Friday, January 9, 2009

Digital Dilemma

We've decided to do an online store, for fun and profit. Here's the debate, which has been going on since April. Do we brand an online store with our Black Diamond Games identity or do we use a separate identity? Sounds simple, right?

The problem with having an online store is that people expect discounts on products. We had a branded online store for the first two years of our brick and mortar store, at full price, and it resulted in almost no sales. The catalog of available products was from a distributor, so it actually had far more selection than our brick and mortar store. It didn't matter. So great, create an online store with a discount. It's thought an online store can discount as much as 20% and still be in good shape. Fixed costs are low. This ignores the fact that online discounters are crushing brick and mortar, but for the first time it acknowledges the full reality of retail sales. Also, let me be perfectly clear that a brick and mortar store, especially in California, cannot survive on anything less than full retail pricing.

The argument against a branded store with a discount is that it will erode brand identity. It will be offering one deal in one location and another deal in another. People will ask for the online discount. The solution, so far, is to offer something middle of the road. For example, if you have an online store that offers a 15% discount and requires you pay shipping, so you can't pick it up in the store, there is less incentive to divert your dollars from the brick and mortar store. Then you focus on things you can't get elsewhere, like a well cataloged used section or liquidation merchandise.

This whole stealing your customer argument has problems, I think. It assumes that a) customers are buying from you out of loyalty, since they can clearly buy things online cheaper elsewhere, kind of counter-intuitive. and b) that there are strict lines in the sand of where people buy things, and that nobody who ever shops brick and mortar buys online too. In other words, couldn't you recover some of your lost sales that go online from existing customers?

The best argument about a branded store is probably the notion of retail purity. Many, many brick and mortar stores have an online store, usually not branded with their identity. It's secret as it erodes their ability to argue about brick & mortar. By not having an online store, you can wave the flag of the old school FLGS, tout the value of community, whether believed or supported, and generally put yourself on the left side of the tally sheet marked "solution", rather than problem. The genie is usually mentioned at this point, and that it's been out of the bottle for some time.

So why do a branded store at all? We have a brand identity and spend thousands of dollars a year on marketing. A stupid amount of my energy goes to that brand, including this blog. Starting over with a separate identity is monumentally hard, and ironically, would hurt the brick and mortar store as I divert energies towards marketing this new project. That's the biggest risk. Of course, if we decide against a branded store, it means you'll never hear about it from me. The big fear is erosion of brick and mortar sales.

You may now throw rotted vegetables in my direction.

14 comments:

  1. That's a tough cookie to crack. Personally me being a "loyal" customer, I would only buy at the store. But during this economic time, I understand people are looking for the best deal, which leads them to our tainted e-commerce.
    I'm not sure if adding 15% for shipping or some other figure would work out. This would just bring the price back up to what retail is. I know when I'm on Epay, looking for parts for my arcade collection, shipping plays a big part if I will bid or not.

    As for the branded or not, I would go branded. Just for the sake of ease, and little over head for say a graphic designer for a new logo. I'm not sure what you want to stock online either. Will this be a web enabled version of the store, or will this be things like flames of war that you are trying to reduce? Ecomm is a hard place to make a buck, specially when you have guys selling a buck over cost and trying to sell 1000's to make it worth while.

    So now I'm rambling and have no idea what I'm talking about. I'll swing back over to my coffee

    Cheers
    DF

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  2. This would be a real-time, web enabled version of the store.

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  3. I generally use online shopping for things I can't get locally or to reserve things instore so I don't spend hours going from place to place looking for one thing. I would leave your online store branded, not discount & use it to extend your customer service - reviews, extended inventory, place special orders, reserve items, etc...

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  4. A separate brand makes more sense to me. The B&M store already serves the local community. The primary reason to go online would be to expand your market, not serve the same market twice, I would think. An avid gamer in Ohio won't know much, if anything, about you Black Diamond brand but he will know you have Super Cool Widget I Can't Find Anywhere Else and will place his order accordingly.

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  5. I recommend keeping the two things completely separate.

    If online sales are cheaper, local people will shift their business to your online site. If they don't, they will ask for discounts or price matching, etc.

    I used to go to stores like Radio Shack to try out electronics to see what I really wanted. Then I would go to the internet and find the cheapest place to buy the exact same thing.

    You risk things like that happening with your store as well.

    It could be even worse. I could go to your store and be drawn to make an impulse purchase that I wouldn't buy if I didn't visit your store. But knowing that you have a website that is cheaper, I may delay my purchase until I've gone home. Once home, the impulse may have left me.

    Keeping the common brand could result in lost sales opportunities.


    I would keep the two things completely separate.

    Tim

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  6. You want a branded "BDG" store with the same prices as your physical store. From time to time you can offer online only promotions. But your online store is a convenience for your customers to buy online (maybe with a loyalty reward program). Think of Costco's online and physical store relationship. You are trying to maintain and grow quality customers. Not just price-hunting customers, who will always find a cheaper price.

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  7. Give that man a marketing job!

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  8. Even if you do go for a Black Diamond online store, I'll still be coming in. You can't socialise at an online store.

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  9. A lot of people have contacted me about this issue today. We won't have a Black Diamond Games online store with a discount. We may eventually have such a store as a "value add" to customers. For example, you could check the online store for inventory availability and reserve it by paying online, picking it up at your convenience. We may also be able to create a pre-order system for product, or a back order system for out of stock product.

    However, the BDG online store will have to wait a while, as it's very expensive at a time when I'm looking for new revenue streams, rather than costly added services. Perhaps I can divert money from the marketing budget towards the end of 2009 for this purpose.

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  10. One benefit of an online store is that it allows access to a wider customer pool. This means that many specialty, or "boutique" items that are just not profitable to stock at the B&M store could be added - even if only as "special order" items.
    This will also mean that customers will have a clear idea of what is available to special order - just by checking the online store.

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  11. "This whole stealing your customer argument has problems, I think. It assumes that a) customers are buying from you out of loyalty, since they can clearly buy things online cheaper elsewhere, kind of counter-intuitive. and b) that there are strict lines in the sand of where people buy things, and that nobody who ever shops brick and mortar buys online too"

    I agree with your point B... but don't be so quick with your conclusion on point A. Speaking from my own personal experience, I started shopping at your store based on reading the blog and developing a sense of 'anonymous loyalty'. In other words, I'm just a guy out there that is a fan of a local game store committed to serving it's customers. That's the type of store I want to help be profitable (in whatever small way I contribute). For example... I bought Wasabi on New Year's Day. I had not heard of the game before this blog... and this blog informed me that you were open on New Year's Day. Online, I could have purchased it for $10 - $12 less w/ free shipping, but I wanted to support the "local store" as I got the recommendation here in the first place. This is a long-winded way of saying that you shouldn't discount customer loyalty. Even during times when I am cash conscious, I will happily pay full retail if my customer experience is coupled with getting new fresh recommendations, convenience (being open on New Year's day), etc. I believe I have spent about $150 to $200 in your store in 2008 (99% of my decisions based on ideas I got from your blog, or from you or an employee)... all on products that I can get cheaper online, but I prefer to my local store because the value-add from commitment to gaming by you guys and relevent recommendations are what is important to me.

    Two more quick points:
    a) If you do an online store, I'd go with a different brand unless you created a creative synergy with the online and brick/mortal.

    b) From a business standpoint, I would hold off on doing the online site unless you can fully commit resources to it. There are already great online sites out there that have evolved over several years and it will be hard to compete with them unless you devote a lot of energy to it. I would instead, continue focusing on enhancing the brick and mortar... you have an opportunity to capitalize on people's renewed interest in board gaming during a tough economic time. As a moderate gamer (and someone's who shops at your store once evey two months)... I would suggest re-laying out the store (especially the right side when you are walking in). The experienced gamers are going to find what they want in your store anyway... for casual gamers... I would position the classic board games closer to some of the newer "gamer" type games and then I would put up notes from the employees and other customers describing why they like the game... similar to how you would see handwritten notes next to wine bottles in a wine store suggesting why I should buy that wine. If I trust the wine store owner / employees recommendation, I will definitely read those notes.


    c)Despite the media, I would be very careful of assumptions that spend in the niche hobby area will automatically drift to a lower-priced internet alternative. In my own situation, if I had less money to spend, I'd spend less on a bigger ticket items (i.e. hold off on that next HD tv), and spend more on < $100 purchases and want that purchase to be coupled with the experience of going into a store and interacting with thers who are into the same type of hobbies that I am.

    Sorry for long-winded note... please take it in the spirit of that I want you to continue to succeed, and that you should look at this economic time as a unique opportunity for you and it's cause to be optimistic! Don't get caught up in the worry over economic times... you are well-positioned to continuing being creative and taking this store to the next level of success it deserves! Good luck and keep up the good work!

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  12. Thanks for the comment.

    Next time you're in, take a look at the new layout of the board game section and let me know what you think. We spent a couple days changing it around. The board games have taken over a good part of the toy section, so we've got those "classic" games next to some of the gamer party games. Getting non gamers to play hobby board games is a worthy goal that's a hard sell.

    I've got a love-hate relationship with signage. The wine store sign model was my big epiphany before starting the store. I was going to have little signs everywhere. I did some of this when I first opened, but learned that most customers don't read signs. It doesn't mean we shouldn't do them, because some customers DO read signs, but there's this sense that you're spinning your wheels when you make them, especially since they need constant updating.

    The big threat to any new online project is that it becomes a distraction from the brick & mortar store. I'm hyper aware of that and it actually made me consider the project sooner for this reason, since I've got a lot of good help that won't be around in another six months, along with vendors willing to make deals that weren't available last year.

    The big issue for me is increasing my personal income beyond what a single store can reasonably provide. However I do that, in store or out of store, it's likely to be a distraction unless I plan it carefully.

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  13. Thanks for the reply, I will definitely check out the new section in the next couple of days.

    With regards to the signs… very good point… and it's easy to forget that along with every idea there is work-effort that goes behind it and given limited resources in the day you've got to pick and choose what is best / highest use of time allocated for things like that.

    With signage, to me it all comes down to what is on the sign… but speaking from one customer's / casual gamer's perspective… if there were a few signs catered to introducing me to things I didn't know about (or couldn't intuitively get from the packaging or placement), I would be very likely to read the signs… acknowledging that there is the inverse relationship between the more signage there is --- the less it will be read.

    Just a quick brain storm from a casual customer… but after I wrote my first comment… I spent the next little while playing through my head the thought problem of asking myself if I were to play arm-chair store owner… what goes on in the head of a casual gamer walking into the store and what are the couple of things I'd do at Black Diamond from a casual gamer customer perspective (of course without the restriction of thinking about the head-aches of implementing the ideas). :-)

    Thoughts process…

    Question:
    Why do "I" shop at Black Diamond rather than online (beyond the obvious answer of immediate gratification of walking out with a product). What type of experience am I 'seeking'?

    Answers:
    I want to find that 'next thing' that is going to capture my imagination… the next game to play… the next puzzle for me to solve. So in a sense, I shop at Black Diamond for the expertise behind the products that are displayed; for introducing something to me I wouldn't have found out otherwise. It's easy for me to search for a game title on the internet… it's harder for the internet to introduce me to something I didn't know I was looking for - something that a brick and mortal can excel at.

    This leads to the question of how do I personally best 'consume' that expertise (acknowledging that everyone different). My personal preference is get this type of information less through interaction (i.e. talking to employees) and more from my own self-discovery / exploration in the store. I'm sure many get great verbal advice from you and the employees in the store… but logistically that's not always feasible and it would be great if I could get Black Diamond's 'expertise' in other ways.

    Question:
    What could the store do to compel me to explore it more?

    Answers:
    - There would have to be a reason for me to go to each section of the store. If I think of my path through the store, my first thought is that whole right side is 'kid stuff' so I stay away from it. If there were some reason / hook that grabbed me to go explore, the chances that I would browse the section increases and even if not finding something for myself while browsing perhaps I'd see something that would be a 'good gift for my nephew' (even if that was not my original intent). The point is, if I never go to the section, I wouldn't get into that mindset. If there were some mechanical type puzzles in that section that appealed to both kids and adults, I'd be more likely to browse it (e.g. those old tavern puzzle toys - www.tavernpuzzle.com).

    - On a typical visit, I walk down the center and then to the aisle on the left (where incidentally most of the customers are at when I am there). The only challenge there is it gets congested so I spend less time there (hard to browse in a small space when a bunch of people are around you). I usually then go to the "card" sections looking for smaller games that are two player, but many of them are pretty low to the ground and hard to browse.

    - I then take a quick look at the graphic novels on the sectional parallel to the back wall (near the cash register)… and as a casual reader see if the store if pushing anything I haven't heard of; I am essentially seeking a recommendation… whether it's through placement or signage, etc.

    - Occasionally, I will walk around that shelf to see what's behind there (where all of the D&D books are). Lot's of great space back there, but if I'm not shopping for RPG that day, nothing for me. I think I bought an interesting graphic novel that was in that section a while back so I still occasionally walk back there to see if there is something new or if there is something I should check out based on what's being featured for product placement.

    To give a real-life example… because I had purchased a graphic novel from that side earlier in the year… I remember checking it out and seeing some signage about the new D&D 4.0 which I proceeded to buy (with no real intention of playing, rather reading through the new rules in part for nostalgia and in part out of curiosity if it would be something I'd get into as an adult). My point is, I wouldn't have made the purchase if I didn't have a reason to explore the area.

    - On the way to cash register I walk by that "back room"… wondering to myself… is everyone 'allowed' back there? Do you have to sign up to go back there, etc. And then I walk by the Warhammer section with only an inkling of what that is all about.

    Given that the above is my "casual gamer / customer experience" two ideas things that would compel me to come to (and explore) the store more given my above thought process:
    Idea #1: Monthly Product Spotlight
    A small section of wall that highlighted one game in each of several interesting genres. This would actually compel me to come to the store once a month as it is away for me to consume "expertise" of the store (which as I mentioned above, is the real reason I shop there). As I said in my first comment, I spent at least $150 at your store mostly from your blog recommendations / stories, I could imagining spending a lot more if my visit to the store inherently educated me about products or product verticals I'm not familiar with.

    Examples of Monthly Highlight Categories(with a small sign below explaining why it's being highlighted):
    a) Featured Solo game
    Example: "Tavern" type puzzles. Something I could buy on impulse and not have to have others around to play with.
    b) Featured 2 player game (perfect games to play with husband / wife), etc. I'd LOVE a new recommendation on this every month.
    c) Featured Party game (3+)
    d) Featured Card game
    [etc.]
    e) Staff recommendations
    Example: Gary / Joe / Jane, etc selected this game because:
    [ Quote as to why they liked the game ] [ Description for the non-hard core gamer: if you like 'Monopoly' you'll like this game because it… etc.]
    f) Customer recommendation (based on top selling product from previous month)
    Example 1: Wasabi… I bought that based on your blog talking about how customers were buying this and it was an interesting premise and fun game for the non-core game (e.g. I can get my wife to play it with me).
    Example 2 (let's say a more niche oriented game was top seller the month before - i.e. Magic the Gathering). It'd be great to have a sign that said… "Never heard of Magic?? Magic is a game that… [info] is played two players… [info] is played in this store by the community every Friday [info]

    With all of the examples above I'd add the caveat of not featuring games that are just popular in the media... but something Black Diamond is featuring / recommending because it's interesting to you guys.

    Bottom-line, I remember back in the day when I was a teenager (I am 34 now)…when I was introduced to bands I still listen to based on recommendations at the 'cool' record store… games I still play based on recommendations from the 'cool' gaming store, etc. That's what is missing (in my opinion) from a lot of brick and mortar stores these days… and something that Black Diamond is well positioned for (and already does to a large extent).

    Idea #2: Signage explaining the 'mysterious back room' :-)

    I get the concept of a gaming room… and though I have occasionally looked back there myself, I can see how the casual customer would be intimidated to go back there and check it out. I have been at the store several times where I sort of 'browse' near that section and look back there to see what everyone is doing (I've noticed others doing it as well).

    If there were some sort of sign that says… this room is for [ x ], and what the 'rules' are… (e.g. anyone is welcome… or it's costs $x to play in here… or you can only play games in here that you buy at the store)- that would be very helpful.

    Ok, I am purposefully being a little naive and know that if I am that interested, I should go in the room and just find out or ask… but I imagine me and others like me would be more comfortable if signage invited me in there…explained the concept, etc. If that back wall left of the back room entrance was a window where you could watch what's going on without interrupting the gamers… that would be great as well (though harder to implement and probably not cost-justified).

    Speaking personally, I admittedly do not know much about those Warhammer type games with models (i.e. is painting them just for aesthetics, is it multiplayer, do people play in the store a lot)… but if there was some signage that explained what it is, how to start playing with others at the store… I really would probably check out that (Warhammer) section in more detail, rather than walking by it (and potentially begin making frequent purchases). This is another example of how a brick and mortar store could hook me in and introduce me to a new game, genre, other gamers, etc. I know I can research all of this on the internet…but my underlying point is that a gaming store that 'introduced' me to this type of gaming, would inspire much more participation (and purchases) by me, as opposed to me browsing on the internet to learn more.

    Please don't take any of the above as criticism… I think your store is great and I like how it continues to evolve. Since you spend a lot of time on your blog talking about "consumer mindset", I just thought it would be helpful to share my brainstorm to give you a perspective / shopping mindset of one of your customers. I realize you have a bunch of different customer profiles that shop there… but maybe there are more like me who are casual gamers at heart who are happy to spend their disposable income at your store… but just need a little prodding on new areas that they can sink themselves into, I know that is the case with me.

    Continued good luck with the store… and I hope these comments 'read' in the constructive / conversational spirit I intended.

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  14. Great ideas! It's a question of how to engage customers in store with dynamic content and display. It's a shortcoming we'll be focusing on. The other problem is we're always short staffed, which could make up for the lack of info in-store, somewhat. Anyway, it's often about challenging assumptions about how customer interact with the store. Also, we'll have a flyer available this week as a bag stuffer that should answer some questions, and we'll work on some better signage.

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