Tuesday, June 25, 2019

Board Game Support Group


Carl: Hello everyone, please welcome Gary to the group. He could use our support.

Group: Hi Gary!

Gary: Like all of you, I buy too many board games. They’re sitting in shrink wrap on shelves.

Group: Nodding approval.

Gary: But I’m mostly trying to sell them to you folks, as a retailer.

Group: Disapproving grumbling.

Gary: But often at a discount, because they sell like crap.

Group: Murmuring with approval.

Gary: You see, as someone whose mostly a role player, I tend to buy board games that interest me. Really complex stuff that makes my brain tingle. But I don’t play them. As my friend Jay says, a good day board gaming is still not as good as a bad day role playing. You know, like the sex and pizza metaphor.

Group: Angry grumbling. Several female hands go up.

Vijay: They can’t all sell badly, what about Terraforming Mars with its eight point four on bee gee gee?

Gary: Yes, Vijay, even Terraforming Mars with its eight point four. Where did you buy your copy Vijay?

Vijay? (Sheepish) Amazon.

Gary: Yes, Amazon. You don’t need me and I shouldn’t be catering to you.

Carl: I bought my Terraforming Mars at your store!

Gary: Oh, when was that Carl?

Carl: At your Black Friday Sale.

Gary: Right, on clearance. *cough* vulture *cough*

Carl: What was that?

Gary: Anyway, this is my first day vowing to order games only for our casual customers, the ones who actually buy from us. People who allow us to sell them games through our demos and our enthusiasm.

Carl: So no more high concept bee gee gee picks?

Gary: No Carl, no more complex board games. Which even at their best, aren’t as good as a bad night of D&D. Or you know, sex and pizza.

Friday, June 14, 2019

The Talk

If I had to give a presentation to a class about my job, my profession, my possibly foolish choice of becoming a small business owner, my main concern is this: I really don't want to sound like an asshole. I say this because I didn't use to be a small business owner, so I know how I sound when I talk about state mandated wage inflation, reckless politicians in Sacramento, and our incoming tariffs from our learning disabled president. I've got enough opinions about politics and policy to really sound like an asshole, to everyone! It crosses political boundaries. I'm that good.

Maybe I am an asshole. It's always a consideration. Maybe I should consider the advice of Raylan Givens: If you meet an asshole in the morning, you've met an asshole. But if you meet assholes all day, you're the asshole.

Or maybe Master Zhuangzi. To paraphrase:

Once upon a time, I, Chuang Chou, dreamt I was an asshole, pontificating hither and thither, to all intents and purposes an asshole. I was conscious only of my irritation as an asshole, unaware that I was Chou. Soon I awaked, and there I was, veritably myself again. Now I do not know whether I was then a man dreaming I was an asshole, or whether I am now an asshole, dreaming I am a man. 

The distant memory of the man I once was, before I became an asshole, sometimes haunts me. Spending Other Peoples Money (amusingly referred to as OPM), flitting from job to job, voting based on lofty principles with no consideration of financial responsibility. Oh to be a man again.

To really be an asshole is to be seen as being somewhat greedy of spirit. This is a problem for small business owners. I regularly spend half a million dollars a year on games, and another half a million on labor, utilities, rent and other garbage. I am a rich man by individual standards, while a poor man by business standards. Surely I can be squeezed for a few more dollars, why so much complaining? When I think of putting The Man up against The Wall, I envision a legion of like minded people behind me. What I don't realize, is I am The Man. I will be put against The Wall. Chuang Chou never dreamt of that!

So class, to understand my plight, to understand whether I'm a man or an asshole, I think perhaps you need to grasp the duality of the situation, that both states are potentially true. That my survival depends on stability, that society is increasingly in a state of flux, and that my ability to flit around like a butterfly, hither and thither, is increasingly dependent on the whims of an indifferent populace and their feckless leaders. Also, STEM fields. Business is a good safety.

Monday, June 10, 2019

Goodbye to Chess

Chess was important growing up. When I finally got my own room as a kid, it was the former den, filled with my father's chess trophies and books from his time on the Penn State chess team. I wasn't terribly into chess, but I read all the books in the den, mostly sports novels (ugh), chess strategy and how-to books. For a while in high school, I brought my chess set and played in science class, where the game was socially acceptable. My player's handbook stayed at home. I was a solid, thinking several moves ahead kinda kid, so the chess books were mostly aspirational. I felt like I wasn't quite smart enough to go full chess, like a wannabe wizard with an eight intelligence. Magic missile was just out of my grasp.

When I opened the store in 2004, I had a very respectable collection of chess sets, amazing really, for a 940 square foot store (amazing equals dumb for non retailers). These were all on full display, and about once a week, I would remove the pieces of each set, dust the board, and put them back on. My father was impressed when he visited. When it came to chess, I knew how to represent. This was all incredibly time consuming and eventually I lost several boxes, making selling them pretty difficult. Oh, and then there were the missing pieces. Realizing the queen is missing from a $250 Egyptian chess set will make you seek out boxed chess sets pretty fast.

As the display sets sold, their replacements tended not to get re-opened, and eventually not re-ordered as the plain white box did nothing to help move them. Chess sets sold poorly. They have always sold poorly. They sell poorly now. Stores in the region who do much better with chess, who dominate with chess? They sell poorly there too. It's a legacy item, an item that says "games" to the general public. It's a touchstone for me and my father. But chess, to be honest, is a complete waste of space.

That's not true everywhere. There are stores in the Midwest that do gangbusters with chess. But here? The serious players buy their sets online, often through chess organizations or just Amazon. In the store, I think it's enough to have a tournament size Staunton set and a roll up travel set, but beyond that there are hundreds of themed chess sets that will make you crazy as customer seek them out. Civil War? Simpsons? Harry Potter? You could stock an entire store with what's out there ... and promptly go out of business.

I used to special order sets and it was time consuming and unrewarding, unlike the work with other types of games. Help a board game customer and you may have created a regular board game customer and maybe even a board game hobbyist. Help someone with a chess set and you've sold them a chess set and you'll never seem them again.

I've watched my classic games numbers stagnate, even when I double or triple my selection. I've tried more and less and different and boxes with pictures and on display and nope, none of it works. It's dead here. I've been foolish not to drop it sooner. I would look at the corner where our "classic" games reside and fantasize about what I would put there. Frisbee golf. A coffee kiosk. Anything but chess.

With 25% Chinese tariffs, I'm extremely concerned about board games. But then there's chess. All those classic games come from China, really. I had forgotten. It's not even on my radar anymore. We just didn't re-order classic games after the holidays and nobody seemed to mind, except the occasional random customer who has clearly never been here before. We send them to the regional store that has a better selection and also doesn't make money selling them. Then that classic game space got taken up with profitable stuff. So with tariffs on the way, a better use of that space, and performance numbers that I use an example at trade shows of what you should drop, I think it's time to say goodbye to chess. Sorry dad.


Saturday, June 1, 2019

Tariffs and the Sixty Dollar Board Game

With 25% Chinese tariffs taking effect this month, I'm already seeing solicitations for board games with significantly higher prices. The $60+ board game is likely to be the norm, up from an average of $45-50. I wrote on my Facebook author page I thought my board game sales were likely to drop by 40%. That's a really high number and it's complete speculation, but let's take a look at what we know.

We know very little. If we try to read the tea leaves of market forecasts, they're concerned with publicly traded companies, most of whom can absorb some or all of a 25% tariff. Best Buy sources enough Chinese products with high margins, they may not even raise prices, just take the hit. For us small retailers, sellers of speciality goods without enough margin to absorb tariffs and no cushion to absorb higher costs, they just predict doom and gloom. A 25% tariff is a necessary 25% price increase.

One example of how price increases directly affect sales from comes from the auto industry. When vehicles rise in price, for every dollar of price increase, demand drops by .87%. With a 25% increase in price, we should expect a 22% decrease in sales using the auto industry numbers. That's our baseline though, a starting point. Buying a vehicle is different than a board game.

If you don't like Chevy dealer A, Chevy dealer B isn't going to have a significantly different price. That's because vehicles are sold through a closed dealer network and gross margin on board games is about 45% compared to 8-10% on vehicles. There's no wiggle room to sell you a Chevy Colorado for 25% off, even if dealer B wanted to. And there's no online clearinghouse for a third party to devalue a new Colorado. If you don't want to spend $60 for a board game at my store, there will always be someone selling that game for 20-30% off online, even in the age of MAP price protection. There is someone selling that same game with an MSRP of $45, right now for $30-35, which is probably half the regional sales of that game. It's more complicated than that though.

As the price of an item increases over psychological thresholds, the pressure to buy it online increases dramatically. Most store owners will tell you once a game hits a certain price plateau, sales drop off considerably as customers seek better value. It's why many of us sell so many little card games and so few $100 board games. The impulse purchase, in which calculations don't play much of a role, is probably around $30-40 nowadays. At $40-50, there's some thinking and we lose a lot of sales to discounters, and at over $50, there's a lot of thought into how to acquire that item most efficiently.  We are certainly earning that business in some fashion. And that's where board games will go, breaking that price ceiling (the one I artificially created for this example).


If you think this will be business as usual, we're going from a strong economy to where, "Markets are pricing in rate cuts in September and December." Markets are already signaling they expect pain in the second half of the year with interest rate increases up a quarter percent. My store sales for 2019 are up a staggering 20%, due to a number of factors. I'm predicting I end the year up 4% due to tariffs. It's a complicated bit of bistro math, but I'm expecting a lot of pain. I know I'll be doing a lot of dancing, I just don't know the tune.


Sunday, May 26, 2019

The Experience

I once spent nine days as a guest at a Taiwanese Buddhist nunnery. Their hospitality was incredible and what stuck in my mind was the most amazing food I've ever eaten. They made Chinese meat dishes out of plant protein, most likely because the nuns were brought up on a traditional, Chinese omnivorous diet, and this food met their vegetarian religious restrictions without compromise. It was so good, I questioned it's meatlessness, being a vegetarian at the time.

After a week of this amazing food, I mentioned on the way back from our conference, that I could really go for a pizza, especially because there was a Pizza Hut next to the nunnery in busy downtown Taipei. No matter how good something is, you often long for the tastes of home. You know you'll get that consistent experience, even if it's not great. Consistent beats great sometimes. An older scholar overheard me and slammed me for being so disrespectful as to want pizza when our hosts had been so gracious with their amazing food. When we returned to the nunnery for dinner, awaiting us was glorious Pizza Hut pizza. The heart wants what it wants.

When it comes to hobby game stores, consistency of experience is wickedly hard. You can train your staff to greet customers, provide stellar customer service, create intricate systems to maintain product and service, but in the back room it's another story. In our Game Center, your consistency of experience is kind of in your own hands.

I could pay employees to run games of a particular style and quality, but the games they run would be limited to the customer desire to pay for that experience. Other than convention fees, which they seem to have no problem with, nobody wants to pay $10 cash money for me to run Dungeons & Dragons. $10, times six players, is $60 for a 4-hour session paying someone $15/hour. That's just their labor, not profit or materials, or prep time. This is a traditionally free experience that can cross over into "nominal" fee territory, but a real fee will never really capture the value being provided.  That may change with the mainstreamization of gaming, and someone will certainly point out the "professional" dungeon masters, but it's rare.

So we run the Event Center a bit like a concert hall in which we attempt to host high quality concerts, but with no guarantee the experience will be great. We are concert hall people, not the performers. I've been to great concerts and I've been to concerts where the performers were drunk off their asses, but in neither case did I credit or blame the venue. But in the game trade that's exactly what happens. Sexist comment? Bad DM? Poor hygiene? It will all be a black mark against the store, even though there's not a whole lot we can do about it, other than craft policies, brief organizers, and strictly enforce rules. We are facilitators. We use volunteers. The only other option is the thing doesn't happen.

This chaos is also our strength, our protective armor. The inability to provide a consistent experience, but to only provide a neutral venue is unacceptable to anyone with deep pockets who wants in on this. What happens if something really terrible (actionable by law) occurs? How do we make sure the D&D session doesn't have something inappropriate? How do we actually monetize this space that costs us $6,000 a month? Really, that's what we pay. About $50 a seat per month.

The reality of most D&D sessions is there are a lot of slightly boring ones and then one amazing one, which you tend to remember without remembering the boring ones. D&D especially is a constant playtest, as most people don't run the same adventure twice. Imagine sitting through a bunch of boring movies to get to the great one. That's how it tended to be before the Internet, but people want blockbusters every time nowadays, and they can get them by picking and choosing. All of this inconsistency is why there are no national chains of game stores. Managing the managers and the organizers would be like herding cats. You would have to have a whole department called Program Development to plan and test event structures. Publishers can't even pull this off well with their one game. Plus, as mentioned, the customers would never pay, at least not so far.

Anyway, this is something that keeps me up at night. Labor, as minimum wage here approaches $15 an hour, can no longer be the solution to bespoke experiences. We are fast approaching hard limits that are testing the demands of customers with the reality of what is possible in small business. It may just be the little store, with the passionate owner working for close to zero dollars, will be the one providing the consistently amazing experiences that big stores could only dream of. The rest of us are wondering if we should get a liquor license or hire some circus performers.

Monday, May 13, 2019

Insurance (Tradecraft)

A nuts and bolts post? Sure, why not.

A business requires insurance. At the minimum, you need liability insurance. There are other types of insurance though. I've got liability insurance, workers comp insurance, key man life insurance, and for years we had vehicle insurance on our van. Insurance is one of those things new store owners don't always think about.

My second year in business I went to a seminar where a store owner had someone drive through their front window into their store. Twice. He was the likely guy to give a presentation on business insurance and for many, needing such a thing was an eye opener. When I started I had a home and assets and made sure the store was incorporated and insured and far away from my personal life. For most young people without a pot to relieve themselves, that might not be a consideration. 

So how do you get insurance? Find a human. I'm not sure if you can get business liability insurance online, but if so, it's a bad idea. You want to talk to a human about your particular business needs and exactly what you do and where you do it. For example, my store went from a regular retail environment to an improved, two story monstrosity in need of rebuilding if it burned down. It probably wouldn't be rebuilt there, but they'll pay to rebuild it somewhere.  If I had just gotten regular liability insurance, I would be left with no protection and a ton of outstanding loans for a burnt out shell. 

Other considerations include insuring Magic singles. My policy has a "fine art" clause that includes those. What you don't want are surprises. Insurance companies are all about taking as much money from you as they can and paying out as little as possible. It's better to be up front, find angles to cover everything necessary, and avoid surprises. Look at your lease and see what you're responsible for.  Plate glass insurance is often inexpensive, but if someone breaks all your windows, you could be out thousands of dollars. Over time, revisit your policy and up your limits when you add inventory or fixtures.

Who is that human? I have a customer who jumps from job to job, and one of his latest was insurance agent. He was an agent for about four months before he moved on. Do not use a green agent. Find someone experienced. I had a new agent misclassify my company for my workers comp policy, thinking I didn't need to be covered as an owner, when in fact it was necessary. A company audit revealed the mistake, and rather than admitting their agent error, they charged me $3,500 in back premiums. Insurance companies exist to do two things: take as much money as possible while denying your claims. 

Personal insurance agents tend not to handle commercial insurance, so you probably won't be able to use your Aunt Kathy's agency to handle your commercial needs (my Aunt K does my personal insurance). Attempt to find a well regarded commercial agent who has been doing this for a while and lay all your cards on the table.

Classification is tricky as there is no "game store" category for liability insurance. You might be classified as a toy store, a book store, a hobby store, whatever is close, and the cost between agencies and within each agency could be enormous. As long as you don't get cute, something reasonable should be fine.

Avoid buying a policy based entirely on price. Ask what's not covered in your case. Have a good heart to heart with the agent. These policies are really cheap compared to what could happen. I once transitioned between agencies and in a 30 day overlap period, someone broke into my store, doing a lot of damage and stealing a lot of cash (foolish me).  I talked to my new agent who walked me through my old coverage, which sucked, and my new coverage, which was great. I filed a claim with the better coverage, and yeah, they canceled me exactly a year later, but I saved $900. 

Make sure you have extensive business interruption insurance, which is usually standard. Knowing that my store could burn down and I have months to find a new place while paying employees allows me to sleep at night. When you get bigger, losing all your employees can destroy your business as easily as fire. 

What's a Good Company? I don't know! They're all terrible! I can't even remember who I have now. Let me check: Travelers for liability, State Farm for key man life insurance, and AP Intego for workers compensation insurance (pay as you go). Farmers burned me on that workers comp policy I mentioned, so maybe avoid them. 


Friday, May 3, 2019

100 Item Challenge (Tradecraft)

I recently read the ebook Smarter Inventory Drives Sales. It was a standard inventory approach with a lot of complex terminology to describe simple things, but one thing stood out. Inventory accuracy reality and perception were vastly different. The article quoted an Auburn University study in which back in 2005, before many retailers had an online presence, most thought their inventory accuracy was far higher than it actually was:
Nearly all retailers truly believed that they were at 95% plus Inventory Accuracy, and why wouldn't they? Online customer visibility was in its infancy and the term omnichannel was barely invented.
Why mention online sales? It's a painful process to sell online only to give back money because a product doesn't exist on the shelf. Stores upped their inventory game tremendously when they began selling online. My store is in that situation a little bit with our Magic singles, Our singles inventory is weak, because we have weak tools and weak processes. The metrics associated with failure are hard. We regularly bribe customers when our inventory is off. Although we're at 99.4% positive feedback, we were told we couldn't sell internationally because the standard is 99.5%. Rather than the soft metrics of back peddling with a brick and mortar customer, when you're out online, it results in bad feedback and less sales in a more direct manner.

For those of us, like me, who don't do significant online sales, we're back in that pre 2005 study territory, thinking we have a high degree of accuracy (95%+) when in reality, the study finds, accuracy is much lower:
Accuracy is somewhere in the 65-75% range. A few still cling to the decade old belief that they have 85% or higher exact match Inventory Accuracy.
This means the value of a retail store should be considered lower by at least a third. If you were to buy a store or put yours up for sale, the assumption of inventory value would immediately start at 65% of whatever you think is there. I think adding even a modest online component may increase the value of the business, if for no other reason than it denotes a higher inventory accuracy of around a third. This assumes this is all understood by a buyer or broker. In any case, if I were buying a business, I would assume 35% of the stores stated inventory is smoke and mirrors.

Rather than claim high accuracy, test this yourself. Do an actual inventory with no excuses. Don't do a regular inventory, do a random check. There are a lot of excuses when you get down to business on why things are wrong. You may have known they were wrong in the back of your mind, like many things in a store that are out of place. It's just a database after all, why sweat accuracy? But remember, you pay taxes based on the accuracy of that data and customer satisfaction is tied to product availability.

Inventory 100 random items. Do a spot inventory. The way I did this was dumping my inventory from my POS to an Excel spreadsheet. In the column next to each item, generate a random number and copy that cell down through your entire inventory. This is the only way to really check, as a standard inventory process is too subjective. Here's an article on how to generate that random number. Now sort your inventory based on the random number column and inventory the first 100 items.



What did I get? Well, how do we measure? If we measure missing items, it's one number. If we measure incorrect entries, it's another. Both were pretty close for me at 85%. I was certainly in the camp claiming 95%+ accuracy before doing this. I already had what I thought was a robust inventory process in place, but I reiterated the need to get this work done to managers and staff and put a monthly 100 random item check reminder on my personal calendar.

This measurement of progress should help improve performance. Doing a regular inventory is clearly not good enough. Give it a try and let us know what you found. There's no shame in admitting you have a problem if you're going to fix it.