Sunday, August 14, 2022

Frosthaven: A Retailer Kickstarter Analysis

Frosthaven is the largest Kickstarter I've supported. It's also the most transparent. You can tell what retailers have paid for it, and thus it's an interesting public case study of my costs, both what I paid and the lost opportunity, related to retailers backing Kickstarters. 

I have a modest amount of Frosthaven on order compared to my peers, a shipping pallet worth. I have 30 games coming, along with a small number of add ons, which we will ignore for this exercise. The cost per game is $80, which is pretty good for a game I'm selling at the market price of $250 (market price is now more like $275). However, my shipping costs for this pallet is $480. I've never paid this much for shipping. I can divide that shipping by 30, the number of games coming, bringing it to $16 per game, or a total cost per Frosthaven copy of $96.

Selling a $96 game for $250 is the occasional win we get with Kickstarter. A 62% margin is very good and a definite outlier. You might be thinking, will I actually sell any games at that $250 price point? 13 copies of Frosthaven, or nearly half are pre sold with cash up front, which is a good strategy for mitigating the opportunity cost. It's also important in the calculations to come.

What is opportunity cost? This is where we see this game isn't so great for retailers, not that Cephalofair is to blame. Every inventory dollar I spend has to perform, measured by my turn rate. My overall turn rate is a strong 4.6 per year. It's generally agreed that healthy stores should be in the 3-5 range. An example of turn rate is if I have a $100 game, on average, that game will sell 4.6 times, providing me gross sales of $460 over a years. This is using the price of the game, not the cost, but we'll get to that later.

If I pay for a game up front, like with Frosthaven, I lock in my money for a period of time, and thus lose the opportunity to turn it with other inventory purchases. This loses me money with hopes of offsetting it with sales of that game when it eventually shows up. The goal then is to pay for the project as close to the shipping date as possible, AND to pre-sell as many copies as possible, to shift that opportunity cost to consumers. It's less of an opportunity cost to an end user, since they only lose out on the fun for that period of time, and not money.

My Frosthaven order was $2,880. I placed the order April 1st, 2021 and expect to receive it by the end of December, 2022. That's 21 months without having $2,880 to invest in my business with a pretty sure thing investment in inventory. However, I pre-sold 13 copies, reducing that amount by $1,248, leaving my an opportunity cost of $1,632. 

That $1,632, locked in for 21 months, would have grossed $13,138 at cost. To get the actual money lost, we can assume that $13,138 bought other averagely successful product at a 45% margin. We need to calculate this because I want to get a net profit amount, which I generally, back of the napkin know from gross sales, not gross costs. $13,138 would buy me, on average $23,888 in product over the life of Frosthaven production and shipping. The ghost of what coulda been.

From $23,888, I can calculate a net profit percentage. For retailers it's generally in the 5-11% range. Let's assume a normal period with an 8% net profit range. $23,888 x 8% = $1,911 in profit. The opportunity cost for backing Frosthaven is $1,911, more or less. How does that compare to the profit I'll make from Frosthaven? 

That's far easier, since we have actual numbers, assuming I don't have to clearance Frosthaven later at a discount. $250 minus $80 cost equals $170 per game x 30 copies = $5,100 gross sales, times 8% net profit percentage = $408 of net profit. As we can see, the $1,911 of lost opportunity cost is not offset by $408 of net profit from Frosthaven. We have a net loss, assuming opportunity costs, of $1,503. I will be really happy to see my $2,890 of (additional) gross sales in December, but if you missed out on Frosthaven, you're probably ahead as a retailer. You might have a lower turn rate, or lower profit margin, in which case you might actually make money? I'll let you do your own math.

Edit: Should I consider the pre sale of 13 copies of vapor ($2,210), and the 4.6 turns of that money, to offset this cost?  

This assumes you have opportunity costs. This assumes you have other product you could have bought instead that would have performed at an average rate. A lot of us are increasingly not able to identify average performing game trade inventory, as we have all the good stuff in our trade. This also assume money has value, which at the time of placing this order, it honestly didn't. Rolling in government money I didn't want to give back, locking in a sure thing for a 21 month return was like buying a game trade bond, when you're used to playing the stock market. 

I think the best way for a retailer to handle Kickstarters is first, try to back projects where you pay upon shipping, and second, consider this money to be separate from your purchasing budget, which removes it from thoughts of opportunity cost. Perhaps call it marketing, where good money goes to die. Backing Kickstarter projects makes my store stand out from competition. It's a flex, a power play, because who has $1,503 to lose on one game?




Tuesday, August 9, 2022

Hagiography

My first year in graduate school, a young, newly minted professor, fresh out of Stanford, pulled me aside. The conversation went something like this, "Look, you can clearly write well enough to weave your bullshit into a compelling narrative, but this isn't college anymore. Writing in academia requires more rigor. Let's work on that." 

I graduated a few years later. My bullshit now backed up with solid evidence and a deadpan, third person voice. It ended up an honors thesis after I applied marketing principles to Japanese concepts of enlightenment. I really couldn't come up with a fifth chapter, so I weaved one last spell of bullshit. I expected to be disciplined, but they totally dug it. The first chapter had been written in that young professors class, re-worked a million times, compared to my rushed final chapter. That first semester I also took a course on Saint Francis, and learned the term hagiography, the opposite of everything I was taught.

Hagiography is the acceptance of bullshit as a legitimate academic category. It's a biographical style in which we have an agenda of depicting the individual in a positive light. In the case of the saints, it's to show how amazingly saintly they are, of course. The purpose is to enhance the faith of worshippers, as the actual lives of saints are thought to be of little significance. 

Academics will still try to tease out truth from hagiography, but it's mostly because they need something to do. The question of truth or academic rigor wasn't questioned at the time of these writings. In fact, the idea of academic rigor, the value of truthful reporting, is so modern, there's often no evidence left in the past to tell a competing narrative. Why would you want to keep that around? The dude is a saint, let it go.

I bring this up because I find it interesting that we're in this period when our hobby founders are dying. This is a hobby that's perhaps 50 years old, give or take, and our founders are aging out. Their stories have been told at conventions, in game stores, around gaming tables. They are spoken of as gods among men. Their writings have been analyzed and scrutinized. Gary said this before he said that, obscuring himself behind a filing cabinet while he said it, or written in a Dragon magazine column. The hagiography is strong, especially when we have aggrieved parties and those around them attempting to cement their legacies. There's a tendency to exaggerate to make a point.

Lately we've had a series of books attempting to tell the true history, back and forth we go. Truth is relative. Hagiography is rampant. What we can see clearly is our heroes are flawed. Villains can sometimes save the town. I think we need to avoid making oversized heroes out of our founders. What they intended the game to be is less important than how you took it, synthesized new information, and made it your own. It's a bit like academia that way. What have you contributed? 

They gave us a gift, sold it to us really, over and over again, a product to do with as we please. It belongs to the world now. We owe them thanks, but I think that's enough. They weren't saints. Neither were they villains.



Thursday, August 4, 2022

The Pilgrimage

It is Gencon week, the national game convention created by the venerable elder of our hobby, Gary Gygax himself. I was one year old when the Lake Geneva Wargames Convention was created, later to become Gencon. I have never been. It is a black mark on my gaming credibility. Gencon is a little like the Muslim hajj, a pilgrimage you should attempt to engage at least once in your life. In that respect, I can say I haven't been to Gencon yet.

We can look at the pilgrimage example and see why you might find something like Gencon relevant to you. A pilgrimage is necessarily foreign and a bit dangerous. You hope to grow by overcoming your fears. There is real danger, emotional and physical. Failure is on the table. When I was 16, after going to just one local game convention, I decided to run a series of public D&D game at a local convention, Strategicon. I needed to see if I could do it. I also needed to break out of the orbit of my local gaming group, where I was mostly just a player.

Did I have the rules mastery, the table charisma, to run a very subjective AD&D game for a bunch of strangers of all ages? It was a harrowing test in a foreign environment. I passed the test. I was a dungeon master, and I've played that role in my gaming groups since. It's odd, but that's an important part of my identity, since age 16. It was a pilgrimage, an initiation, and a kind of self ordination. I put that experience away until a friend found his Strategicon schedule while we were hanging out recently, 38 years later. Oh right, that's how I got here.


Gaming for you might be a touchstone, a life line, a reason for being. A comfort in a cruel world. I know that's how I felt at 16. A pilgrimage might be a communion with the hive mind. You might hope for personal transformation, confirmation of identity, even if it's just boosting the confidence of a teenager. I see people try to parse complex metaphysical topics, normally the purvue of religion, using the wisdom of Yoda and Gandalf.  For many, geek culture is their source of meaning and wisdom. Of course you'll consider a pilgrimage.


A pilgrimage is an inherently solitary activity, even when surrounded by thousands of people. Everyone attends for their own reasons. My friends did not join me in those Strategicon games. It was a thing I had to do by myself, as a budding master of dungeons. If you think you may never go, consider this: Because it is inherently solo, you can always plan to go next year. Those who wish to accompany you on this pilgrimage will appear in your life, once you've established the intention. Or not, the solo trip itself being an important part of your experience. I wish you a safe and fulfilling journey.


Sunday, July 31, 2022

How 40K Works (Tradecraft)

From a store stocking perspective, the rapid advance of new products from Games Workshop is untenable. Thankfully, Games Workshop understands its own efficiency requires models to be regularly discontinued, much to the dismay of fans. New products theoretically release at roughly the same pace as we should be discontinuing old product, in a zero sum game. Figuring out what to discontinue is the trick.

Figuring out what to order is also a trick, a combination of skill and intuition. We have weekly releases, combined with a forced blackout pre-order period until the models are already on the train across the country. We generally fly blind, relying on past sales patterns to predict future results. Or we cheat a little and find a way to get informal or even formal pre orders from customers. This results in overstock as a way of life, or lately, ignoring releases if customers are indifferent, or sales patterns show no interest at all (Warcry this week). So how do we decide what in our 40K line stays and what goes once it's here?

Every store stocks differently. Also, every store stocks differently in their stocking lifetime. If you have a store now and you have a rigid idea of how you stock a line, just give it some time. When I first started, I carried a minimum range of GW stock. Three years later, with a huge store, with our local GW store closed and my main competitor retiring, I carried every Games Workshop model produced. A couple years after that I added Forge World from England, marking it up 10%, just to satisfy hungry customers. I was selling resin parts in display cases. At one point a competitor popped up specializing in 40K at a discount, and I pulled way back on my inventory as sales flagged (they're gone now). Lately I'm somewhere in the middle. There is no one answer or strategy. Local supply and demand drive my stocking strategy.

As a stockist store, I carry every required model. Are there ones that perform so poorly I would like to drop them? Sure, I've got five model kits I would like to dump, but I can't (three are Warhammer Underworlds). This is fantastic. It's $135 worth of product, which is a small opportunity cost for the benefits of the various GW programs. This wasn't always the case. 

Sometimes this dead stock number can be thousands of dollars. The stockist benefit to customers is you can always find a core group of models at a store like mine. Does GW define that core well? It can be hit or miss, but it's mostly a hit. Companies can define their core on what they wish to sell, as opposed to what actually sells (Privateer Press). GW, in its current incarnation, is good with defining a strong core. It works for both of us.

All the other stock must serve the local community. This is a hard pill to swallow. I would like all the Orks or Tau on the shelf at all times, but once my customers have had a chance to buy what they need, it's increasingly difficult to stock for the casual who buys from us irregularly. Keeping a "coherent collection" of models of a particular army often falls apart, if you don't have new customers, with new needs, constantly visiting. With events functioning, but the public still wary of gathering, my sales are great, but new customers are harder to acquire. This is a game that for a good percentage of customers, requires new opponents on large tables in public spaces. 

How do we know what 40K stock to drop? This is where sales performance metrics come in. Once a week I'll get a report of inventory that has stopped performing and I have to decide what stays and what goes. This report is overly generous, and if a title shows up, it's truly deceased. Those five core stockist items must stay, obviously, but 20 other items were deemed unworthy this morning, that should have gone. Five of those 20 were added to our online clearance section with some regret. 15 were given a pass, because I deemed them relevant ... for now.

So my store, and likely most stores, are going to have a core collection you can count on, new releases that are still fresh (this trade is "front list driven") and a collection that represents the current needs of their local 40K community. If as a customer, you shop irregularly, or you cross shop, don't be surprised if you find what's available makes no sense. We're using your sales patterns to predict the future, and with unpredictable sales patterns comes a mismatch of inventory to customer needs. I'm not placing blame, but this is what you get and I can't do anything about it. This is all we can do and it's why multiple stores exist, surviving on imperfect information (mine and yours). It's how I pay my mortgage, so certainly don't feel bad for me.





Friday, July 29, 2022

5 Responsibility Holes

 When it comes to remotely managing a business, there are likely some responsibility holes you may have overlooked. These are areas of responsibility that require, you the owner, and only you, to properly manage. We want to eliminate these as much as possible, to maintain independence. Here are a few:

1. Hiring a Manager. If you have staff and you're remote, it likely means there is a middle layer of management. Ideally this person will stay for years and give you plenty of notice before they leave. However, they could notify you of their two weeks notice at any moment or worse, get hit by a bus. You will need to come back from wherever you are to resolve this.

Resolution. Ideally you have someone being groomed as an assistant manager at all times. I say ideally, because it's common not to have anyone in line. Second choice would be someone who could manage operations while you return to hire your next manager. We have a relatively flat organization chart to where almost anyone can do anything, provided they had a little more access.


2. Security. The day after Christmas, I got a call at 5am from the alarm company. Someone broke into my store. Would I like them to call the police? Duh. I was 400 miles away. My manager didn't answer their phone and I put out an all hands request for anyone to meet the police at the store. Thankfully a junior employee stepped up. What if they didn't? 

Resolution. Ideally the manager would be a secondary or even primary contact with the alarm company and perhaps with property management. Keeping cell phone numbers handy of all your employees as an owner, even though you probably can't imagine ever calling them, could be critical in an emergency. From 400 miles away, I was able to arrange for a board up service to get us through the holiday weekend and eventually new glass. 


3. Final Paycheck. In some states, including mine, an employee is required to get their final paycheck their last day of work. No waiting for direct deposit; pay me now or may me my daily pay for every day you're late What if you, the owner and probably only person authorized to sign checks, is out of town? This happened yesterday.

Resolution. If you know an employee is leaving, proper planning can arrange an electronic rushed payroll on their last day. This doesn't work for someone fired on the spot, who again, needs to be paid right this moment. You could authorize a manager as a check signer. You could provide some check to the manager for this purpose, either blank or signed, or perhaps you could provide a cash reserve with a receipt showing final payment. I don't have a great solution to this. Thanks California.


4. Your Mail. It took me a couple years to start changing addresses so mail was sent to me house instead of the business.  There is still time sensitive mail that's important someone is authorized to open, notably your manager. For example: Letters from your landlord, government correspondence and unemployment audits, and one that haunted me for a week, potential lawsuits that require a quick response. 

Resolution. Teach your manager to triage mail, scan and email important documents, and generally take responsibility for your physical in-box. 


5. Supplier Invoices. During my first long trip of several months, the manager would take in orders, create a spreadsheet of invoices that we shared, and I would pay invoices remotely. Some were inevitably missed. How do you avoid invoice mistakes?

Resolution. Moving entirely away from paper, I now track every order in a POS database with a shipping tracking number. Generally, that tracking number is part of an invoice. When there is no tracking number, it means there is no invoice, and it triggers me to query vendors. Taking complete ownership of orders means fewer steps, fewer mistakes. It's also more work. This is great until a random order shows up with no tracking or invoice, which triggers alarms from staff, at which time an exception occurs, and we resolve it. 

BONUS:

6. Oh F#&* Budget. What happens when you need to fly home to hire a new manager, you have a minor disaster, or Wizards of the Coast decides they don't like your furniture?

Resolution. Money in the bank. Plan to have a few thousand dollars or more to cover your return flight, emergency glass replacement at holiday rates, or other eventualities. Maybe you can even bribe your manager to stay another month. Money will buy your way out of a lot of problems. 

Anyway, those are my big holes after two years of working from home. I plan to take my first long, international trip in 2023 and I am fully aware I may need to take a flight home at any moment. 

Sunday, July 24, 2022

Agreeableness and Why We Won't Hire You

I am far enough removed from day to day operations to finally say this without anyone thinking I'm referring to them. The biggest reason a game store doesn't hire you (after repeated attempts), or let you run your volunteer event, is we simply don't want to work with you. 

A great number of our customers, more than the average business I would wager, are people with difficult personalities. They are disagreeable. Some will argue otherwise (they love to argue), but I do believe this trade brings in the more socially awkward and difficult folks. That's fine. We love all the misfit toys, being misfit toys ourselves. 

Game store employees are weird and awkward as well, but they have the added trait of being agreeable. When I hire an employee who is not agreeable, I always regret it. Being agreeable is an important personal trait for retail, just as much as being geeky and knowledgable about games. From Psychology Today:

Agreeableness is a personality trait that can be described as cooperative, polite, kind, and friendly. People high in agreeableness are more trusting, affectionate, altruistic, and generally displaying more prosocial behaviors than others. People high in this prosocial trait are particularly empathetic, showing great concern for the welfare of others, they are the first to help those in need. Agreeableness is one of five dimensions of personality described as the Big Five. The other traits are openness to experienceconscientiousnessextraversion, and neuroticism.

A good percentage of our customers, sometimes our best customers, are not agreeable. Being agreeable ourselves, we do what we can with disagreeable customers. We bend quite a bit in this trade dealing with them and their often difficult behavior. They say an employee doesn't quit their job, they quit their manager. In a hobby game store, if you ask former employees, they'll tell you they really quit the customers.

Something else to consider is perhaps 70% of our customers are male, and women consistently score higher in agreeableness than men. We have more men on staff than women, but this does mean that the average customer is probably not what we would look for in an employee, statistically.

"What about neurodiversity?" you might ask. People don't submit job applications like character sheets, so we generally don't know if someone is on the spectrum or otherwise neuro divergent. We can only go with our social interactions with them, and as everyone has to do every job, we envision them in customer service, often dealing with difficult customers. 

I want to be clear that some customers I really like. The thing I miss most about daily operations is the customers. There are a good number of customers I consider friends. Would I game with them? That's my barometer of friendship. Probably a dozen at least. I miss them dearly. 

There are other customers that are prickly, but I enjoy the sparring, the back and forth give and take. I wouldn't game with them, but I would gofundme a fifty for their cancer treatment. I appreciate their existence beyond monetary gain. There are some customers whom I feel I've barely survived their presence, that I've earned their business through painful social interaction. When I worked in the store, some of these customers would only want to talk to me. We had an understanding. Being an agreeable introvert, this is exhausting. Again, I still miss them. However, I wouldn't hire them.

I'll also mention that I personally like customers and even employees, that my manager at any given time, definitely does not appreciate. I see one side of people. Being a male store owner, I tend not to see unpleasant sexist or class based interactions. I have close friends who some staff feel look down on them, while seeing me as an owner, worthy of respect. That's troubling and I try to confront that. I am not the arbiter of cool, but as an employer, I can choose who I will work with. It's a small group of agreeable people.

I don't always hire agreeable people, but when they're not agreeable, they have a strong skillset I need. That's my advice to you, disagreeable one. Find a field that values you well beyond this one personality trait. I came from IT, a field populated quite often with disagreeable people. It was some good training for owning a game store.

Tuesday, July 19, 2022

New Adventures

It is time I've made some changes. Since July, 2007, I've been writing blog posts about gaming and the game trade. It started as a place to share thoughts, but it turned into a book and so much more. 

 I have learned a tremendous amount through the give and take this dialogue has provided. Certainly I am not the best game store owner, but I'm probably the best person to report on the topic. I want to continue that in a new way. 

For four years, we've been planning a return to Mexico. We spent several months on the road through Mexico, Guatemala and Honduras in 2018 and we've been yearning to return. I'm on day 1,022 of online Spanish lessons. This will be a five year mission to explore Mexico. To seek a new life in a new civilization. 

For me this is remote work, managing the store while on the road. This is going to be exciting! It would take very little for me to have to drop everything and fly home. The plan has a lot of inherent failure points, the biggest being "rigs" big enough to live in are also too big for a lot of Mexico. It's going to be tight! 

This might be a fiasco and if you join me, you'll have a front row seat, including the challenges of true remote business management, where you can't drive 30 minutes to your business to fix a problem. 

The schedule is six months on the road, six months off, so there will be fun travel interspersed with damage control, if any, back home. Where in Mexico? All of it. We have 152 Pueblos Magicos sites we want to visit plus some bonus UNESCO world heritage destinations. I imagine we'll also take suggestions. 

I want to use something like Patreon for subscribers. I'll continue to write regularly for Patreon members, and occasionally still post publicly, so I don't disappear completely, but I'm kinda done with this. Using a somewhat private platform will allow for a lot more detail of the "challenges" of day to day management. 

There will be photos and video, and a Youtube channel would be a natural place to deposit older content after Patreon members get it first. There are thoughts that a book might be be derived from this, although it may not be game trade specific. I could imagine ancient culture interspersed with "store on fire" stories. 

Although money will be tight, I'm not doing it for the money. I'm naturally going to write anyway, either for the book or for Patreons. It's what I do. My financial "offset" for this trip is about $1,000 a month, meaning that's what it costs me to maintain my life back home AND travel. I'm not going to get that in subscriber fees, but it would be nice to offset costs while creating content. It would be even better to use subscriber money to do cooler things or buy things like camera gear or a desperately needed new laptop. 

Thanks for reading this far! Please post your thoughts. I'm not one for "begging" for money, and I haven't set anything up at all. I have no experience in the subscriber model, other than what we did with Kickstarter. If you have suggestions, please leave them in the comments. My Facebook page Owlbear Adventures documents some of the technical elements of the trip since April of last year. We leave the first half of 2023.