where store owners disagree, often strongly. Do you hire the gamer to retail or the retailer to sell games? You can't train for passion, but you can train a muggle to play games and talk competently about them. Some will argue that they still won't have authenticity, but I've given up on that concept, as a good number of men, sadly, will never accept that authenticity in half the population. You'll have to be content with stellar customer service and reasonable product knowledge.

On the other hand, there are many gamers who will never master the social skills and customer service necessary for zero tolerance retail, which is what we have nowadays, with toxic review culture. When stores get one star reviews over the type of greeting a customer gets when they enter the store, it changes my focus. You can't lose with either recruiting method, but at a certain point you tire of trying to turn partisans into ambassadors. A retail centric employee may not know how many spells a first level Wizard gets, but they sure as hell say "Hello" every time you walk in.

So that's my strategy for hiring right now. What I really wanted to write about is advice on how to interact with a potential employer as a candidate. Candidates in our scenario are often inexperienced in the hiring process, because of our bottom of the market pay rate (someone has to be at the bottom of the range, and that would be a game store). Either they're young or perhaps have moved up in the same company over the years. The job interview can seem confrontational, which is somewhat true, since both parties want to see if they can make a strange shaped piece fit a strange shaped hole.

Here's my advice for candidates. For the most part, consider an interview exploration. Do you really want to work for these people? Do they offer a work environment that will let you thrive? With unemployment at a historic low, there should be more give and take than desperation. So here's my list:
  1. Follow the Process. There are those who would tell you to skip to the head of the line by directly contacting the company, tracking down the hiring manager or otherwise not following directions. Or in one case, coming in with your parent. Although having an inside source is a great way to get a job, going around the process is a great way to irritate potential employers and possibly give away what might be a confidential process. Go through the process, be courteous, follow up, and go through the usual ritual. If you're interviewed, I think you're owed a follow up. Applying? Not so much.
  2. It's a Conversation. There's a lot of information exchange, but what we're really trying to do is determine if you can handle a customer facing position and express yourself coherently and succinctly. Even more important, we want to determine if you're the kind of person we want to spend a lot of time with. For some, this might seem like a trap, and the less said the better. Some people talk way too much. There is a middle ground.
  3. Trajectory. We're looking for a job trajectory that leads you to this point. Retail is one of those things a lot of people circle back to when they're unhappy in a new field. What we would rather see is an associate bottle washer promoted to an assistant manager of bottle washing to manager of sanitary containers. In the case of line employees, a job or two in retail directly leading to this point in time is ideal. If we're digging into a resume to find relevant experience, because you've moved on from retail, it's not a deal breaker, but it's not a good sign. It looks like a fall back plan. With wages rising, and college level positions at half the number of college graduates, retail is becoming a place where many people will spend a good part of their lives. I mean that's what we're signaling when we raise minimum wage 10% a year, right?
  4. Research the position. A notable candidate will demonstrate they've learned a little about the industry, how it functions and the role of the store within it. It's a good idea to do some company research that shows you're interested. This will not go unnoticed. Every company has a website or Facebook page nowadays, so spend some time learning about a future employer and their trade. Tradecraft is one of those things some employees will never get and is often not trained. Showing an interest in how the sausage is made, not just where you'll be standing when you turn the handle, impresses business owners.
  5. Be Honest. Be honest about the compensation, scheduling, or other areas that may not work for you. Sometimes there's wiggle room for the right candidate. I'm likewise up front about potential advancement, or lack thereof, and our ability to pay competitive wages and what skills I envision a candidate picking up in the future. Often the opportunity to learn new skills and build a resume is more valuable than the compensation. Often when people want more money in a job, they really just want more challenges and a chance to succeed at something new. Training and learning new skills that help the business are great ways to get past the fact that retail compensation, although rising quickly, will likely lag other opportunities. 
Thanks! And please share if you thought this was helpful or have someone in mind this might benefit.

Thursday, November 8, 2018

Mistakes and Intent

For two hours this week on the day it was announced, I sold the new Ultimate Masters Magic set for a ridiculously low price of $225. There were a few reasons. This set was initially greeted that day with profound indifference. When I queried my staff, they told me it appealed to the grinder crowd, which has nothing to do with gay sex, I'm told, and everything to do with wheeling and dealing Magic cards as commodities. That is certainly not our crowd, as we cater to the more casual player. My sales rep threw up his hands with a big "who knows" when I asked if he thought it would be hot. The biggest reason I low balled it was the release date, December 7th.

Why is that important? Like 90% of game store owners (I took a poll), I use the fiscal calendar year. In the United States, if my inventory value was X on January 1st of this year, I am taxed on the amount over X on December 31st. It's taxable income hidden in inventory. Canada doesn't have this, which is why you can see glorious "museum" stores there with vast inventories. Also, in case you're wondering about changing a fiscal calendar year, small corporations like mine need permission from the federal government. Their response is "get bent, you made your choice."

A Magic release in December, although likely profitable, is not welcome. It will mean holding extra, inactive stock of this product in exchange for strong turning stock that is actively making money. Long story short, the correct amount of Ultimate Masters to buy on December 7th is 24 days worth. When I buy a Magic set, it might last a weekend or it might last three months. So Ultimate Masters was ultimately dangerous, especially at a price point of $336 per box. Blowing it out is a reasonable fiscal decision.

So that night I mangled a flyer to read $225 to attract customers I wouldn't normally have, for a product I didn't want, that I necessarily needed to blow out in 24 days. I posted it in our private Magic forum on Facebook, hoping we might get a few pre orders in the next few weeks. Then the calls began. My manager texted me, asking if I was sure that was the price I wanted. Store owners from 200 miles away called to make sure my head was on straight, because their customers were about to jump in their cars and drive to my store. Then I checked my distributor's website, because remember, Wizards of the Coast just stopped selling direct to game stores. Oh boy. I had made a big mistake.

Our distributor Magic prices are going up significantly starting January 1st, because Wizards of the Coast is reducing our margin significantly without raising the MSRP.  That January 1st price change date assumed there were no other Magic releases for the rest of the year. This surprise release caught everyone by surprise, so those January 1st margins? They went into effect starting in November with Ultimate Masters. Not January, right now. What was going to be a modest profit on this release, was now going to be $10 of gross profit, which is a bit of a disaster. So now what?

I did what any retailer would do, I made a course correction and increased our box prices to $250, which was still $50 less than any online price that evening (putting it at $250). The two people who bought boxes at $225 got to keep their orders intact, of course. I didn't suddenly demand an extra $25 from them. One person who wanted a bunch at $225 but couldn't pay that evening was angry and threatened me, but we eventually came to a resolution that made us both not homicidal. Here's where it got a little dodgy ethically though.

My crazy price had spread far and wide. There was a Reddit post. Reddit is an Internet bulletin board system I'm told. The resulting buzz for $225 per box brought in many customers, who ultimately shrugged and paid $250 a box, because it was still the best deal out there. I sold a couple dozen boxes, where most of my store owner friends sold a couple. The question you should ask: Was this Bait and Switch?

Bait and Switch is where you advertise one low price to get customers in your store, only for them to discover a higher price when they arrive. There's a good article on this here. Retailers make mistakes, and I clearly had made a big mistake with this one. The difference between bait and switch and an honest mistake is intention. Did I intend to advertise for two hours my $225 price so I could raise it when customers called in later?  If so, that's illegal bait and switch. Was it an honest mistake? The same actions, even though they resulted in the same phenomenal sales that would have occurred with illegal and unethical bait and switch, are just a mistake, if it wasn't your intention.

Eyebrows were raised, and what I want to say is good. Eyebrows should have been raised. It's a shady and illegal tactic if done intentionally, and the only way to know for sure is to get into my head. That's worth an eyebrow raise. I also want to say sorry, I made a mistake. I apologize for that. I paid the rent on Ultimate Masters, so I'm glad this happened, but I also acknowledge I burned a lot of social capital to do it. I certainly won't make that mistake twice, if I can help it.

There are some who will be angry and suspicious regardless of what I say, and to them, sorry, I can't help you. For the rest of you, I think this is an interesting parsing of a mistake and what this means ethically and legally. We make so very many mistakes in small business and most of the time they cost vast amounts of capital and time. It's not entirely terrible when one works in your favor. Now I just hope my allocation is big enough to cover my pre-orders. Whee!


Monday, October 29, 2018

5 Reason You Shouldn't Start A Game Store

Here are five reasons you shouldn't start a game store, right now, in California specifically. Some of these apply to other regions, but it's specifically my market. Later I'll write about five reasons you should start a game store in California right now. There are few times when it's clear you absolutely shouldn't start a business, and they tend to involve national catastrophes. Most of the time, there's a little of column A and a little of column B. But for today, here are five reasons you shouldn't start a store in California right now:

1.  Wages. While other regions of the country work with the very low national minimum wage of $7.25 an hour, California's minimum wage is at $10.50 an hour and rising dramatically with no end point in sight. In three years it will be double the national minimum and it will continue to rise by law. This is because we've got a mismatch of education and jobs and we're trying to turn every job into a living wage position. I don't know how traditional retail stores will survive this without double digit growth and robots. Retail stores that use an MSRP system cannot raise prices to make up for higher wages and the only hope is a "rising tide" scenario where all these workers (about 50% of the workforce and climbing) have more money to spend with us. But you know where they'll spend it? Let's look at number two.
2. Rising Inflation. The Western region consumer price index rose at 3.4% last year, over 50% faster than the rest of the country. This means not only are your expenses rising, but the expenses of your customers are on the rise. The game trade addresses inflation by shrinking your margin, which we'll get to, rather than raising prices. With all that wage growth in California, you may wonder about the net result. California income rose 4.5% this year, which only leaves a small 1.1% net if you look at that 3.4% inflation. Wages are rising, inflation is rising, nobody is getting richer, but your store is become more expensive to run.

3. Retail Apocalypse. The report of the retail apocalypse is mostly overblown, however, there is some truth to this as the United States has roughly ten times more retail square footage than other developed countries, with large retailers falling off cliffs regularly at this point. There are simply too many stores, that are too large, selling the same things and scraping by.  The likelihood of a recession nuking as many as half of retailers -- permanently -- is rather high, leaving survivors like us in strip mall ghost towns. There are only so many nail salons and massage parlors to fill in the holes. At least half of retail, right now, are dead stores walking. A recession is coming (it's always coming) and there will be a retail reckoning. Although game stores are counter-cyclical, meaning we'll survive fine, the retail infrastructure is likely not to be the same afterward.

4. Shrinking Margins. The big publishers like Wizards of the Coast and Asmodee reduced retailer margins by several percentage points each. This means you have to sell more product to make the same amount of money. My store needs to sell $7,500 more each month, just to offset Wizards of the Coast's margin shrink. That's an extra 150 D&D Player's Handbooks, or 1,500 copies if you're Amazon, who sells these books at our cost. That's pure fantasy. We're moving towards mass market margins, which means you'll need rapid growth and high sales velocity to stay in business in the future.

This makes it increasingly difficult to start a store with Magic as the cornerstone, and that's probably half or more of new stores. When Magic is no longer the cornerstone, it also means stores will be smaller, with less game space and less marketing power for the rest of the game trade. Those who don't believe game stores are a positive marketing force for their game, may be in for a surprise when they change formats.

5. Massive Instability. Traditional retailers, who rely upon a catalog of games, built over decades, are struggling to survive due to the constant pressure of one-off crowdfunded games. There are ten new board games released each day. While traditional retailers build a business with traditional relationships with publishers, crowdfunded game designers are interested primarily in getting a game directly to the consumer, rather than building a catalog and a brick and mortar company. This instability leads to disintermediation by desperate game publishers, which often harm brick and mortar retailers. Crowdfunding is something we've embraced as retailers, but for the most part it's a disintermediating force. Publishers of all stripes desire to get as many direct sales to consumers as possible. You are the middle man. The middle is friction and cost. Nobody wants to feed the middle, if they don't have to.

Conclusion:
Doom and gloom is easy. Retail is about two steps forward and one step back. Anyone can talk about that step back. In the next post I'll talk about the two steps forward, why you should start a game store. In reality, it's a poor business model in a ramshackle industry and you should do anything else if you can. However, if this is really what you want to do, there are good reasons to get in now. Or at least that's the sunshine I'll be selling with my next post.

Friday, October 26, 2018

Your Extended Purgatory (Tradecraft)

I was lamenting about the slog of retail yesterday, because really, most of us would be promoted or fired if we did the same thing for over a decade. One of my store owner friends, who has 24 years in business, commented that maybe, with my 14 years, I'm still in store owner purgatory. Store owner purgatory is when you are not quite profitable enough to do what you want, you have limited wiggle room, and all you can really do is work your way forward out of the hole.

When your perspective is you have done this long enough to be a success, a slog in year 14 is demoralizing. It's your ego telling you you're better than this. Your ego is a dirty liar, so if you can trick it, you've accomplished something. If you take a longer view, like say, if you've been doing this for 24 years, it's a liberating concept that maybe your struggle is only coming to a middle. Your ego can go back to sleep while you vacuum another million square feet of store space.

The real problem as small business owners is we know how to fight, but we don't know how to win. We make good underdogs but terrible overlords. Americans love the underdog and as you can hardly make a mistake if you are small and scrappy. Big and arrogant? You can't walk to the restroom without offending someone. Most of us don't have the answer to "Now what" when it comes to success. This is why small business ownership is always a risk and why when we approach the top, we tend to make one of two big mistakes: disengagement or overextension

I work on my Jeep to avoid gnawing my arm off, typical disengagement.  It means I'm taking my eye off the ball and growth is taking a back seat. I engage in risky construction projects more out of boredom and the need for a new personal challenge, rather than business need, typical overextension. Business eventually becomes boring, but only when you've reached a certain height. Re-define your progress as being somewhere in the middle, and your perspective brightens and your decision making improves. So the lesson here is find your extended purgatory by redefining your struggle as somewhere in the middle.