Thursday, May 30, 2013

The Invisible Hand

When a customer comes in and asks for a bag of nails, I tell them to go to the hardware store. When a hundred customers come in and demand I provide them a bag of nails, despite the hardware store being conveniently located, then it is my duty as a retailer to sell them a bag of nails. I am now in the bag of nails business. This is how I described my role to a game trade friend when he asked about Cards Against Humanity.

Is the game racist? Is Amazon the enemy? Will it hurt my customer relations if I re-sell it? Before I get ahead of myself, lets talk about this game for a moment. It's a Kickstarter derived game that is basically a blatant, over the top, politically incorrect version of Apples to Apples. It's an accidental success from amateur designers and it's the hottest thing in games right now. Whatever rudeness in the game was brought by the player, albeit coaxed by the designer.

It's sold exclusively on Amazon with the patent refusal to offer it to the game trade and angry denunciations of game stores who acquire it, which just about guarantees I'll want some. Deliberately or because they don't know what they're doing, the supply is almost always out, so people come to us. The demand generally far outstrips the supply.

Enter the invisible hand, or at least a somewhat twisted version of Adam Smith's metaphor. At its simplest, the profit motive will win out and a way will be found to supply the demand in the marketplace and everyone will be happy (or the social good will be furthered, according to Smith). In other words, if I'm asked to sell bags of nails and bags of nails are not made available to me through normal channels, I'll go outside normal channels. I'm not going to argue about nails, whether ten penny is better than a duplex head or whether my supplier has my best intentions in mind. I pull up my big boy retailer pants and put in my orders with Amazon.

The internal game trade debate about this practice is heated. However, there is no piercing of the veil here. It's not like people don't know you can find nearly everything on Amazon for a little cheaper. We will buy CaH from Amazon and re-sell it for a bit more in the store to willing customers who often know exactly what we're doing. In fact, we made a point of explaining this whole story to customers for a while, at least until we were sure they didn't give a damn, which was the case for most people. Sometimes they come up and explain how the Amazon price is cheaper. I smile and say, "We'll, you've got a choice then. It's here now." I really do just want them to get their bag of nails and I really wouldn't mind for this thing to just go away.

Many retailers are uncomfortable with this since it breaks the wall between the brick and mortar value proposition that we all work hard to uphold and the online discount model, which de-values the games we love and makes it hard to run a legitimate business. What happens, however, is nobody cares. We've sold over 100 copies of the game. It outsells our top board game in volume, Settlers of Catan. And nobody has pulled the curtain back and said, aha! You're just a miserable little man pretending to be something else! Everyone knows these uncomfortable facts we don't want to discuss. Brick and mortar is not a charade, it's not smoke and mirrors, it's a truly valuable community service and the trolls need to go read some Adam Smith if they don't get this.

Tuesday, May 28, 2013

Top 10 Games (2013)

Around this time each year, I like to post our top games. For most people, they have their game and they happily, blissfully, go on playing it. Good for them. For others, we want to know the trends, where things are headed, possibly as a crystal ball to see where we're going. I use this to spin a narrative about my store, justifying decisions and verifying gut instincts.

I think there are two game trades right now. There is the traditional model with established publishers, distributors and retailers and then there is the indie scene, primarily via Kickstarter. The money is certainly in the traditional market, by far. All of Kickstarter derived "sales" to date are a rounding error on a year of the traditional game trade, although to believe there's a firewall between them is to miss the point.

That said, the traditional game trade is coasting. Game stores are doing great, amazing, fabulous, with CCGs, but that's about it. Board games haven't seen another innovation like deck building and even that category has become rather tired and derivative. Our board game sales are driven by Tabletop, which is more about marketing than innovation. The choice of games for that program seems  arbitrary, although there is some reason related to their format. RPGs (AKA Pathfinder and "other") haven't seen hits in quite some time and as I've mentioned, those "second wave," mostly 90's RPGs have lost in-store steam, while getting in on the "third wave" indie games is maddeningly difficult. It's possible, we just haven't cracked it.

So it's ho hum in the game trade, while Kickstarter and other direct projects, seem to have all the energy, but without much (financial) spill over everyone was hoping for. There are no crowd funded games on our top list (although one is close, and I'll get to that).  So here's the list:

Jumping onto the list and a game to watch is Cardfight Vanguard. I would describe this Japanese CCG as played by Yu-Gi-Oh graduates who want a more nuanced experience. There are multiple deck types to build and each release focuses on a type, rather than being a universal blind purchase for everyone. If you were thinking Yu-Gi-Oh players might graduate to Magic you would be mistaken. It's Cardfight Vanguard.

Hordes joins the list with Warmachine, and together they would be at the number four spot. I would like to make some sort of claim that Warhammer Fantasy players have gone this route, but most of our Hordes players have chosen the game as their second or third army after Warmachine. You know that old Games Workshop strategy of having a primary, secondary and break game? This is the Privateer Press secondary, it seems.

Warhammer Fantasy has dropped off the chart and is generally perceived as a failed edition by our fans. The upconing stock list from GW doesn't require much breadth or depth of this game from a partner store like ours, and I'm thankful for that. Sales have fallen off the chart and interest in events is lacking. Some will blame us for lack of support, but you need cheerful volunteers for an event like this and there's not much cheer. Step up if you want to run it. The latest High Elf release was our worst ever, but maybe you weren't aware it even happened.

Dungeons & Dragons is likewise down in the dumps, with special edition sales keeping it on the radar. We still sell this game, including to new players, but for us the game is no longer "top tier." D&D Next is due next Summer and it will bring the game back for sure, although it's no Pathfinder killer, at least from what I'm reading. I really hope it does well, kind of like how you hope your ex-girlfriend finds happiness, with someone, hopefully, over there somewhere.

What else? Malifaux was on the top ten two years ago and we plan to bring back second edition. Cards Against Humanity, a Kickstarter derived project that uses Amazon as their wholesaler, is number eleven, a strange and uncomfortable blog post in itself. Rio Grande is likely to be replaced by Z-Man as popular board game licenses transition to that company. I thought it would have happened already.

Caveats: Yes, data for only one store and across town it could be completely different. Top games and top companies are not the same. For example, "Fantasy Flight" is only FFG board games, with LCGs and RPGs pulled out in other categories. FFG is probably our number three company. Also, because sales are year-to-date, they ignore seasonal increases, mostly the holiday board game sales bump (which is a skewed mess anyway).

Tuesday, May 21, 2013

What They'll Tell You

They'll tell you that you can't have a game store. It can't be done. Retail is dead, so do what you can to sell lots of Cokes and candy bars, if you must, but nobody will actually buy games from you. Because Internet. This was common sentiment on a Reddit thread recently.

They'll tell you you'll be giving up your current livelihood, and no matter how long it takes you, the opportunity costs will be harsh. In my late 30's and 40's, I was told I was giving up my peak earning years. This is true.

Once you have a store, they'll tell you failure is imminent. The competitor has been there for 20 years. The store down the street does Magic better, does 40K better, has a better selection of Yugioh singles. How can you possibly compete?

When your competitors fail, one by one, those same people will have logical reasons for why they fail having nothing to do with the management of that business. Well, that Games Workshop store had difficult demographics, which is why they're gone. It's hard to steer a narrative. When a store is gone, they're gone. Call it a failure if you want, but they're still gone.

They will continue to be surprised when you are stubborn enough not to die. The property manager for my old landlord confided in me that they both thought I would fail well before my lease was up. How surprising I'm still in business! Why ... thank you. Customers would visit my old store in years two and three and express shock at my continued existence. Imagine someone coming into your work every day and expressing surprise you haven't been fired.

When you succeed, they begin to make excuses for why you succeeded. Other store owners will point to your superior demographics. Oh, you might have something to teach us, but your demographic doesn't match ours. Your success is special. You're an outlier, a corner case. Psst, demographics is also a choice.

They will credit the economy, the housing boom, for example, but will not give you credit for surviving the economic crash, like 9/11 or the financial meltdown. They will instead call you counter-cyclical. Well, of course you do well in a bad economy, it's a flight to value, and of course you do well in a recovering economy, people have money to spend again.

They will give all the credit to your staff, as they are the ones truly running the business.  I often think of myself as the Venkman of game store owners, so I'm happy to give away that credit. They will see me come in and work my 35 hours a week at the store, but not see my 20 at home. Like the tree with invisible roots.

They will think you are lying about all of it, question your numbers, and poke at your business model to see if it deflates. They will give you bad reviews online for the sake of punishing hubris and they'll send their rejects to you to rattle your cage.

They will start protest stores, because you don't love them as much as they deserve. Then they will fail and blame you.

The truth, the reality of why I'm still in business, is I don't fall down as often as my competitors. It's a game of attrition. I don't discount, so I have resources. I don't cheat my customers, so I have growth. I hire good people and pay them well, honestly, and above board, and they grow the business. We take small chances and try new things and keep the things that work. It's not rocket science, it's just failure avoidance. What's the secret of flying? According to Douglas Adams, you "throw yourself at the ground and miss." That's small business in a nutshell.

I've had enormous boons and resources, including growing up with well educated parents with the best public schools in the country and a free college education (thanks to those parents). I've got well educated friends who understand business who could help me through the process. I had access to easy capital before the financial crisis. There are a lot of reasons I should be thankful and give credit to others, but those reasons aren't what they want to talk about.

Sunday, May 19, 2013

The Impossible Employee

People like to complain about service in this country. It's practically an art form, with Hipster hangouts like Yelp existing so people can out smarm their friends about the shortcomings of small business. We know big business fails, but small business offers so many new variations on the form. Just today I could write a blog post about the annoying Fox News playing on the TV (I don't want around) at my diner or the lecture I received about pumping gas and hose tension at my usual gas station. There's no limit to this.

Service is uneven for a reason. It comes down to compensation and what it takes to get someone to work a retail or service job, and their inevitable leaving.

My store is hiring right now. Honestly, we've been short staffed for many months at this point. We're always hiring. My problem is I can't find qualified employees, despite an 8.1% unemployment rate in our county. When I say qualified, what I'm referring to is a nearly impossible set of circumstances that rules out all but a particular type of potential employee.

So what does it take to be an employee? Employees, first and foremost, need to have reliable transportation, both to work and to the bank afterwards to make deposits. I'm not allowed to say they have to have a car, but buses aren't running after we close.

I don't offer health insurance, so that's pretty much on them. Heck, I don't offer it to myself. Imagine the UK, where universal healthcare is a huge benefit to retail and small business.

Employees have to have a flexible, part time schedule, meaning the job likely won't pay rent on its own. We're pretty good about keeping schedules regular.  Businesses with rotating schedules are evil, horrible places with lazy managers. Shame on them.

Employees need to be well spoken, appropriately dressed, and fairly well educated and able to communicate electronically with staff and often customers. I can't require they have smart phones, but since they all do, we have systems in place that leverage that, like our backup Square credit card readers.Yeah, I don't pay for that either.

They will be required to learn new skills, improvise on the job, and generally read my mind. They'll get emails day and night from me that they'll need to figure out how to deal with as part of their job responsibilities and hours. That's not an extraordinary part of the job, those are base requirements, and I do expect them to get compensated for this time.

They'll all need to be at least 18 years of age, so they can work alone at times. Some will leave because they feel overwhelmed by the solo gig, or creeped out by having to make bank deposits at midnight (alright, I'm describing me).

In exchange, they will be paid an hourly rate of around $9-10, even if they're a manager. Managers mostly get more responsibility with a token raise in pay. It's a resume booster for later.

So mostly who we're talking about is college "kids", adults who are subsidized by other adults (who thus subsidize my business). Although I've had some employees for years, and I would love to have them all for years to come, all employees working for me are on there way to something else, something better. Sure, I could hire lifelong retail people, but they wouldn't fit my high requirements or the generally unrealistic demands of my customers. They certainly wouldn't put up with my crap for what I'm paying them, and occasionally we'll get an applicant who didn't understand that.

So I seek out these niche people, who, by the way, must have retail experience already. I prefer to have someone else do their basic training. I want to see a resume, not some cheesy application form. It should impress me with past experience, and to get to the top of the pile, it should have something extraordinary. Eagle Scouts get top pick for men. Being female and knowledgeable about games is somewhat equivalent in rarity and desirability. I don't want to down play the female requirements, in fact their higher level of maturity alone eliminates the myriad of problems I have with young guys.

I can do this, being incredibly picky for essentially a sales clerk position, because being around things you love is a wonderful thing. There are toilets to scrub, annoying children to wrangle, and plenty of work to do, even when it's slow, it's still a way better job than anything I had in college. For the most part, you get to share your passion about what you love. Also, if I'm doing my job right as a manager, I'm handing out challenging projects and tasks that engage employees, rather than expecting a counter monkey. The biggest insult you can give to a retail employee is ignore them, or allow them to do homework or play video games on the clock. That's a truly pointless job, and they'll perform pointlessly in response.

So there are opportunities, if we find the right match. Of course, most people who apply think it's standing behind the counter pontificating. Hey, I had to vacuum a lot of floors to get that pontification position. In the end though, everyone will leave. We'll start over with the new person. We'll have new and different problems, err, I mean training opportunities. Ideally, we get better at expressing what we want up front. I've learned to let someone go as quickly as possible if it's not working out, and because I really despise letting people go, I've become much pickier on hiring.

And while we go through this process, some jackass hipster will write a scathing Yelp review about how a staff member hadn't heard of their favorite game from ten years ago or looked at them funny, or wouldn't date them. And we'll all lament about the death of retail and wonder why game stores still exist. Sell more sodas is what they'll tell us, because it certainly can't be about selling games.

Wednesday, May 15, 2013

Our Reaper Relationship

Back in August of last year, Reaper Miniatures raised $3.4 million, the biggest hobby game Kickstarter project at the time. The question was raised whether this direct to consumer appeal would undermine our brick and mortar local market, whether we would dump Reaper out of protest, or whether this would just whet the appetite of alpha customers and grow the market. It turns out to be far more complicated.

We've since dropped our Reaper paints, the full line of Master Series paints that it took months to initially bring in. We've also dropped a bunch of stock, and we're down about 70% from last August. Was it protest? Animosity? The death of a local market? None of that. It was about Reaper being unable to "fill" their product lines. They've ceded the market by not having the resources to continue their normal operations at the same time as their Kickstarter Bones initiative.

Our miniature selection is down 50%, and when our paint selection dropped by a third, we knew it was time to let that go. Reaper left us, we didn't leave them. Some rumors state they're in trouble due to miscalculation of shipping on the Bones project, but the reasons are not my primary concerns. So like a parting couple, I want to set the record straight with my friends, it was their idea.

On the bright side, as the stock dwindled down, we were able to take a closer look at our Reaper strategy, re-evaluating our relationship. Items and sections of our "wall of lead" came into sharper focus. Maybe the relationship wasn't so great after all. We decided to dump various sections as the dregs came into view. It went beyond tactical inventory management and more into strategy. Reaper has gotten a free pass for years, mostly because I'm at heart an 80's era RPG enthusiast, and Reaper is a huge part of that legacy. It would be like growing up with a poster of a super model on your wall and then getting to date her as an adult, only to find she's not as amazing as you thought.

The reality is RPGs, as much as I love them, are a dwindling sideline. D&D is dormant, Pathfinder has peaked for us (although it's still very strong), the second wave 90's games have gone direct, and we have a heck of a time trying to break into the indie scene with our local demographics. If RPGs are a sideline, then paintable miniatures is an even smaller subset of that. Again, there is love there, that supermodel will always be in my heart, but Reaper really doesn't belong in game stores, I would argue, not one that appreciates modern concepts of inventory efficiency, or you know, a strong relationship.

We're not going to drop Reaper, although it's not like I can call someone and get the 155 back ordered miniatures I want from them. What we will do is re-allocate some of that space to other companies, other projects, hopefully some other games. We're going to reboot Malifaux with version 2 of those rules and their plastic reboot. They're also a nice cross-over miniature for RPGs. What we won't do is give Reaper a free pass any longer. It would be easy to cheer a little at their misfortune, but I actually like this company, and if they want to leave me and see other people, I'll respect that. I just  don't want to be jerked around.

Monday, May 6, 2013

Fair Taxation

It's kind of dumb I feel compelled to write a post about the fairness of the Marketplace Fairness Act, but the closer this issue hits my demographic, the more misunderstanding I see. The youths, they are appalled.

Here's the thing: If you buy something online, you are legally obligated to pay sales tax on it. If you don't report it on your state income taxes, you're evading the tax. Few people do this, and honestly, I'm not super orthodox religious about it either, although I'm meticulous when it comes to the store's finances.

For what it's worth, I at least know better. To gnash your teeth about having to pay this tax is to be angry you can no longer break the law with impunity. I see why you might not like it, but to publicly decry it is to be kind of a douche. Pay you're freakin' taxes already or shut up about being a scofflaw.

The fairness part of this tax refers to the fact that my store must collect sales tax, currently at a combined 9% rate, while most online businesses out of state do not. That's essentially a 9% discount before the typical online devaluation even begins. Sure, I can go online and screw over the tax base of other states, but that's not the point. A level playing field means tax is collected across the board, not only where enforcement is effective.

We tend to give new technology a pass on the rules, allowing them to skip taxes, possibly because they claim they're some sort of charity, like a holy prostitute. We do this because this country loves the new, but it's time for some old fashioned fairness.

If you don't like sales tax, find a way to increase revenue to cover the roads, police, schools and other services you benefit from daily. Californians pay some of the highest sales tax in the country, while other taxes, like real estate, are very low. We're in the top ten for sales tax, depending on how you calculate it,  and 39th for real-estate. You can see who this hurts the most, those who can least afford it. That's typical California though. However, if it makes you feel better, our effective tax rate is pretty low compared to other developed countries.