Wednesday, June 30, 2010

Expanding Inventory (Tradecraft)

With our big inventory project complete, we find ourselves with a higher turn rate than we originally estimated. It turns out our inventory was far more efficient than we first thought. Yes, this is a way to spin the fact that stuff is not where we put it. It's a little bit like saying, I can't find my keys but I've reduced clutter by not having them there. So with less inventory, efficiency goes up. However, you can be too efficient, and we're there.

When I talk about efficiency, I'm back on turn rates. Inventory, I believe, should turn four times a year. Not everything will turn at four, but a strong department, looking at the overall numbers, should average four. Some will be much higher. For example, our collectible card games turn at an astonishing 27. Some departments are naturally (this is debatable) a bit lower. Our classic games are at a depressing 1.5. Failing departments can be pruned (like our toys). I've talked plenty about "firing" under performing departments. But can you have over performing departments?

You can have turns that are too high. The CCG example of 27 is probably not one of these. There is no benefit to having more card inventory. There will be no additional sales by keeping extra boxes of cards around, just in case. CCGs naturally just turn high, which is why they're great for small shops. Bank on it and look elsewhere for trouble. An example for over performing inventory for me are card games. They turn at six. These are games like Five Crowns and Munchkin, non collectibles that a lot of stores lump into their board game section. The recession made them super popular, far more than board games, due to their excellent value.

Once you get beyond that peak threshold of four (some would argue three) turns, it's thought that your inventory is too lean. I'll often refer to inventory as the engine of my high performance race car. An engine that runs too lean is being starved of fuel. Without fuel, you don't get the power you need. The same is true with lean inventory. Yes, you're being efficient, but you're losing sales. In the case of my card games, I could fix this by expanding my inventory to bring it up to that four turn mark.

So if I had $40,000 in card game sales last year, it means I had $6,666 in inventory to get six turns. If I wanted to add some sales horsepower to my economic engine, I would add $3,334 in card inventory to the mix. That's the budget to get four turns ($6,666 + $3,334 = $10,000 or 1/4th of $40,000). Step one is making sure I'm not running out of my top card games. For example, we keep three copies of Munchkin in stock, a safe number that almost always gets us through to our next order cycle.  After my evergreen best sellers are taken care of, I can expand my breadth of games. Perhaps I'll add more Steve Jackson Games or look for other clues to what people want (asking can be helpful). When new games are released, I might add more than usual and I might be more forgiving on slower turning games within the department.

This all assumes the store is in good shape and there aren't more important fires to put out. However, it doesn't require that you be profitable or even have money. You can easily come up with that $3,334 by looking at the bottom of your turn numbers. Take my 1.5 turn classic games, for example. Assuming that I don't just accept that classic games turn poorly, I have too much inventory in that area. As much as I try to offer up a variety of classic games, the local community just doesn't want them. That's a department, that if I were brutally honest, could be cut in half, at least, the money shifted to my growing card game section. I've increased my sales with my resources on hand. Magic.

From what I gather, big box stores do this kind of math all the time. Sophisticated open to buy programs, costing thousands of dollars, offer this kind of granular balancing for your point-of-sale machine. Shifting inventory is very difficult, both in strategy and tactics. Worse, as a game store owner, I probably have a stake or at least an interest in one department over another. It's my perception that I need classic games, or that role-playing is critical to my store. This will often drive my purchasing decisions. It takes a true business person to say enough. You have your share. You have to stick to a budget despite all the shiny new releases.

Monday, June 28, 2010


Congress is trying to pass a bill that would limit interchange rates that banks charge retailers. This might sound like an esoteric topic that doesn't apply to you, and in fact the head of the California Bankers Association believes it has no consumer benefit, but it effects everyone.

Here's how it works: The banks have a stranglehold on providing credit card and debit card processing to retailers. Every year they raise the rates, often telling retailers that they're now paying more as a convenience to themselves. Yes, that's right. Your fees as a retailer go up for your own good. This usually relates to paying for all those frequent flyer miles and other benefits, but mostly it's because they can. They have a monopoly on processing. One company, First Data, processes 75% of all transactions and who hasn't heard of Visa and Mastercard? The banks don't pay for all the marketing they provide to encourage people to use their cards (we would prefer they use cash!), retailers do. The only option is to not accept credit cards, which is not much of an option.

The banks are right that we'll make more money by accepting cards, but when retail profits are between 5-8% or so, is it reasonable that credit card processors make 2-3%? They're like one third partners in our businesses, when really their level of service is negligible. I've never accepted a bad credit card, never had fraud problems of any kind, and have had to call my processor once in six years.

The California Banker's Association believes limiting interchange rates has no consumer benefit, but what do you think retailers do as their costs rise? They raise prices. Personally, I see it as a class issue. Shareholders see increased banking profits as the masses pay high prices just to get by. Gas, food, clothing all get more expensive while banks profit and their stock prices rise. It was estimated that the average family was passed on $478 in interchange fees in 2008. 

Also, not all businesses can pass those costs along. Game stores and book stores are retail endangered species, constrained by MSRP from passing along costs. If a book has a cover price of $24.95 and I want to charge 1% more to cover my new interchange fees, my customers will flee when they see $25.50 on the price tag. So these businesses fade away and we get the homogenized big box stores taking their place with limited options for mass consumption. The world becomes a lesser place as we have more money to spend on increasingly retarded products.

Saturday, June 26, 2010

June Top Sellers

It's officially Summer. I mention this because our top sellers this month are about the sheer volume of kids we have in the store. We may talk a good game with our new role-playing books, boxes of miniatures and photos of shiny board game releases, but Summer is all about kids and cards. This was not the case a year ago, with a dismal June and only about 18 months into the new store location. Apparently it takes about two years for the local kids to find you, and with our sales up 30% from last June, the word "locusts" sometimes comes to mind.

Here are our top 10 sellers for the last 30 days:
  1. Magic: The Gathering - Archenemy
  2. Magic: The Gathering - Rise of the Eldrazi Booster
  3. Yu-Gi-Oh! Gold Series 3
  4. Pokemon HS Unleashed
  5. Yu-Gi-Oh! Shining Darkness Booster
  6. Magic: The Gathering- Worldwake Booster
  7. Yu-Gi-Oh TCG Duel Terminal
  8. Dresden Files RPG: Volume 1
  9. Dungeons & Dragons - Monster Manual 3
  10. Magic: The Gathering: Rise of the Eldrazi - Fat Pack
Eight out of our top ten sellers are collectible card game releases (all of the top seven). All hail the young suburbanites! Our closest miniature release is the Warmachine: Cryx book (#13). Our closest board game is Pandemic (#14).  I've stripped out drinks and snacks (bottled water and Mexican Coke would be on the list).

Dresden would be higher if we hadn't taken in a dozen pre-orders of both books earlier. The Duel Terminals are treated like a product in every way (including sales tax), so I left it on the list. The release of duel terminal 2 cards has created quite a bit of excitement.

Friday, June 25, 2010

Cars! (Off Topic)

Early on, when there were something like five readers for my blog, you could read about whatever came to mind and it wasn't all about display cases and business analysis. One of my favorite distraction, back in the day when I had a reasonably good income, was cars. I wrote about my car history in 2007 and in 2008 I wrote about my excitement about diesels coming back to the US. 2009 seemed like too austere a year to write about such a trivial topic, but hey, it's mid 2010, the economy won't fail tomorrow, and I just started saving for my next car. Sure, that's 100,000 miles and six years away, but a guy can dream, right? So just let me get this out of my system for 2010 and we can get back to the exciting stuff.

I am 42 years old. Despite what my employees might think, I neither feel particularly old nor am I likely to keel over dead from old age at any moment. Nevertheless, I've been lusting after a Buick. Let me back up a moment and tell you what I want from a car. I've had fast, luxurious, and even some legitimate up market rides. What I want is a good looking car, with reasonable performance, with exceptional gas mileage (about 35 MPG). It has to have a stick shift, I would prefer a wagon, and it must not lower my testosterone (sorry Subaru and Volvo). I actually have a kill order out on myself if I'm caught driving a Volvo. It also can't bankrupt me with maintenance and repairs, which eliminates the obvious Euro choices, especially Audi and my old favorite, BMW. No $1000 brake jobs or $150 oil changes.

I really want a diesel, but the US market has yet to fully embrace the Euro centric diesel paradigm. We've got little Volkswagens and expensive Mercedes, but reasonable diesel cars, those that can perform well, yet get excellent gas mileage, while not sacrificing on space, are just not available. Current diesels are a cultural oddity for the granola crowd and the wealthy who want to make a statement. There are many cars in Europe that would be awesome here, if only Americans would embrace them. So with diesels a non-starter, so to speak, the turbo four cylinder seems to be a good deal. Great gas mileage and performance on demand. That brings us back to the Buick.

The new Regal is made in Germany (for now), has a turbo four with good performance and gas mileage, and has European tuned suspension, just how I like it. A wagon is rumored to be coming in a few years. It's got an upmarket interior and looks pretty good. It's by GM, which is the kiss of death, but they did pay back their loan and early. So I went to my local Buick dealer (this already sounds wrong) a couple days ago and checked it out. They let me into the detail shop, as their first Regal wasn't ready yet. I needed to align my car lust with reality.

And? Disappointing. The exterior styling looks good in photos, but it's bulbous and overly muscular in person. Part of that is the new European pedestrian regulations that require the hood to be a cow catcher. The interior is too busy and the leather is that typical grainy GM stuff that looks like a catchers mitt, with different colored stitching that makes me cringe. I had hoped maybe that was a by product of American cows. The sticker price is approaching $30k, thanks to a lot of overly technical gadgets that do nothing to make the car drive better, like blind spot detection and BMWesque dynamic suspension. The fact that GM is number 15 in reliability made it fall apart for me.

So my holy grail remains a powerful diesel, shoe-horned into a sport wagon with great styling and handling, with a manual transmission. It has to have reasonable reliability and maintenance expenses. Who will ever make one of those? Oh yeah, it's the latest model of the same car I drive now, but only available in Europe. A Mazda 6 Sportwagon with a powerful diesel. And a manual transmission. So it looks like I'll be waiting for the American market to catch up. Think they can do it in six years? $4/gallon gas says yes.

Thursday, June 24, 2010

Display Cases

One solution to our ever shrinking inventory is to put more stuff behind glass. We'll be buying a couple new display cases. These will house the dice and snacks, the two top sticky finger categories that need additional protection. It's a shame really, when I think about the new games we could have bought if people were more honest. I'm told the impact of being ripped off becomes devoid of emotional content after ten years or so. I'm not sure if that's a good thing or not.

Most stores already know to put these two categories behind glass. Unfortunately, I've had to re-learn what I know about store security in our new location, one crime at a time. Our Walnut Creek store had a less thieving demographic, shorter hours, fewer customers, and a space so small that you could talk to anyone, anywhere in the store, without raising your voice.

The new store is very different. It's big enough to attract professional criminals.  I've got a police report on record for my stolen laptop; the guy literally snuck into the office to steal the old dinosaur. There's a criminal bad check claim in with the district attorney's office (thank you Lisa Holmberg, of Walnut Creek) . There are a couple police reports based on customers behaving badly (one went to jail). A counterfeit travelers check didn't even raise a red flag at the bank, just a letter denying payment. We don't take them anymore. As you may notice, I am not completely detached from the situation just yet. 

Rather than show you the new game system we're bringing in, let me introduce you to the four foot melamine Full Vision display case (we're getting two).  Ohhhhh. Ahhhh. The places you'll go.

Wednesday, June 23, 2010

Navigating New Releases

If you are an alpha gamer, if you read blogs about games (or write one), participate in discussion forums, and attend game store events, or if you're new to the game trade, you should know about the strange terms the game industry uses to release new product.

Most of the 20,000 items we stock (compared to 4,000 at Costco) just show up when we order them. There are no street dates or release dates, thankfully. There just isn't need for fanfare for the vast majority of games out there. When a company does try to create excitement with a date when there is none, it's usually met with eye rolling and sarcasm from the buyers and sales reps out there. There is coordination that must go into timed releases, especially if you try to run a top store that gets everything on the street date (like ours). At the same time, some companies need dates but don't have them. For example, it looks like Fantasy Flight Games, the release date joke at our store, will soon have street dates for some of their new releases. Some games, including most of the FFG line, very much need a street date. Take that as a compliment FFG.

Fans of the hottest games rabidly await releases, and street dates help us manage the process. It gets product in early so we're not telling a dozen people the average arrival time of UPS. It ensures that competing stores won't take our sales because their UPS delivery arrives at 10am and ours arrives at 2pm. This happens. Street dates cut one way unfortunately. A Wal Mart that sells Magic early will get a finger waggle from Wizards of the Coast, while my WOTC account, and thus my entire business, would be in jeopardy if I broke the date.

Some retailers really don't like street dates. Their attitude is that they've already been billed for the product, therefore it is theirs to do with as they please. Sometimes this can be justified, such as when a company ships product a week or more before the street date. The clock is ticking on that invoice and you're sitting on your hands. Fair competition is the main driver for maintaining and enforcement of street dates, so if a product has no competitors within your region, it becomes mostly a formality. The question: Would anyone complain if this was sold early? Some games, like Magic, have such rigid street dates with clear penalties and strong local competition that you would be risking your business to sell product early. Meanwhile, Games Workshop has street dates, but in most cases encourages us to sell stuff when it shows up.

There is some confusion about street dates and release dates. The street date is the day on which an item can "hit the street" or be sold in a store or arrive at your door, if you bought online. Then there are release dates. The release date is when an item can be shipped to the store or customer. Clearly a street date is a firm time in which you will get something in hand, while a release date is fuzzier.

There are very hard street dates and somewhat soft street dates. If the game has a street date of Friday and I'm a two day ship from the distributor, ideally it will get shipped on Tuesday to arrive Thursday for a Friday street date. A more rigid company might not approve of that, so they'll allow it to be shipped Wednesday for Friday arrival, which is bad for those with late UPS times. Wizards of the Coast is actually the most flexible on this, probably because breaking the dates are considered serious, so they may get product two days earlier than the street date, in case something happens in shipping.

A release date with no street date is very fuzzy, and there are lots of these. A release date is a shipping date to retailers. So if a game has a release date of Monday, it will probably arrive to me, with next day delivery, on Tuesday. It would arrive to a two day ship store on Wednesday. Some stores only order once or twice a week, so it may just show up whenever that day is. In some industries, release date and street date mean the same thing, but not in the game trade.  Many people get this confused, even those in the industry.

Monday, June 21, 2010

Free RPG Day Follow-Up

Free RPG Day was a huge success for us. Before we even opened, there were a dozen people waiting for us outside. By noon, all of the free stuff was gone and we had already ran half a dozen events in the game center, mostly the D&D  Dark Sun adventure. This was a much bigger turn out than last year, and next year we'll be sure to get additional kits to give away.

The event went especially well thanks to our new social network marketing. It's pretty hard not to know what's happening at the store. Between Facebook, Twitter, Constant Contact emails, the store blog and the RPGA, you have to choose to ignore us to not hear about these great events. The event was free, including a surprise pizza delivery from Aldo, Free RPG Day's national organizer. The Dark Sun Adventure that we handed out for free, now sells on Ebay for over $20. How could you beat that?

I played in a noon session of the Pathfinder adventure, Master of the Fallen Fortress, and had a fantastic time. My half-orc cavalier, a new class from the Advanced Player's Guide coming out August 4th, was the party's beat stick. I loved getting a mount at first level. The adventure's pre-gen characters showcased the new classes in that book, including the inquisitor, alchemist, witch, oracle and summoner. You can still download the beta PDF for free from the Paizo site, if that sounds interesting. It's already available for HeroLab as well. I don't play a lot at the store, mostly because it tends to be too disruptive for me, with people asking me questions all the time. Sorry if I ignored you, I was beating up trogloydytes.

Only about 10% of game stores participate in Free RPG Day, which is unfortunate for the other 90%. Bug your store owner to join up next time. Let them know our sales were double our usually good Saturday sales. Most stores report significantly higher sales during this event. Like in past RPG Day events, sales were across the board and not limited to RPGs. This is because the customers plugged into these events tend to be alpha gamers. Alpha gamers, we've discovered through social network tracking, tend to be "multidisciplinary gamers," meaning they have purchasing interests that go beyond role-playing games (about two thirds of them). These are our best customers.

We ran D&D and Pathfinder because we were able to tap our organized play community, RPGA and Pathfinder Society. In the future, I would like to see more diversity in the games we showcase on Free RPG Day. I'm going to place this at the feet of the other publishers. As Free RPG Day starts to roll around, use your forums and your social networking skills to get your fans to volunteer to run your quickstart at the best stores in the country, the 10% who embrace role-playing games.

Finally, I want to thank our fantastic game masters for spending their day with us, promoting the games they love. It's also a stressful day for staff, so thanks especially to Michael Parker for managing the chaos and wrangling the game masters. Everyone should thank Aldo at Impressions for promoting role-playing games like he does and buying us pizza.

Friday, June 18, 2010

The Stages of Inventory

Inventory seems like an obvious task for a retailer. However, it's horribly time consuming so it's often put off. A full and thorough store inventory, taking everything off the shelves, scanning it and returning it, will take us about 16 man days of time, an expense that may be higher than the losses. We could move the entire store faster. We're in the process of doing this now. Usually we do spot inventories of a particular product line or perhaps an entire department a couple times a year. There's an emotional toll to inventory that seemes peculiarly like grieving. There is loss. Granted, it's nothing like losing a loved one, but it's probably bigger than you expected. Here's the grieving process applied to the inventory process with some exaggeration added for emphasis:

Shock and Denial. Denial is what kept you from doing inventory for so long. It seems mostly right on a daily basis. How bad could it be? When it's eventually done, the shocking truth of inventory losses is hard to swallow. The longer you wait, the worse the denial, the more shock experienced. Where did it all go? There's an accepted industry shrinkage of 2-5% of your cost of goods, but any loss is hard to bear. This 2-5% includes shoplifting, but it also includes items that weren't received properly, weren't sold properly or that had to be disposed of because of shelf wear. If you're in hard core denial, you may believe that most of your losses are mistakes not related to theft. They're procedural errors and thus that stuff never really existed. This isn't happening! That your customer base could be so callous as to steal from you and you family is simply impossible. Silly computer, you lie.

Pain and Guilt. You should have done inventory sooner. How will you explain this to your investors, your spouse, your employees? Why didn't you hire more staff to keep an eye on the store? Why didn't you aim your cameras in the right direction or invest in an inventory control system? You suck as a retailer. You're just playing at retail, while your peers would never have let this happen. You want to forget about this and throw yourself into your miniature painting, making that next character, or building the killer deck, but you know it won't solve the problem.

Anger and Bargaining. That stuff was gone anyway, a formal inventory was just an acknowledgment of this fact. Nothing to see here, move along. If you had done your inventory sooner, it wouldn't have changed the fact that the stuff was missing. You probably lost sales because you thought you had that stuff, but heck, it's not like you had the money to replace it, right? You paid taxes on it too, but hey, the schools need teachers and the roads need paving, you were just doing your part. Consider it your charitable donation for the year. Not having product on the shelf serves the customers right. A theft of an item has a direct effect on the community that stole it, as your offerings in that range diminish. Screw those guys! Maybe if you just buy back the missing stuff you'll feel better about it.

Depression. Oh my God, there's thousands of dollars of stuff missing. That could have gone to your kids college fund. That's a vacation somewhere nice! Just when things were turning around with the economy, this. Everyone needs to just leave you alone. Spend some time in your office, contemplating your profession and the base nature of those who have robbed you blind. You can't believe how many hours your staff took to find this out or the hours you spent when you could have been at home with your family or playing games.

Upward Turn. You begin to think straight and everyone doesn't look like a crook anymore. Some missing items show up, possibly because they were miscounted or mis-categorized. You run a bunch of reports that show the damage wasn't quite as bad as initially thought. Questions to employees about missing items yield some logical explanations. The emotion of the situation begins to defuse as you apply your professional skills to the task at hand. You work through it.

Reconstruction. It's over now and after a careful analysis, most of the stuff wasn't worth re-ordering. Otherwise, customers would have brought it to your attention or you would have noticed. Sales should turn around in those areas with missing stock. Extra staff has been assigned busier periods to watch over the store and extra security was implemented to cover trouble spots. Staff will get some loss control training. You can handle this and the losses are built into the business model, after all. Remember that 2-5%? You'll have to put off some product expansion and new fixtures to pay for the missing merchandise.

Acceptance and Hope. You'll have to do this more often to lessen the pain. A bit of your faith in humanity has been removed from your soul. Perhaps it is gone forever.You generally know who stole what, based on the categories. You've got a short list of suspicious customers, perhaps based on rumor or gut instinct. You stop pretending and take precautions, such as putting product in display cases, increasing visibility, or simply drop product that can't be secured. This is a learning process which means you can get better at it, which should increase profitability. Your faith in humanity has been diminished, but you will be a better retailer for it. You focus on the future and the exciting releases coming up.

Thursday, June 17, 2010

Blog House Cleaning

The blog will be three years old next month. Here are a few changes and why:
  • Removed follower boxes. Times are a changin' and those who "follow" the blog are now a small percentage of those who read it, about 10%-20%.  There are many ways to get here. Most people get here via Facebook.
  • Removed ads. It was something to try, but figuring out effective online advertising on Facebook made me realize the futility of monetizing something like a blog.
  • Removed profile. Which was redundant and told you nothing anyway.
  • Old Comments. I still haven't figured out how to get old Disqus comments to populate back to the blog. Sadness.
Some stats for you:
  • Most popular blog posts. Anything discusing top sellers. This blog post disussing RPG marketshare was 10% of my blog traffic over the last year and has links in three different languages. Anything RPG related gets way more traffic than discussions about other types of games.
  • Short posts generally get more attention than long posts. That doesn't seem to stop me.
  • Product reviews are always popular long term pages, while news pages get huge blips in readership and then nothing.
  • Visitors. About 2,000 per month, mostly from the US, then English speaking countries, followed by the rest of Europe. 65 countries total. Finally got some people from Africa (thanks South Africa and Morocco!). What's your problem Belarus and Estonia? (Kidding).

Wednesday, June 16, 2010

Return of the Muggles

Unlike your average game store owner, I worry about cleanliness and lighting, contemplate just the right music and volume settings, and generally stock my store in a "cradle to grave" fashion that places the scarier stuff farther back and the ponies and butterflies up front. I very much want the general public to visit my store (AKA muggles*), as opposed to creating intentional or subconscious cues that drive them away. I'm a bit like a stay at home parent surrounded by children all day long. I want, no I need, adult company after a while, especially during the Summer when I'm babysitting the local kids. That's why it's my pleasure to announce that the muggles are back.

The recession devastated many retailers, and anything that we sold that attracted the general public, suffered as well. Toys, classic games, puzzles, all performed wretchedly over the last couple of years. The store in general prospered during this time, but it was due to our core hobbyists and rapid growth and almost nothing to do with "muggle" customers. Unemployment is at 11% in Contra Costa County, with a more accurate rate of probably twice that, so I don't want to pretend everything is back to normal. That said, we've got a baseline normal that people have accepted. Check the origin of the word SNAFU to catch my drift.

Nevertheless, this new baseline normal is seeing regular folks returning to our store. They are frugal, carefully target their purchases and are likely to ask a lot of questions. Most shy away from our high end items, but seem to appreciate their presence. Many say they'll come back later in the year for that perfect gift. Our jigsaw puzzle clientele is slowly growing, especially since we've expanded our Ravensburger and Pomegranate lines. Classic games do well too with a fuller range of products, from the super cheap games from Pressman to the super high end by Alex Cramer.

Overall, we're doing pretty well. This June is dramatically better than last June, which was a basket case. Our store plans extend out to years now, instead of wearing survival blinders that had us planning weeks or months ahead. We now talk about grandiose plans, like large product expansions, constructing bigger spaces, buying buildings, and adding or buying additional stores. Few of these things will happen, some give my bad dreams, but there's a sense of optimism just thinking about them. We're learning to navigate the snafu.

* Muggle: "Generally speaking, it is used by members of a group to describe those outside the group, comparable to "civilian" as used by military personnel." - Wikipedia

Sunday, June 13, 2010

Hobby Board Games Go Mass

Yesterday I attempted to go to my usual Barnes & Noble store in Richmond, but discovered it was out of business. This store, along with a closed store in Jack London Square in Oakland, were occasional weekend destinations for me and my family, especially when shopping for my five year old. I prefer independent bookstores (and despise Amazon) but there are few left.

Where once you could casually wander through bookstores on almost any shopping trip, book stores are now destination stores, requiring planning, much like a game store. That my Richmond store blamed the closing of the nearby Circuit City for a fall in foot traffic and their eventual closing, shows that regular foot traffic must have been a big part of their business and that they're far more susceptible to a bad economy than destination stores like ours. Thus, the 25,000 square foot space, which now seems insanely optimistic, is on the market. That it closed four months ago and I hadn't noticed shows that I've cut back dramatically on my book store purchases.

My next destination was the El Cerrito Barnes & Noble store, where customers were sparse, a burly security guard stood in the entryway like a bored gladiator, and the idle staff congregated in the center of the store. In this center area were a bunch of mostly empty silver shelves. Some were stacked with some tired board game titles. However, what caught my eye were the various planogram documents taped to the shelves, awaiting product. A planogram is a kind of map that tells you exactly where to shelve products. The games on the planogram sheet were anything but tired.

These were serious hobby games, the cream of the crop. Usually about ten percent of B&N board game offerings have any cross over whatsoever, but the planogram showed most of our top sellers. Settlers and expansions, Carcassonne, Dominion, Ticket to Ride, various flavors of Munchkin, Pandemic and even the new Forbidden Island and the SdJ nominee (and presumed winner for months now) Fresco. Someone with a lot of game industry sales knowledge (or a distributor - I wonder who?) did their homework. The Days of Wonder and Gamewright games provide an easy hint.

Taken with my super secret spy camera (iPhone)

I have to admit being a bit shocked and appalled. Usually when a hobby game hits mass market, it means the decline or death of that game for us. Our sales plummet, turn rates go from stratospheric to average, and we generally stop pushing that game. Games like Apples to Apples, Cranium and Blokus used to require multiple case ordering for the holidays, but now get treated like the red headed stepchild, both because mass has tarnished it and taken customers and the margins are usually turned into mass market low profit items. The game trade often sees itself as the stepping stone or test market for games that eventually go mass, and eventually get dumped when they fail to meet mass markets high turn rate requirements.

I could go on a tirade about the potential threat of mass market to these publishers and to us, but the threat is just not there. Barnes & Noble and the mass market book store are no Target or Wal-Mart. This smells of a desperate attempt at relevance and capturing sales through diversification. It's the wrong move. I dumped my book purchases on the closest shelf and left the store. I'll be buying my books online from now on, although I hope I can find an alternative to Amazon.

Saturday, June 12, 2010

Free RPG Day

There are two events this year that are such good times, such fantastic values (free), that you should clear your calendar and make sure you attend: Our 6th Anniversary Party, with free prizes and amazing food (October 24th) and Free RPG Day, where you can pick up free role-playing supplements and play in RPG events (Next Saturday, June 19th).

Free RPG Day is what it sounds like. Come to our store and pick up free role-playing games. These aren't recycled or discontinued dreck, but brand spanking new supplements created specifically with this event in mind. That's the basic gist of the event. Some stores stop there. However, we organize RPG events to coincide with Free RPG Day, with semi-volunteers (they get a small gift certificate) running games in the back. Traditionally, it has been a hugely exciting day, with lots of happy people doing what they love.

The point of the event is to try to get RPG customers back into brick and mortar stores. Perhaps the lure of free stuff can pry them from their WoW game for an afternoon, and if the sunshine doesn't turn them to dust, reintroduce them to ye olde game store.There are also the online only shoppers we would like to bring back in, if possible. If you haven't played an RPG in a while, it's a great way to meet new people and perhaps recruit for a game, or learn about our regular gaming schedule.

The event is free to participants, but we do pay hundreds of dollars to get the books shipped to us as well as compensate the game masters and pre-empt other events, which is why some stores pass on Free RPG Day. Without any optimism or wishful thinking, I can tell store owners out there that the expense easily pays for itself with happy customers (goodwill) and strong sales (money). For us, most of the people who come to Free RPG Day are not just lifestyle role-players, but true multi-disciplinary hobbyists, AKA core game store customers.

I think RPGs are in trouble. Getting new players into the hobby is an uphill battle, considering all the entertainment options available nowadays and our aging RPG base with all their adult responsibilities. Events like this build and reinforce the RPG community. I envision an event where five guys who stubbornly want to play five different RPG systems but can't find a group, sit around a table and play one agreed upon game for a couple hours. Maybe they'll be inspired to compromise and get a group together. I curse the long tail of role-playing games not because it hurts my sales, but because it divides the pie too thinly. Free RPG Day brings everyone together at the table, just for a little while.

For best results in getting into a game on Free RPG Day, RSVP on Warhorn, an RPG scheduling tool. We've got one Pathfinder game, a bunch of D&D 4 games and a few others in the planning stage. Otherwise, just show up, check out the store, and pick up some free role playing games. If you have suddenly become inspired to play once again, we've got a very strong Dungeons & Dragons RPGA group on Thursday nights, as well as a fledgling Pathfinder group that meets at the same time (Pathfinder is D&D 3.5 with candy).

Friday, June 11, 2010

Disqus Down

The comment software add on refuses to work with Blogger after I changed the template. The comments are all still there on the Disqus site, but I can't get them to display. I'm working on it; Disqus is being the helpful.

Tuesday, June 8, 2010

Facebook 500

We hit 500 Facebook "fans" last month, or at least I think they're called fans; perhaps likers. As a reward to our loyal fans, we provided a generous 40% off coupon. The catch was we wanted to know what games you played. I was hoping to increase our understanding of our Facebook customers. It's no use telling people about some fantastic new card game if they hate card games. We want to tailor our marketing to our community, which is what social relationship marketing is all about; being useful. So with a coupon that you simply cannot ignore and asking for just a small amount of information, we received 79 coupons back. Here are some of the results.

The general game store rule of thumb, one which I spout off about all the time, is that our customers are generally mono-gamers, interested in just one game. The RPG people don't visit the miniatures, the card players don't care about board games. One game store owner in a seminar talked about how he once put a sheet over a display. It generated more interest from customers across the spectrum than any product could have. The general impression is that a display needs to literally be on fire for a customer to cross genres and check it out.

Perhaps that's true, but our Facebook crowd, those that actually pay attention and are regular customers, are multi-disciplinary gamers for the most post. 65% are cross genre gamers, playing more than one type of game. If it is true that most gamers are mono-gamers, then our active Facebook crowd is something else, a group far more engaged in hobby gaming. They would have to be.

Imagine not being a cross-genre gamer and listening to use on Facebook. There are roughly five categories of hobby games, which means if you're a mono gamer, 80% of what we're saying is garbage. You certainly won't find us interesting and you'll likely ignore us after a while. Facebook is really not a very good medium for communicating with those people, unless they're very good at adjusting their filters without tuning us out completely. That's very different from say, a comic book shop or a potato chip company.

So let's look at what they play:

Here's a break down of what people play. 65% fit into more than one category. Mono gamers tended to be from across all the categories, although very few RPG players only play RPGs, according to the surveys.

So what did we learn?  16% is a fantastic response rate. Direct mail coupons usually return 2-3%. Those who want to follow the stores activities are for the most part (84%), only mildly interested in what we're doing, and are unlikely to act. Perhaps having the coupon more prominently displayed for a longer period would get better results, although that's hard to do with Facebook. The method in which the coupon was displayed, on the wall, posted a couple times, rewarded those who were more actively participating in the forum. Those listening were obviously more interested in what we had to say. For every type of game you play, I become 20% more relevant to you, so it's not surprising.

I should also mention that those 500 fans (now over 600) are not all local customers. One hundred are friends and family, with some store overlap. Probably another 50 are remote fans, game industry people, or otherwise not likely to visit. That should put a damper on excitement over raw fan counts, but it also reflects well on the coupon response rate. I would love to hear your observations about this.

Monday, June 7, 2010

Cake Mix

Driving into work today, I heard an interesting interview with Dan Ariely, author of The Upside of Irrationality. Arierly is a behavioral economist who looks at the marketplace. He made a couple of interesting points I think related well to how we think of value and investment in hobby gaming.

Back in the '50's, instant cake mixes originally consisted of a powdery mix that only required adding water. Housewives, used to baking from scratch, hated this. So these all-in-one cake mixes began requiring additional ingredients, like eggs, for example. Suddenly people liked cake mixes because they were engaging with the product. They were creating something themselves. They had an investment, even if it only meant adding a couple eggs.

I had similar thoughts while I was putting together a Warhammer vehicle a few months ago. It was the new Hellhound flame tank. It's built on the chimera chassis, a common element to all vehicles in the Imperial Guard, except the Leman Russ. This was my seventeenth chimera chassis vehicle, but something had changed. The tedious wheel assemblies were missing and the fiddly track bits were much easier to put together.  It occurred to me that the whole process was something of a scam, or at the very least, a mental exercise.

Heck, you can buy a completely assembled tank for less than half the price. It's called a toy. Yet, I pay a premium price for the experience of putting this thing together. Better yet, I began seeing the line that Games Workshop was walking. They couldn't put the whole thing together, yet it couldn't be so difficult and tedious to discourage people from the hobby. I was being asked to add some eggs to the powdery mix and water so that I would engage with the hobby.

Adding this extra ingredient to our games is why we value our hobby. We have invested in it. We have engaged with the product and more than likely modified it in some way that put our signature on it. We make "unique" characters or write our own adventures in our role playing games. We creatively model and paint our miniatures to be different from our peers and to satisfy our creativity. Our card decks are about beating random card distributions into submission with our creative will to create a competitive deck. This is hobby gaming at its best, and it's really just adding a couple eggs to the mix. Scratch building anything is not part of this equation. The value is in the addition to something already perceived as a quality framework.

Where games have failed, I would argue, is when no eggs are required, or when the framework is lacking. The best example are pre-painted or semi-painted miniature games. There are no eggs to add, just models to set up and play. You may like these games, but let me tell you they are dismissed by most hobby gamers out of hand. They're often not sure why. The rules are solid. The models are pretty. But there's something missing. What is it? Hmmm. No eggs to add.

Likewise, anything free form without a solid game framework is also not going to get much traction. Miniatures without a game system in mind, role-playing books that are more about ideas than the game (some indie stuff, for example), or game that don't allow the addition of creativity, which I'll discuss in a minute.

The personal investment we have in hobby games is why we love to regale anyone willing to listen about our character or our adventure. Ariely talks about how we value our children. How much money would you give to have never had your children, to erase all your memories of them? They just never were. It seems the real value we place on our children is the life investment we've made in them. How much money would you take for every one of your game books and supplies? How much would you take to have all your memories and experiences of those games erased?  It's like the Visa commercial. These memories are priceless.

Board gamers perplex me because of this and I don't really understand them, since they don't add eggs (I love eggs). They seemingly add no value to their games. However, to many analytical types, such as my wife, games are not about adding value, they're about an even playing field and well designed rules. Perhaps there's another personality type, a truly analytical one, that enjoys cake but doesn't want to think about the eggs. It's also why, I think, most board gamers are serial purchasers of games.

There are definitely those who only play one game, like Scrabble, Monopoly or Settlers of Catan. However, most hobby gamers play many different games, and the hobby store business model requires that we sell many games to these people, unlike say chess or backgammon. Once you've sold someone a chess set, you'll probably never seem them again. Hobby board gamers don't add eggs, but man do they love variety in their cake. It's also a kind of warning to other game manufacturers, if eggs aren't involved in the baking of your cake, expect to get treated like a board game; something that holds momentary interest, a new flavor of frosting, but only until the next new cake comes about.

Sunday, June 6, 2010

Recession Business

I've been thinking more about how running a business in a recession changed my thinking. It has been a good thing for me, really. It transitioned my thinking from gentleman farmer, dabbling in retail with one foot in the IT world, to true retailer, examining the nuts and bolts of our operation. It has moved my from a gross footing to a net footing. There is definitely some high concept strategy in running a small business. It's required to be successful, but the recession taught me that executing that vision requires strong tactics, especially in cost controls.

If you define yourself as a strategy guy, tactics can seem beneath you. You can outrun your boring "tactical" expenses with your brilliant "strategic" income growth. The recession made frugality fashionable. Everyone was doing it. As sales began to slip when customers began losing their job, society (the press, friends, etc.) reminded us all to focus on costs. Nothing was sacred any longer.

Our fancy, logo printed bags were dumped. The term "merchandising expense" was stricken from my vocabulary; usually used as an excuse for overspending on displays or under performing muggle product. It became clear to me that after five years, the community had shown their demand and I would no longer attempt to supply them with what I thought they should buy. Some games were simply outliving their demographic, as harsh as that sounds. I still fret over the thermostat temperature, battling with the evening staff who have to deal with skyrocketing heat in the game center. You could probably create a temperature formula based on the event attendance and demographic (AKA girth). We buy all of our office and cleaning supplies in bulk now. However, the biggest savings came from the marketing budget.

One of the big assumptions I made when I started my business was from a book I read on retailing (I read most of them). It postulated that retail stores should spend 3-5% of their gross sales on marketing. That's exactly what I did, spending tens of thousands of dollars over the years on TV, radio, print, direct mail, movie theater ads, you name it. No doubt it brought in customers, but the expense always seemed rather high and the results inconclusive. When the stock market crashed and we experienced a big drop in sales, I stopped our traditional marketing out of survival. I was always told you could coast for a few months without advertising before sales lagged. Then I asked the important cost cutting question, what if I just didn't spend that money? What would happen? What if I could extend that few month lag to six months?

What happened was nothing. Or more accurately, when we stopped advertising, our sales actually went up a little. Over the following year, it was clear that traditional advertising had little bearing on our success. Nobody watched TV, and when they did, the medium was so scattered that you rarely hit your audience. The year before the recession, everyone was advertising heavily in the Yellow Pages; that stopped cold. What was increasingly driving customers to our store was social media marketing and word of mouth. Our customer emails, Facebook, Twitter, and the occasional guerrilla marketing campaign were working wonders. Despite naysayers, we're now learning that social media marketing targets both your base and new customers. This is hugely important.

Since then, I've decided to focus our marketing entirely in the social media arena. I'm definitely trading my time for my money, but the savings are tremendous. It's often the difference each month between losing money and making money. 3-5% of my gross sales, the amount I was spending on traditional marketing, is a huge increase to your bottom line in a trade where 7-10% is the usual profit margin. The media website Vitrue tells me my time spent marketing on Facebook is worth over $500/month. None of this would have happened without the recession driving cost cutting measures. You would think everyone would want to do it? Facebook advertising is up 400% in the last year, but there are many who still shy away.

When the dust finally clears, small businesses that survived the recession will be stronger. If they ran profitable businesses before the recession, they'll do even better now. If they were marginal, my guess is they'll be much stronger in the future. For me it has been about fully engaging in every aspect of my business. It has been about questioning every assumption and focusing first on customer service. If it doesn't serve my customers and it doesn't make me money, I don't do it. Most importantly, it has been about listening to my customers.

P.S.: We increased our store hours by 5% during this period, adding staff.

Thursday, June 3, 2010

List Making

As a retailer, I am a little obsessed with watching what other store owners are doing. Unlike your normal work environment, we generally work alone. Those little bits of knowledge and tradecraft you would normally grok by just being around people are hard earned on our little desert islands. Oh, you use 8x10 bags instead of 7x4? Genius! You can yell at UPS for not delivering a package during posted business hours? Amazing! When it comes to product information, this is no different.

There is no monolithic clearinghouse for new game information. Even the big distributors only carry a fraction of what's available. So we prowl forums and social networking sites and scoff at the various top lists that show up on occasion. There is scoffing, but there is also some analysis of what we might be missing. The list I've scoffed at the most over the years is the ICV2 list. Who are these guys? Where do they get their wacky information? You can go nuts trying to analyze these things, or go bankrupt thinking you can follow someone else's list.

Still, lists are intriguing, so in the spirit of oversharing, I thought I would compare the current ICV2 list to my own. It's as close as we've ever gotten to their listings, so it struck me as interesting. Feel free to discuss.

Top 10 Hobby Channel Collectible Games -- Q1 2010
1 Magic: The Gathering Magic: The Gathering
2 Yu-Gi-Oh! TCG Yu-Gi-Oh! TCG
3 HeroClix D&D Miniatures
4 Naruto CCG Pokemon TCG
5 Legend of the Five Rings CCG Game of Thrones LCG
6 Pokemon TCG Naruto CCG
7 Star Wars CMG Star Wars CMG
8 D&D Miniatures Warhammer Invasion LCG
9 Vampire: The Eternal Struggle Axis & Allies CMG
10 Arcane Legions Heroscape

Top 10 Hobby Board, Card, Family Games -- Q1 2010
1 Settlers of Catan Dominion
2 Dominion Settlers of Catan
3 Ticket to Ride Space Hulk
4 Pandemic Dungeon Lords
5 Carcassonne Carcassonne
6 Mystery Express Pandemic
7 Ticket to Ride Agricola
8 Munchkin Thunderstone
9 Bang! Runewars
10 Agricola Memoir 44

Top 5 Roleplaying -- Q1 2010
1 Dungeons & Dragons Dungeons & Dragons
2 Pathfinder Pathfinder
3 Warhammer Fantasy Roleplay Rogue Trader/Dark Heresy
4 Rogue Trader/Dark Heresy Warhammer Fantasy Roleplay
5 Dragon Age Star Wars RPG

Top 5 Non-Collectible Miniature Lines -- Q1 2010
1 Warhammer 40k Warhammer 40k
2 Warmachine Warmachine
3 Warhammer Fantasy Warhammer Fantasy
4 Hordes Malifaux
5 Dark Heaven Dark Heaven