Thursday, August 30, 2012

Key to the Ferrari

We're hiring and this is the last day to get a resume in. We tend to only hire remarkable people and remarkable people don't spend their lives working at a game store, unless they own one. So they go off and do great things and we happily wave goodbye and hope they keep in touch in their travels.

I use a lot of automotive metaphors when talking about the business, such as the inventory as my economic engine. It needs constant tuning and tweaking. It can be supercharged or turbocharged or increased in output. When it comes to the entire business, I see it as a race car, my Ferrari. The value of the business is probably Ferrari territory, so it makes sense. Sure, probably more like a 458 than a 599, but you get the idea.

Continuing my analogy, it's the car that keeps my family fed, my bills paid and maybe a retirement someday. It's my most valuable asset. When I hire people, I keep this in mind. Would I hand the key to my Ferrari to this person? Would I trust them to drive it without my supervision? Will they keep it clean? Will they be pressured to let their friends drive it because they're weak willed? Will they even bring it back? Will they drive it responsibly with passion because the Ferrari calls to them or do they just need basic transportation?

But it's that first question really. Would I hand the key to my Ferrari to this person?

Wednesday, August 29, 2012

Q&A: Resources for New Game Stores

Xeareas asks:

I am in the process of starting a game store in Shreveport, Louisiana. I have been working on this venture for a year, you know making business plans, doing research etc, but i do not have a crew or support team willing to help me and i would just like some guidance on what procedures or processes i should take first to begin my business within the next year.

The Game Store Resource Forum is a private bulletin board for new game store owners. Veteran store owners are on hand to offer advice to new owners. Email Brian Guenther on that page to gain access. There are a couple other game store related forums on the Delphi network as well.
Make sure to ask lots of questions and compare approaches. There are many ways to run your own business, all of them wrong except for yours. Once you get a feel for your next step and meet the people that resonate with your approach, I suggest moving on to social media and other means to avoid the echo chamber effect.

I also strongly recommend going to a Gama Trade Show in Las Vegas before you open. The next one is in March. This show is ideal for new store owners. Cram in as many seminars as you can. Many store owners will tell you their business was saved by something they learned at GTS. 
Besides GTS, it's a good policy to visit open house and game day events put on by game distributors. You can often add more knowledge and get one on one time with manufacturers you couldn't get at GTS. Consider this a professional development expense that you need to budget for continually and not a one time thing.

My big bit of advice: Rely on game trade resources in the beginning, but work hard to get alternate retail opinions. Most successful game store owners never say a word and wouldn't dream of getting into the fray of forums and the like. Consider diversifying into related trades like comics, toys, gifts and hobby items. 
Consider other models that focus on service and not just selling product. It will depend on your situation if any of that will work for you or not. I suggest this because the game trade is primarily focused on manufacturers with retailers at the bottom of the food chain. Having some diversity will protect you from shenanigans and give you some peace of mind. It also helps insulate you from the natural cycle that occurs in any sector.

Other stuff:

The Retail Doctor: Practical bits of retailing advice (tactics).
Seth Godin: Big picture advice (strategy).
My Game Trade Facebook List: Game trade related stuff I follow on Facebook. Made for my own convenience, but it might be a good place to start.

If you're a retailer with some advice, please post it in the comments.

Tuesday, August 28, 2012

Q&A: What's Most Enjoyable

Ryan asks:

What part of your work do you enjoy the most? (Interacting with customers, learning about the latest games, crunching the sales figures, managing employees, running events, etc.)

What I mostly enjoy is working for myself. Self employment is so much more satisfying for me than working in a large organization. If I ever have to work for someone else again, a big part of my brain would be working in the background trying to figure out how to attain self employment again.

Being self employed means I get to set the agenda, take the chances, and reap the potentially limitless rewards. All the failures are mine as well, which is fine with me, as it allows me to learn and change, something that I couldn't do as easily in large companies. There are also no safety nets with self-employment, something you don't realize until you find yourself up on that tight rope.

There is no unemployment insurance for example. The expensive workers comp insurance I pay  each month for employees doesn't apply to me. Banks don't understand how to calculate my net worth, so when I try to get a loan, I'm impoverished with a shaky job history but when I try to get a loan modified, I'm a wealthy business owner who doesn't need it. My income has been calculated from 1/2  X to 4X. Every decision I make is legally required to be the best for the business entity, or else. My favorite phrase borrowed from Neal Stephenson is " maximize shareholder value." Just tack that on to the end of all your sentences (to  maximize shareholder value).

The first few years I started, I did all the tasks, but now I can delegate the ones I don't enjoy. For example, running events means my job would be a permanent 50+ hours per week, on site, leash.  Plus I don't really enjoy that task. So events I delegate. This is a little unusual in the game trade and there are examples, such as working with Wizards of the Coast, where their system for events assumes the same guy ordering product is the same guy scheduling events. That's a challenge. I don't recommend delegating events, but hey, I'm the boss, right?

I'm also not a big fan of management and scheduling, so I have someone do that too. Scheduling is just some logistics, but I have my manager do that and most of the training of new employees. I end up doing some management by default, but I prefer to treat everyone professional and assume they'll act that way. I'm one of those "don't make me be the boss" kind of managers. I'll help you develop, but for the love of Orcus, show up on time and do the thing.

I still put in that 50+ hour week, but I work on the parts I enjoy most. I work around 35 hours at the store each week, allowing me to interact with customers (probably my favorite part of the job) and another 15 hours at home working on the numbers, marketing, research and planning. Purchasing is a huge part of my job as we place orders daily, which also means receiving daily. Remote access means I can be almost anywhere and perform a sizable part of my job, something I realized when I was logged in while in line at Disneyland a couple years ago.

My goal, by the way, is to be dispensable.  I want the business to be able to run without me. I want it to be Black Diamond Games and not "Gary's Store." This means a bunch of things are possible: It's closer to a hand off if I want to sell it or retire. It's closer to being franchisable, since the processes are sound. I could get sick or injured and it wouldn't crash and burn.  I could start a second store or second business without the first tanking. It also makes working the store more enjoyable for employees when processes are clear. 

Provided we're at full staff, I know I can schedule a vacation and everything will be fine. I've been going on vacations lately where there is no phone service or Internet and I've returned to the place as  I left it. Good processes, but great employees.

Monday, August 27, 2012

Q&A: Data and Inventory Makeup

Kyle Tracy asks:

You've posted often about the performance of your business broken down categorically (or sometimes by the bucket). When does this data change the makeup/merchandising of the store?

I use a common retail method called "Open to Buy" in which you budget your cost of goods so inventory remains stable. Inventory is a zero sum game, so everything new requires something old to be phased out.

Most larger open to buy users track their goods by department. So if I sold a board game for $50, I would have $25 available to buy another board game, assuming a 50% margin. I don't do that. I have a big enough budget to buy just about anything I want at any time, but I let the money slosh between departments organically.  I don't know if that's a good thing or a bad thing, but it's what I do.

Then I do most of my work on the back end with performance metrics.So board games can have all the moneys if they're performing very well, or they'll get very little if they're in a lull. They'll just be organically culled on the back end rather than being starved for resources on the front end. This seems to work well for me and avoids the problem of limiting a department, possibly one that's booming, because it has too much stuff already.

Again, this requires a big enough budget to pull this off, and I often struggle with purchasing deficits, a concept that most small retailers can't grasp because they haven't taken the small step towards open to buy. So right now I have a budget deficit of $2,642 and I'm about to order another $3,000 of stuff today, including the new Warhammer 40K starter sets. If my store were smaller, if it weren't my Summer season, if the economy was starting to lag, if I was in a losing money position and making payroll this week were iffy, if I didn't have money in savings to cover this if things went  horribly wrong, I would be in a lot of trouble with these numbers. But, you know, that's typical business risks and eventually my budget will balance and it should equal cash in the bank.

Open to buy example from the first year in my first store. I go over more open to buy in this presentation.

Sunday, August 26, 2012

Q&A: Attitude Towards New Games

Kent Bunn asks:

When you see trends happen, like Dominion creating an entire market segment, do you just groan, and think of all the stuff you'll eventually be having to clearance out when it doesn't sell?

A game like Dominion led to the deck-building segment, but it did it slowly over time and without a big impact. It's easier to handle popular board games, as the investment is small compared to say, a new miniature game, where I must spend a couple thousand dollars just to get a small selection. There are probably 20 boxes you could call deck building games in our store at $25 a box my cost, so that's a fairly small investment of around $500.

Dominion is also interesting to me because before Dominion, nobody really sleeved cards for board and card games. Now we sell enormous quantities of sleeves in that area. I think it's a little ridiculous myself.

When I see a new segment emerge, I don't think of the eventual clearance of that game, but I do think of what I need to get rid of now to make my inventory budget balance, assuming I didn't have a surplus. I assume what I just brought in will sell, otherwise I wouldn't have bought it. A good example of this recently was when we brought in Dropzone Commander. I didn't have a surplus because of the enormous CCG orders I've had to bring in, so it was time to clearance the game it was replacing, Malifaux. So it was "hooray! New game!" And "Hooray! Old game on sale!"

What new game models have genuinely excited you (if any) in the last few years?

There hasn't been much new and exciting in the last few years, really. Deck building was the last big trend, but that was what, 2009? There are smaller developments I find interesting, like the super high quality resin used in Dropzone Commander. Redakai was exciting because of the multi-cell animation on the cards and the tie in with toys, but the game tanked.

Books by Frog God Games have surprised me for Pathfinder and Sword & Sorcery with their creative use of brain storming tools like Tome of Adventure Design and their enormous monster tome that I didn't think would be nearly as useful as it first appeared. Those things excite me but they're hardly commercial blockbusters. Paizo continues to innovate, surprising me with what appeared to be a pretty sedate segment. Everything they do is thought out just a little bit better than what has come before.

Saturday, August 25, 2012

Q&A: Games We Wish Had Done Better

Nick Lucas asks:
Are there some games that you, or the staff, wished had taken off better? I mean, you want all your sections to do well, but has there ever been a certain line that you hoped for more than others? And did you find yourself going out on a limb to try and help it succeed?
Yes, there are games and categories of games that we wanted to succeed but they failed. What a lot of game publishers don't realize is the store owner has a limited amount of sway in what their customers buy. There's this pre-Internet notion of "taste makers," that we decide what customers will purchase through our stock selection and how we push products. That couldn't be further from the truth.

Our job is to understand our demographic, our customer base, down to the individual. We then stock our stores based on those needs. Sometimes we bring in one product we have in mind for one individual. When we're successful, we sell stuff. When we fail, we are punished severely with dead inventory. The better we are at at predicting demand, the more efficient we become, the more money we make.

I had this conversation recently about why another local store was so successful with one product category that we could barely nudge. What was it they were doing so well that we couldn't?  How come with money, knowledge, passion and influence we couldn't achieve similar results? It came down to pure demographics. Some stores will do very well in some game categories and others will do poorly based on their communities.

If a store is doing very well, it's much like what happens with a successful individual. You have some natural gifts (your demographics), but you also put in a lot of intelligent decision making and hard work over time. Not everyone has the natural ability to be an Olympic athlete, but all Olympic athletes had unique opportunities, expert coaching and put in a ridiculous number of hours of training. It's like that for a successful game store.

My realization was that a perfect game store was a perfect representation of their community. What they sold was precisely what their customers bought. A perfect game store would let go of what people should be buying, what the owner thinks a game store should stock, lets go of games they personally like but can't sell and legacy categories from dwindling demographics.A perfect game store also uses numbers and metrics but isn't a slave to them.

In the case of our store, we have a young population base with a very broad swath of gaming interests but without much depth. We lack strong local game clubs, a war game community, or much interest in small press role-playing. However, we cannot be matched in the intensity and interest of our collectible card game crowd who play and support four different CCGs at the moment. Our interest in conventional role playing games like Dungeons & Dragons and Pathfinder is the strongest in the Bay Area, period. We can barely satisfy our highly knowledgeable board game crowd, some of whom go to the Essen show in Germany annually to see what's new. So although I often have demographic envy, our community has their own strengths that aren't reflected in other local stores.

Friday, August 24, 2012

Q&A: Game Space and Events

Scott Bonner asks:

Not counting things like magic tournaments, which I assume are money makers, is it more financially beneficial to have gaming tables taking up space in the store all the time for various gaming uses (ie 4 tables always set up in the store), or to have racks of product in that spot? In other words, do gaming tables pay for the space they take by bringing in sales, or are they out there to help the community despite loss of revenue?

Game space, when properly managed, is a profit center. Our game space takes up a third of our store space. Going from no permanent game space to a dedicated game space, our sales increased 60%. So that's a third of our space raising our sales 60%. That's far above the average of what that area could do as retail space.

This increased revenue is not from event fees, it's from increased sales from event participants and people who appreciate that we're fostering a community. Only about 20% of our customers use our space, but many more who don't use the space support us because we have it.

All of the events eventually result in increased sales for that game. Card events have the most direct correlation, but customers tend to shop where they play. There are exceptions, of course, but we generally can't support certain product lines without organized play.

For example, a miniature game without a regular event is dead to me. Our inventory performance for a game with organized play is about 50% higher than without. Miniature games without OP will fall below my inventory performance threshold. Malifaux was quickly doomed when we couldn't organize an event for it. I saw its end coming a year out. Dropzone Commander will only succeed in our store if we can manage an event for it. If not, it will be doomed for us in 18 months.

Which brings me to:

Mike asks:

What steps do you take to bring in a new (to the location) table-top game? Where would you start with table-top minis if you have no in-store play currently?

Prime the pump. Tabletop minis demand organized play or they will languish. If you have product champions in the form of customers, see if you can help them create a regular event for the game. It needs to be at the same time every week. It can't move around. It can't be every other week, it must be weekly and it must last for a good amount of time, preferably 4-6 weeks. It takes time and your support promoting it.

In the case of a brand new game, you may need to champion the game yourself or have employees do it. I have two employees I'm paying to run Dropzone Commander events for a month, with the goal of teaching the game and transitioning it to volunteer coordinators.

Laura Asks:
We have several large groups that regularly meet & play at our store (d&d 1e, pf, malifaux). Each group has one maybe two members who are buying/supporting us. The rest just stream in use the space and leave after playing 1.5+ hours past closing. What can we do to monitize these folks so we can continue to provide a place they seem to enjoy? Thx!

We have a voucher system that I know has worked for a number of other game stores. We charge $5 for each event and in exchange the customer gets a $5 gift certificate. So, the event is essentially free, but it's a guarantee that participants will eventually buy something in the store.

This requires there not be a free play alternative at the same time. So all of our evenings are paid events with zero open play. Open play happens during times we can't monetize an event, during the day or on weekends with no scheduled activity. Monetization won't work with open play in the same room, as the people paying will feel they're being taken advantage of and the people not paying will find it an easy way to avoid the fee. We've actually tried this hybrid system and there were a lot of hurt feelings. It has to be enforced and those not paying are not allowed in our game center at all.

Also, I'm not very sympathetic to those who can't come up with $20/month to play their game for essentially $1/hour. Where else do you get that kind of value? Would a bowling alley or movie theater charge you $1/hour? In any case, those that can't afford the price of such an event are simply not customers and good riddance. Don't fall into the trap that warm bodies add value to paying customers. That's what they'll try to tell you. They really don't. It's not like airlines give free tickets to balance out the plane.

Also, if an event fails because the voucher system removed the customers, it wasn't a valid event. I also think it's entirely possible that an impoverished community can't support any of this, in which case, it sounds harsh, but I would consider whether the store is viable in that location. Do they deserve a store? Can they support it? In a lot of cases, I think not. We've got a local Bay Area exurb community that sees store after store pop up and disappear. That community won't support their store for whatever reason. They don't deserve one.

So... with those vouchers, some customers consider them inconsequential and use them to buy drinks and snacks. Definitely have a good variety of drinks and snacks for your game center. This is not a big profit center, as some would suggest, but it helps. Others really do see the $5 as a financial hit and they save up their vouchers to buy the latest Pathfinder book or 40K release.You might not be able to justify to your significant other a $45 RPG book, but you should be able to justify a night out to explore your hobby for $5 (which gets you that book in a couple months).

Finally, the very best way to run events is to have employees run them and charge an actual fee to cover costs. This is rarely done, but if you find a way to supercharge the experience with a trained staff member, I've seen it work wonders. That said, I've also lost a lot of money trying to make it work. We have a paid Yugioh coordinator so far, but all other events are run by volunteers.

Q&A: Showrooming

Tinner asks:

How do you deal with people using your store as an showroom? How can you compete with their prices? I have had it suggested that the key to combating this is to offer an in store experience (aka in store gaming) that Amazon can not offer, thereby ensuring repeat business. Your thoughts?

May I direct you to the Amazon is the Devil post.....

I usually don't know when people are showrooming, but sometimes I suspect it. I'm usually wrong and a customer brings up a board game to buy or tome of an RPG book.  I'm much better at feeling out a potential shoplifter. Sometimes they come back later to do this, as they're using the Internet to research and they're overly cautious.We also have product information codes on boxes and sheets of product information codes you can scan to learn more about a product online. So there is some active online research we encourage in the store.

The general retail advice I've been given is good customer service discourages showrooming. You engage a customer, ask them if they need any help, and continue to check up on them over time. Real customers find this helpful, while I suspect show roomers find it a nuisance, and only those without a conscience will continue without feeling a little guilty.

If I openly observe show rooming, something that usually only happens with young shoppers who like to talk about who clever they are for discovering the Internet, I'll engage them openly (AKA confront them). I try to keep this civil, but I generally would rather they just go away, and I'm sure that comes through. Occasionally, it results in a guilt purchase, but I would again, rather they leave. I also tend to close up and withhold information if I feel people are showrooming, as in, I'm clearly not going to be your value add to your online purchase. I could see where this would make you jaded and more cautious to be helpful, which would be a bad trait for a sales person.

I don't understand the advantage of shopping a physical product in a box at a store rather than just reading online reviews. The price of products online is not what scares me, it's the level of helpful information that makes online shopping powerful. Use it to shop online and use it to buy in-store. I don't understand why you would need the tactile experience of touching a product, holding a product, checking its heft and then go home unsatisfied to wait days for it to arrive. My suspicion is these are the same people who are into BDSM. It's the only explanation that makes sense to me. No, I will not drip hot wax on the box, sir. And please stop calling me daddy. Firm, but polite, if you can muster it.

Thursday, August 23, 2012

Q&A: RPGs and Online Sales

Ken Moscardini asks:

Do you see the need to even sell rpg material whan the people who create said material also offer it online as a PDF? What does this do to your bottom line? Also, piazo offers both hard copy and PDF support when you buy from then, why not generate a certificate where the buyer can also have a back up PDF copy once he purchases a hard copy from the store?

I don't know what PDF sales do to my bottom line. I don't really know what online sales in general do to my bottom line, or any data on what percentage of sales happen online versus brick and mortar stores.

My feeling on this is that PDF sales are a separate product and not a replacement product. That said, we are at a distinct disadvantage when we're not allowed to offer PDF products for sale, as in the case of Paizo, but only for those who want both products. Retailers discussed access to PDF products with Paizo at a trade show a couple years ago, but the discussion was later disavowed.

To the heart of your question, do we need to sell RPG materials? Need is a word I tend not to use as I'm in the business of want. Diapers and cigarettes are the world of need, and I'm glad not to have to be selling those. Should I sell RPGs in my store? The answer is technical and hinges on performance metrics. We've dropped things in our store before, like Flames of War, because no matter how we tweaked our inventory or promoted the game, the metrics never worked in our favor. The turns were always too low, to the point that it eventually lost all cohesion and had to be dropped.

RPGs in our store have a healthy turn rate of around three. We have had a problem with a lot of RPGs over the last year or two that we didn't have before. There are RPGs that have essentially gone digital that we still carry, that are no longer viable, like Shadowrun. There's White Wolf that's now in the middle of a re-boot. There's D&D 4 that's going to be limping along with us until sometime in 2014.There's Evil Hat in their "development year" with nothing new for a while. For all the talk of Pathfinder and PDFs, Pathfinder is the only healthy RPG product line we carry.

Q&A: Second Store

Mason Peatross asks:

Do you already have your business plan for a second store ready to go? If so, why haven't you moved on it? If no, why haven't you done it yet?

We made the difficult decision five years ago that a bigger store was a better choice than a second store. It came down to a few factors:
  • Demographics: Our community was big enough to support a much larger store. Most multiple store owners tend to be in areas with a smaller population base. With our large, Bay Area base, we can have a single store that does the sales volume of 2-4 average sized game stores.
  • Skill Set: At the time of having one store, there were some skills that I had mastered and some that were weak or unknown. The skill set of opening up multiple stores requires strong management skills, strong process oriented skills, and strong organizational skills. Those were not my strong areas, although I'm much better at them now.
  • Desire: Do you enjoy the day to day operations of one store, regardless of size or would you rather manage process? Managing process seemed too much like what I was trying to get away from in owning my own business. I like having my hands in all the aspects of the business (some more than others). On top of that, there's no additional money generated from managing process over managing a single store, provided the larger store can support that.
As for the future, we've grown tremendously every year in our current location and I think we have capacity for another 30% growth before I would even consider a second store. We also still have plans to expand our game space, although the schedule for that is up in the air.

Ask Your Question

I've posted over 1,300 times about the game trade and my store, in particular. Are there questions you have? Are there mysteries you would like resolved? Are there procedures or processes that you find  perplexing? Ask them in the comment section, email, Google+, or Facebook and I'll write a post with my best answers.

Perhaps you'll point out an inconsistency or problem we can actually address. Perhaps I'll have to do some exciting research. I've noticed that when my posts go viral (literally tens of comments), rarely does anyone actually post back to the blog so an issue can be addressed. I'm decent at generating smoke, but very little fire. Rarely, it seems, do I ever change someones mind. I preach to the choir and afflict the comfortable. But here, yes here, it seems there are opportunities to illuminate and educate, myself included. Ask away.

But wait, there's more! I'll pick a commenter at random and issue a $25 gift certificate. Heck, I'll even ship something to do, if you like (shipping would be included in the $25). If you check the quantity of past posts, your odds of winning are astonishingly good.

Wednesday, August 22, 2012

My Favorite Game

I read some helpful advice recently that said don't try to figure out what the world needs, find something you're passionate about, because what the world needs is more passionate people. That assuages a lot of "what if" guilt I tend to have about other things I could be doing with my time. What has me most passionate is this game, the game of running a small business, which often resembles the more complex hobby games I enjoy.

What game does it resemble the most? I would guess that most board gamers would find the constantly shifting rules and strategies not to their liking, although I was just thinking it felt like a game of Caylus, with complexity and upgrades at higher levels of play or a constantly changing, brutal game of Small World. I had over six competitors when we started in our new location.  It doesn't quite feel like a roleplaying game, although trying to leverage a complex, existing system to do something completely new sure feels like D&D.

If you like your game rules shaken up every few months, like Magic or Yugioh, you might enjoy the shifting sands of retail. How about miniatures? You know how you paint an army and by the time you've finished you're such a better painter than when you started that you're almost embarrassed by your work? There's a lot of that too. I could write a book about the mistakes and start a second store with just the money I blew figuring this business out over the years. There's still a constant, nagging feeling that I'm leaving money on the table in any given moment.

Our anniversary party is November 4th with some great food, fun games and a relaxed vibe where we celebrate what we've accomplished. I've been doing this for eight years now and I want to thank you for playing with me. Although this is my favorite game, I see our staff and customers as far more than pieces on my board. I've seen some amazing young people develop as solid employees before my eyes. I've seen children grow up and go off to college. I've seen young adults marry and have children of their own. It has been just long enough to where I've experienced inter-generational gaming between some people who weren't alive when I started. My own son was born six months into the business and occasionally tries his hand at dungeon master.

So thank you for playing! If you get a chance, please come to our party and have some amazing food and some fun in the back. And if you feel the need for advice: Let the world sort itself out. Just do what you love.

Sunday, August 19, 2012

Why Pathfinder Will Remain #1

The old school marketers Ries and Trout wrote a book that expounded their laws of marketing. It included the Law of Exclusivity, which says it's pointless to try to take over the top position in an established market. I say old school, because there are modern exceptions of this because of concepts like open licenses. What if Coca Cola decided to license out their recipe so anyone could take a hand at making soft drinks? Madness, right? Perhaps, but not if they leveraged it properly.

This is what happened with Dungeons & Dragons 3.x with the OGL and why Pathfinder was able to take that number one spot, a concept inconceivable before open source, and in open defiance of Ries and Trout's laws of marketing. It should not have happened by old school standards. D&D gave out their recipe and undermined themselves, not because they gave it out, but because they didn't follow through with all the new age opportunities that provided, as they turned back to traditional ways. Yet, the djinni was out of the bottle.

Now that Dungeons & Dragons is essentially a closed system, it's on an equal, traditional playing field with Pathfinder, but Pathfinder is at the top. There is no traditional way to dislodge Pathfinder at this point, according to Ries and Trout's laws. Pathfinder will remain there unless Dungeons & Dragons can pull another non-traditional trick to get back on top. Also, as we discuss endlessly via counter talk, it does not matter whatsoever how good the new Dungeons & Dragons is, the battle is already lost. Again, according to R&T and their traditional methodology.

What Dungeons & Dragons can do, is forge a new niche, a new category, the advice Ries and Trout would give. Dungeons & Dragons can be the simple fantasy role-playing game, or the most electronically integrated role-playing game, or the game preferred by women or left handed Albanians. Dungeons & Dragons can't be number one again in role-playing games, but it can be number one in its own, new, niche.

Or Dungeons & Dragons can throw Ries and Trout in the garbage again and make D&D Next entirely OGL, open source, available for anyone to write supplements for. It's not a guarantee of  success, because Pathfinder already did that, but it levels the playing field and at least allows them to play by new school rules, rather than being destined to fail by old school doctrines.

Saturday, August 18, 2012

Zero Sum or Expanding Pie

The keyword at Gencon this year is Kickstarter. I want to take a look at the general attitude of retailers towards crowd funding. Generally, you can look at it as the expanding pie or the zero sum game.

Retailers range from supportive to indifferent towards projects that expand the pie. These are the third of new publishers that likely wouldn't have gotten off the ground without Kickstarter. They would have gone through IPR or PDF only providers like Drive Thru RPG., if they ever got published at all. What's been so shocking about these projects is the support level, the sheer amount of cash that has poured in from origins unknown to bring these projects to light.

We talk regularly about the lapsed, closet and hidden gamers that our marketing seems impervious to reach. These are often projects that we couldn't fathom selling in our stores, and indeed, when I bring them in, they don't sell well at all. So this is expanding the pie, bringing in new people and expanding interests. Good for them. Good for the publisher and good for these mysterious people who support their project. Everybody have fun.

Zero sum is more serious, and I use it to refer to the the existing publishers going direct to consumers with their product and bypassing the game trades byzantine system. This is stuff we sell on a daily basis and know there's a market for it. For example, Steve Jackson Game's Ogre and Reaper Miniatures with their expanded Bones Kickstarter project. Zero sum refers to how this is likely to undermine the retail game trade by selling "conventional" games to "our" customers, direct to consumer. This is not a new phenomena, and there is no question programs like GMT Game's P500 can undermine a store's ability to sell games.

With P500, eventually products make it through distribution channels, but only after "alpha" customers receive their copy. With marginal product lines, that may not be enough for some retailers to continue carrying a line, or may, in the long term, reduce their store sales overall. We really don't support GMT because of this, not because of philosophical differences but because P500 eroded our ability to sell their product. Too many titles, especially expensive ones, were already being bought by our customers. It was Russian roulette to bring them in.

The counter to this argument, by the way, is whether this is truly "zero sum" or if established publishers who use crowd sourcing are seeing their pie grow, which would be a win for everyone. I think it's too soon to tell, both because there aren't enough established publishers doing it and Kickstarter still has a shiny allure that I don't think will last. The company will continue, but customers are likely to tire of it for various reasons. A company like GMT might know though.

But what about retailer opportunities? The business consultant, Seth Godin, will tell you the wrong question to ask is how disruptive technology can be leveraged by your business. The right question to ask is how this disruptive technology has the potential to completely destroy your business. Destruction leads to more opportunity and change, so it's not all bad, but pretending to leverage Kickstarter for retailers, the "me too" strategy, is like hoping to make it big selling Geiger counters during a nuclear war.

Nobody knows where this is going, but I can envision a doomsday scenario of undermining. I believe collectible card games buoy the game trade right now. They are hot, on fire. Sure, good game stores and distributors are diversified, but many aren't, and many segments are somewhat marginal during these times. RPGs, miniature games, and even board games aren't producing much light. There's nothing terribly shiny or revolutionary going on out there. Perhaps the shiny this year is Kickstarter itself.

Perhaps the doldrums are caused by the sucking noise that CCGs make as they pull in players from other games. Perhaps it's because publishers and manufacturers are in retreat, which begs the question economists like to ponder, is this cyclical or structural?

So my scenario is this: As the CCG boom continues, probably for another year or two, various segments of the game trade are undermined by crowd funding direct to consumers and atrophy, as they focus on back shelf projects in favor of creativity. When that boom period ends and cards lose their luster, will the rest of the game trade be stronger, weaker, or about the same because of crowd sourcing? Discounting the game trade entirely, do publishers need stores to support their games? Many say they do, but their actions seem counter to this or at least recklessly indifferent, just as distributors act as arms dealers, selling to Amazon with one hand and game retailers to others.

We don't know what will happen, but it's something to watch. Volume remains relatively low with Kickstarter, but it does seem to be growing at a fast pace. We watch not so we can sell gas masks and Geiger counters, but so we can grasp the next opportunity.

Friday, August 17, 2012

Three Buckets

I was reading an article about the restaurant business and how they could divide up their expenses into three buckets: food, labor and everything else. It got me wondering if retail had three buckets, or at least small retail like what we do. The advantage is a kind of shorthand. A huge part of retail is constantly pounding down expenses and reducing costs. We've got net profit margins in the single digits, so there's little room for excess.

Envisioning several buckets is a lot easier than the 125 consumable supplies we use daily or even my 18 expense categories in Quickbooks. It keeps you from focusing too much on the small stuff, like office supplies, before tackling the big stuff, like re-negotiating your lease or cutting idle staff. Three buckets; I like that.

The three buckets would be rent, labor and everything else. Cost of goods isn't included, which is fine with me, since I budget that separately. I've seen stores who don't budget it separately. You know the stores that get new product eventually? Yeah, they've got four buckets. They buy product, the lifeblood of their business, after they've filled those other three buckets, which sometimes means they don't get anything new at all. Product does not belong in a bucket. Imagine if you did your personal budgeting like that and put food in a bucket (Monty Python references aside).

The closest I've been to perfectly sized buckets was my first year in my first store. Labor, rent and everything else was about equal. The following year I added labor, which increased that bucket size.  In the new store, our rent is low and our labor cost is higher, due to re-negotiating our lease and adding staff as we've grown. So bigger stores are likely to see labor exceed rent. Also, "everything else" is a smaller bucket for similar scale reasons in the bigger store.

So the bucket analogy stands, but there are no one size fits all buckets. Helpful at all?

Sunday, August 12, 2012

Is the FLGS Relevant?

What does that even mean? If a business exists, it's clearly relevant to some people. If it's paying its bills, not cheating on its taxes, and is there year after year, it's certainly relevant to its community. It serves a purpose to its customers, enough of a purpose to where they give them money. To question its relevancy is to question capitalism itself. This is true regardless of its quality or whether the owner knows more than you about your micro interests.

There are many reasons why you, personally, might not go into one. Perhaps you don't play games. Perhaps you don't like people or wouldn't belong to a club that would have you as a member. Perhaps the owner is an ass or the clerk looked at you sideways. I've got one Yelp review where it said the employees were amazing but they were managed poorly by me. As if my job is not to obsess over their amazingness.

Perhaps you believe there's an inherent efficiency in giving your money to the biggest company you can find, or getting the cheapest price possible. About 10% of products are purchased online, a ratio that does not grow.  E-commerce is a niche. Or, maybe your tastes have grown beyond the offerings of a sedate store into the hyper realm of the long tale and the obscurity of vanity press. Nothing is wrong with any of this. The key though, is whether your FLGS is relevant to you, despite the fact that the Internet can make it seem like your universe is the universe.

And is the FLGS dying? Are they shrinking? Are there fewer of them? How many are there? What exactly is a game store? Should we count big box stores that now sell our games? Should we count toy stores? What would dying look like? While we're at it, how big is the game trade? What's the gross sales of all games combined? What's the dividing line between game and toy? Nobody can agree on the answers to any of these questions.

Game store owners are so unique, so divided by their personal ways of doing things, that lumping them in the same group might not even be helpful. They seem resistant to it anyway, which might actually be a strength, like a terrorist cell where nobody knows whose in charge. But one thing is for sure, relevancy is a personal question.

Wednesday, August 8, 2012

The Money Question

Say you own a game store and you come into some money. It's possible. We're in boom times with CCG money. It won't last, but maybe it's there for you now. What would you do with it? Here's what I wouldn't do. These might sound counter-intuitive:

Diversify. Yes, absolutely deepen your stock of well selling games. Cautiously bring in new games your customers show interest in. However, a good use of capital would not be diversifying too far afield in hopes of broadening your customer base. People you don't know, don't matter in this case. I spent a ton of money on toys in our new store when we opened, and spent the subsequent years getting rid of the stuff. I can say the same about comics, but that's close enough that it just might work. However, the "build it and they will come attitude" does not work for diversified inventory, in general. 

Pay off Debt. Yes, you should absolutely put yourself into a better financial position, but you have an opportunity now. How do you see the future? If you think the game trade good times are about to fizzle, sure, put a cork in it. Send a check to the bank. However, if you see it continuing for the next year or so (I do), how can you capture that in a bottle? Do you need more inventory, chairs, a point-of-sale machine with hard drive space (my current problem), or staff to make you money (another one of mine)? Consider building a bigger economic engine to make even more money to pay off the bank.

Buy New Fixtures. If your store looks like a gamer den, if it smells of cat piss, if mothers feel uncomfortable leaving their children with you, definitely upgrade. Fix problems. Put yourself in a higher class of store. But my tendency is to let the money get in my head, and suddenly I have delusions of grandeur. Things that work pretty well could be replaced with things that work great! I have a ratty chair that I keep around just to remind me of this. It's the obvious thing to replace, so it's an obvious reminder. Sure, replace the cinder blocks and milk crates, but don't fix what's not broken.

Add More Space. Absolutely re-organize for more game space. If you can build up or out without paying rent, it's worth considering. We're planning a second floor where we pay the build-out, but we don't pay more rent. I know of another store that has a storage area they're knocking down to make more game space. However, if there's added costs, like additional rent, it's probably too dangerous. If I look at my sales and subtract gains in cards, I see a very slow rate of growth for the last few years. So this is definitely a temporary boom for us. That said, this is an excellent opportunity to renegotiate a lease, especially if you want that extra space. The landlord will see you as an angel, coming to his rescue to take up that space (not really, but act as if you are, it's more fun that way).

Pay Yourself. You have a great opportunity here to leverage your success, to supercharge your operation. Unless you're in dire need personally, is it a good time to cash out? I do take additional draws when things are good, but to treat the business like a cash cow in the middle of milk production season (I know nothing about cows) is probably not a good idea. Don't miss the opportunity.

Hire New Employees. But Obama!? Be careful. Here's why I'm cautious about hiring employees (I currently have six, not including myself): I really, absolutely, worst thing in the world, hate letting them go. This is especially true if I brought them on for something in mind, and now must say I was wrong. Try to give your current people more hours. Try to find replacements for those who aren't working out. But be careful if you think your boom is temporary. Also avoid excessive raises, as you'll be inexplicably squeezed when the money runs out and unable to reduce rates. If they're doing a great job and want to reward them, give them a one time bonus.

So what am I doing with money? I'm getting my marketing straight with a big sign related project and a website upgrade (I haven't changed it in 8 years). I'm hoping to lessen my reliance on Facebook, since they seem on a downward trajectory. I'm building out our rent-free game space upstairs, hopefully by the end of the year. I will pay down debt, but not as a priority. I could easily absorb $5k, $10k or even $25k in just inventory increases in existing lines. My inventory budget is like a hungry animal. "Feed me!" Then there will be debt payoff.  I dream of college funds, but better positioning for the future is my first goal.

As usual, one guys opinion.

Monday, August 6, 2012

Turns, Turns, Turns

Here's a quick look at how our store sells board game. At the moment, we have about 750 board games, a number that grows to around 1,000 during the holidays. This does not include card games.

Our turn rate, the average number of times we sell a board game is a respectable 3.4. What does that include?

49% of our board games sell a single copy in a year. These games are brought in, linger a bit, and are often bought by that one person we had in mind. They're not re-ordered. Imagine that. Half of everything we order is a one shot.

Another 15% sell two copies and share the same fate. They under-perform and are dropped. Sometimes we make an exception if a game is so iconic that it's pretty much guaranteed to sell two copies a year for eternity. 

So right off the bat, 64%, nearly two thirds of our board games, under perform. But we are undaunted.

34% of our board games meet our minimum standard of three turns or more. Some barely squeak by, while others do extremely well. 

90% of our board games, including the strong performers, sell less than eight turns. This is an important number to keep in mind, because eight is around the number of turns that the big box stores would like to see with their board games. In other words, the absence of a local game store like ours means that your choice of board games is reduced by 90%. Target and Wal-Mart cannot abide slow sellers, which is something to remember if you're a board game publisher and you think you've cut yourself a good deal with these folks. For how long? How long can you keep your turns up? 

The top 2% of our games sell 20 or more copies a year, with the top 6% selling 10 or more copies a year. So to ask a retailer to carry 10 copies of your board game assumes a pretty high performance standard. Settlers of Catan, our best seller, sells 68 copies a year, twice as many as our number two seller, Risk Legacy.

Friday, August 3, 2012

20 Posts in 30 Days

20 of my Facebook game trade posts related to the store over the last month, from newest to oldest:

1. Planning to finally put effort into a store website re-design as we distance ourselves from Facebook.

2. If you're going to send me a customer sign up sheet for a product you haven't acknowledged exists yet, expect a little push back

3. I think there's going to be a reckoning when the current CCG craze dies down. We'll be looking around and wondering how to boost sales, how to run better events, how to attract lost customers, how to bring in broader or different product lines....

4. Listening to a customer do an impression of Deanna Troy and her psychic breasts. Pure comedy.

5. "Bubba, what happens if your new truck burns up too? Do you have a plan C? (there will be a long story posted about this project in a couple months).

6. I'm enjoying the new Pathfinder book on aasimar, Blood of Angels. I think I've narrowed it down to Amber Scott's excellent writing and if I go back through some of my favorites, her name keeps popping up.

7. Back home from the trip in which the highlight was blowing up the truck in which Christian Kane (Leverage) once ran out of gas on the way to a music audition (see #5).

8. Still haven't had anyone malign Dungeons & Dragons players in this election cycle, but it's still early.

9. Dear self from last month, you cannot bring in starter sets to sell and then complain when they special order accessories. Now go remind the tech to tighten your oil pan bolt.

10. You know when you say " the very least, I'll buy one?" That's today for me.

11. "Bubba, what's that?" looking over my shoulder. "It's a girl [scantily clad],"I reply. "Convention?" He asks. "Yep." [Comic-con]

12. Duel Terminals spontaneously report card dispenser errors. Both of them. Together. Hmmm. [Friday the 13th]

13. No matter how many times I do this, when my new stock exceeds the value of a Corolla, I worry nobody will come. I suppose it keeps me from being too stupid.

14. A heated defense of Captain Janeway's decision making, completing unappreciated by the shop keep.

15. In case you missed it, Paizo announced the launch of a virtual tabletop over the weekend. Also over the weekend, WOTC announced the cancellation of their virtual tabletop initiative after a beta program didn't work out for them.

16. My big recurring nightmare is I get a call about a second business that I've completely forgotten about. I don't recall it ever being in Bermuda though.

17. It's not that I get bored, putting orders together, receiving, straightening shelves, doing some marketing, cleaning and helping customers, it's that I thoroughly enjoy it and constantly wonder if it's a good use of my time. I think actual work is highly suspect nowadays.

18. The boss said I could leave early! — at Black Diamond Games.

19. [I] Will be closing the store tonight for the first time in 4 years. I assume the light switches work in the opposite direction and there is a bank branch somewhere nearby.

20. My "zeroed out" receipt for $475 in [stolen, miskeyed] CCG supplies. We finally did an inventory after our cash wrap move.