I was talking with industry people this week to get a better view of the game trade and the conflicting economic information I'm receiving. There was some good news and bad news. For one, the distribution tier seems as strong as ever, with several of them expanding, opening new warehouses around the country. ACD and GTS Distribution are ones I use regularly, and although ACD is expanding towards the East Coast, GTS is opening additional West Coast warehouses that will help us. This is a threat to Alliance, which is the 500 pound gorilla of game distribution. Heck, their logo is the freakin' Death Star. Some distributors are not doing well, usually due to missteps of some sort, so the news isn't all good.
So do distributors expect a strong holiday season? Yes and no. Although the game trade is counter-cyclical, meaning it should do well in a troubled economy, many stores across the country, and especially in the Northeast, are hurting badly. Consumers in those regions are losing jobs quickly and competition for gaming in poor weather regions is stiffer. There's a separation going on between the strong, well managed stores, and the stores that never really organized themselves as a proper business. That second class of stores is failing, like most poorly run stores in a troubled economy. So talking about "counter-cyclical" assumes you're doing everything right. Most people think the winnowing down of stores 's a good thing for the industry, but these stores add as much disruption in their closing as they did in their existence. They've always needed to make room better run businesses, a problem based on the low barrier of entry into the business. With these stores on the ropes, distributors are being cautious.
Most distributors are going very light on their inventories, even now. Yes, they believe it will be a very good holiday season for games. Yes, they believe the game industry is counter-cyclical. Yet, they're scared and cautious, even more so than usual. Nobody really knows for sure what will happen with the economy. I envision middle managers in distributors preaching counter-cyclical, while owners are looking at the macro picture of the economy and telling them to pull back. Those chaff stores that are likely to fail will also play a role in distribution stocking. Nobody knows if these stores will survive and exactly what impact that will have on the creaky system.
Game store owners are also being cautious. I'm still planning to order less and use "just in time" inventory more than usual. However, that's problematic considering distributors are hedging also. This will be a holiday season in which I'll be doing my best to monitor inventory levels of key products at the distributors. I've got about 50 items identified that I don't want to run out of. Still, it will be one of the other 5,000 products I carry that I'll be howling about by mid-December. A well funded retailer would be wise to order deep for the holidays for no other reason than to be well stocked for what will likely be sparse distributor inventories for first quarter of 2009.
One final observation: Have you noticed how ruthless people talk about businesses? The wheat and chaff analogy I use is an example, but there's a Darwinian language used to describe the failure of businesses during tough times, as if it's a necessary business imperative, a clearing of the brush, or whatever you want to call it. As a business owner, this lack of empathy is sobering. On any given day I may self identify as wheat or chaff, so it's a little scary to hear people talk about the necessity that I clear out of the way if I make a mistake. It's the last form of "blaming the victim" that's still acceptable in American culture. It's taboo to blame someone for being the victim of a crime, even if they made foolish choices that led to their victimization. It's common to call laid off workers victims, while money people quietly refer to them as "dead wood". Owning a business is a virtue, but there's absolutely no sympathy afforded to business owners.
It's fine to openly talk about the demise of a business as a necessity. Sometimes business failure is just bad timing or a result of larger events that are out of the owners control. 9-11 killed a lot of new businesses. Small business owners understand this and sympathize with each other. Small business owners share a kind of fraternal bond, an understanding of how their world works, how it's different from that of "employee." They're working hard, with their money and for their money, without a net, without sympathy from outsiders. There's no unemployment insurance, no sick days or paid vacations, and everything is financed on your personal credit. Everybody wants to put their hand in your pocket and a letter from the government is never good news. People will shrug and move on when your business, the life blood of your existence, closes and disappears. Employees (meaning everyone else) don't understand this. That fraternity is one reason why I enjoy trade shows and talking with other business owners.
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