Saturday, October 31, 2015

Courtesy as Flirtation (for Parents)

Hello Parents,

No, this will not be an indecipherable message using educational jargon from your child's teacher. However, I do want to talk about an educational deficit that unfortunately falls upon you, parent, to fill. That deficit is teaching boys to respect female customer service workers.

Please make this an addendum to your birds and bees talk, or if you've already had that, perhaps a new discussion. You see, I've given up on the current crop of young men entirely in this regard, so I'm hoping we can catch this early in the next generation, a social inoculation. My own boy will be getting this talk soon.

Female customer service workers, like the ones I employ, are a captive audience. Their job is to be friendly and helpful, which, in this day and age of indifference and hostility, can be mistaken for flirtation. Boys see these women as "practice" for asking women out.  I've seen their fathers encourage this. Ha ha, you go junior! Bad form, dads.

It may seem cute to you, and it certainly brings light into my life when this happens to me as a man, the one or two times a year when it occurs, but too much light will burn a person out. That's what I'm left with. Demoralized, burnt out female sales associates who are constantly hit on by "men" as young as 12, often multiple times a day (not year). It's not flattering, it's just harassing. It also keeps them from being happy and productive, which is what I need from all my employees.

Please teach your boys to let these women be. They are not there for the amusement of men or for eye candy. They are there to do a job, an authentic job, next to men who do the same job. Captive female employees should simply be off limits. Hitting on them or questioning their authenticity (Do you even play games?) is oafish and offensive.

I shouldn't have to justify why women work in a game store, but I will mention they bring a wide variety of skills and perspectives that my male employees (and myself) lack. Unfortunately, with a 75% male clientele, they have to put up with constant grief to contribute.

Thank you, and next Thursday will be a minimum day and remember, no peanut butter.

Tuesday, October 27, 2015

Stop Cheering REI Already

REI is sending their employees out to the wilderness on Black Friday as they #optoutside. That's a nice thing, especially since Black Friday has become such a wretched spectacle of consumer avarice. Let's remember a couple things though. Black Friday, for a lot of retailers, is allegedly called that because it's when retailers go into the black, since they've been in the red all year until that fateful day.

REI, on the other hand, is a 2 billion dollar company. The CEO makes 2 million dollars a year. It's a co-op with a net profit margin somewhere between nothin' and two percent (much like Amazon. Why do people invest in that again?). I'm good with that, since as a member (both REI and Prime), they pay me to shop there. Man I spend too much at REI. Another sale on Honey Stinger Energy Waffles and I'll be bankrupt.

Anyway, for those retailers who don't work at REI, we'll be planning and hoping and decorating like a mofo to get some customers in the door on Black Friday. My store did a fantastic $5,000 in sales last Black Friday and believe me, that money didn't go towards my 2 million dollar salary. It went to keeping the lights on. Really, the net on $5K will just about cover the electricity bill for one month. So just keep this stuff in mind when you expect everyone to follow the REI example. Also, pick me up a Honey Stinger Energy Waffle next time you go.

Saturday, October 24, 2015

D&D and the Three Pee Pee

This is a chart of our RPG sales over the last year. Dungeons & Dragons 5 and Pathfinder are neck and neck. Add in the 3PP (Third Party Publishers) and ... it's still neck and neck. Those 3PP are the interesting bit. They had no significant role in our store before D&D 5. We stocked some Pathfinder compatible items, but honestly, Paizo is so prolific, Pathfinder 3PP materials were pretty much ignored unless it was a special niche (psionics, for example). I have so much unread Pathfinder guilt, it's crushing.

What's interesting with D&D 5 is the return of Third Party Publishers. Frog God Games has made it into our top ten with their D&D 5 and Pathfinder compatible products. Really, it's about their D&D 5, especially Fifth Edition Foes, an excellent monster book that's D&D 5 compatible. Their similar Pathfinder books sell far fewer copies than nearly identical D&D 5 books. But what about the D20 glut, you ask? Isn't third party publishing for D&D dead?

As long as Wizards of the Coast keeps people hungry for new content with their trickle release schedule with D&D 5, The Stable IP Edition, there will be demand for 5E content. Coming in at #9 is Gale Force Nine with their D&D 5 spell cards (which would be higher with a steady supply), and Goodman Games at #19 with their D&D 5 adventures.

Adventures never sell well, so no surprise there.  Figure one in five players (the DM) could potentially buy a published adventure and only half of them actually do (10% of the market).

Licensing (or lack thereof) is a whole other discussion. GF9 sells licensed D&D products, while the others do not.

Note "Other" in the third position. D&D, Pathfinder, and compatible lines may be 70% of sales, but we carry about 25 additional brands in the Other category, for about 45 total "lines." A line can be a single book, so this can include a lot of things.

Wednesday, October 21, 2015

Business Plan (Tradecraft)

If you are planning a new store, write your business plan. I don't really want to talk with you, until you have a plan (and a giant bucket of money). I can give you all sorts of advice, but in the end, you need to write the plan. Just write the damn plan. Why?

The business plan will demonstrate that what you're about to engage in is a very bad idea. It's going to show you the margin for error on this behemoth, that you only vaguely understand, is far thinner than you realized. Most importantly, if you do it right, it will show you the capital you need to invest is far greater than you possess. Besides not planning (if you fail to plan, you plan to fail), undercapitalization is the biggest reason small businesses fail. So what is a business plan, really?

First, let me say, I'm not an expert. I've written exactly one business plan. However, all the aspects of my business plan have been daily concerns for me for over ten years. Not just 9-5, Monday through Friday concerns, every ... single ... day concerns, all the time. That will be your life too, by the way. Other people have written far better plans than me, but that doesn't matter, and it should't matter for you. Writing a business plan is about getting your head straight.

The core of your plan is your Unique Value Proposition. What are you offering, in your market, that is unique and special enough that people will spend money on it? Your plan should include an analysis of the industry you're hoping to be in, the competition in your area, and a look at the location you're proposing. It should include a marketing plan, because you will be marketing your business on day one. After you write this section, you may come to realize you're not offering anything special, your industry is dumb, your market is saturated and your location is bad. Great! That's the first draft. Or maybe you're done. Your choice.

Your plan should then include all your financials, which will require you to understand every expense of your business. When I wrote my plan, I was off by 50% with my expense. Not enough research. With your expenses nailed down, you can project (guess, hope, dream) your income and then determine how you'll get there. I use turn rate analysis, which then tells me how much capital I need to hit my income numbers and cover my expenses. That's the method I used when we doubled our operation. This capital number is really important, because this is your gut check number. Most people will (and should) quit right here.

Why quit? You've seen the narrowness of the profit margin, you've projected your PFA income (Pulled From Ass), and you're about to invest $50,000-$150,000 or more to make this happen. It's madness. No sane person does this. Your chance of success is completely unknown. It's probably more about your character at this point than anything else. Experience will make a great deal of difference. If you don't have experience, you will buy it with more capital (startup losses).

The financial section will assume you understand things like income statements, which most non businessy people have never seen before. They'll walk you through one when you buy a house. Get help here. Don't skip this section. People are tempted to write "The Poets Business Plan," like the dumbed down science classes I had in high school, with no financials. I had no idea how to do this and I get excellent help from a good friend (and now investor) as well as bouncing it off people from SCORE. Your plan is not top secret, so go ahead and bounce it off as many people as possible. The most likely response is your income or expenses are unrealistic. Or your value proposition is not unique.

Here's the thing about small business: failure is an acceptable option. Success is great, failure is second best. The worst thing that can happen to you is something in between. You don't want to waste years of your life "getting by." The opportunity cost for you is tremendous and it will be a horrible, demoralizing period of your life. Too hopeful to quit, not successful enough to succeed. It may happen to you anyway. We were there for a couple years, mostly because we moved to a space bigger than we could afford and it took that long to grow our income.  Nobody wants to buy something fun from a miserable person. Writing a plan avoids the terrible experience of limbo.

That reminds me, define success for you. How much money do you want to make? Build your salary into the plan. Take a salary from day one. If you are not taking a salary, you're not doing the thing. You want to write a plan that includes you getting paid, even if it means paying you money you just raised from yourself. You also want the option to hand it off later. You may build a successful business over a couple years, but realize you don't really want to do this. If you have a manager's salary built into your plan, you have the option of hiring someone else to do it, without losing your investment (at least not right away).

You should re-visit your plan and re-write it on occasion. I don't, but I crowd source my thoughts on this stuff all the time. If I were going to re-write my business plan or give you advice on a focus (other than the retail elements), I would suggest looking at Third Place Theory. Go through the linked article and address how your business will hit all the marks for a successful third place. Heck, if you're betting your livelihood on it, hunt down and master the source material.

Monday, October 19, 2015

Disintermediation (Tradecraft)

When we plan the future of our businesses, we want to make sure we invest in the right things. If you make a wrong turn, you not only lose opportunity, but it puts you a step behind. Too many steps and you're in debt with no hope of catching up. That assumes you're looking to follow trends.

You can run a perfectly fine, traditional retail store that just sells things, and does nothing else, under the right conditions. Those conditions are basically a full embrace of retail with proper capitalization. But we'll assume you are entrepreneurial, even though we're in small business. You want to be cutting edge, but avoid the usual pitfalls. 

What you mostly need to avoid are disintermediating technologies that you see as opportunity. It's a common mistake. Disintermediating means things that remove the middle man. We are mediating as retailers, to disintermediate is to remove us from the picture, usually to save money. The problem is these technologies look like opportunities from a middle man perspective. For example:

PDF Publishing. The instinct is to think you have involvement here, that somehow you can buy a big all-in-one printer-binder and make books from electronic copies, if only the licensing can be worked out. We now know this won't happen.

3D Printing. Imagine if customers could come in, order a custom unit of Space Marines, and wait while you print them up. Yes, all you need is for Games Workshop to get on board with that. The reality is the printer will be close to free by the time widespread demand exists, if it ever does.

Crowd Funding. The store is currently owed $650 from missing Kickstarter rewards, but there's also the various retailer promises. In exchange for tying up your capital, we'll allow our customers to pick up games at your store, or give you the promos, or half a dozen other schemes that you really have no business engaging in. Kickstarter is the ultimate disintermediating technology in the game trade. 
Full disclaimer: We're a year behind our own Kickstarter project and owe about a third of our backers rewards related to construction. Hopefully we'll announce something about that soon.
Online Store. This obvious thing that every game store should do? It doesn't work unless you've got a unique value proposition. The Internet is the ultimate disintermediator and you're late to the show. By all means, dump your junk on Ebay or speculate on Amazon, but don't create an online storefront without your UVP.

Or maybe you can become an Amazon Locker location. Or maybe you can start selling electronic games in boxes. Again, you are not or will soon no longer be needed in this equation. 

So what to do?

Your key asset is you are here now. 

No, it's not another Zen reference, you have things, things people want, right here, right now. Inventory is always your key asset, along with knowledge of what they are and how to sell them. It's what your customers want (or they're not your customers, really), and it's what differentiates you and insulates you from competitive forces. Most stores never need to think beyond the inventory question because most stores will never have enough (most stores are at risk because of this).

Once you have all the things you could want, and believe me, everyone eventually comes up with a hard dollar amount of what that might be, you begin to think about space. I'm referring to a location that people want to be in, or could possibly want to be in. 

Third Place Theory basically says you want a special place between home and work/school where people want to spend time. Event space clearly scratches that itch, but it's wickedly hard to monetize and overly dependent on card games. If your percentage of Magic sales scares you, and you've got seating for three figures of participants, how will you pay that rent when Magic recedes?

So beyond game space, we're seeing other game store variations on Third Place: cafes, mini pubs, and other models are popping up. It's ridiculous when an Internet troll tells you to sell more soda if you want to make it in the game trade, but it's totally true you can do very well with coffee or beer.

This is my way of saying this is very much on my mind at the moment. With plans to build a mezzanine, we're looking at a very expensive expansion ($100/sqft build cost).  With a move option, and no need to spend ridiculous amounts of treasure on vertical boondoggles, we're looking closely at what Third Place can do for us.

Thursday, October 15, 2015

Work Paradox (Tradecraft)

For years, I've believed the key job of a small business owner is to create policies and procedures, methods for others to work in your business. This is called working on your business rather than in your business. You can improve indefinitely, but eventually you get diminishing returns, and worse, much worse, you get bored. Boredom leads to less innovation, and less innovation leads to stagnant sales and stagnant sales, assuming you're still profitable in your bored state, leads to stupid decisions.

Stupid decisions are what drive a lot of large, stagnant corporations as well. This is when you tend to see mergers and acquisitions, which experts are finding are almost always more destructive than value creating. In small business, this leads to adding additional locations, moving to a larger location, messing with speculative product lines, or diversifying in various ways, mostly, and few will admit this, because it's challenging and entertaining. Stupid decisions based on stagnant growth are the Peter Principle of business, when every company rises to the level of their incompetence.

So what to do? There is no answer here. Those who can be successful in business, large and small, are driven. When they read The Four Hour Work Week, they have no desire to implement process and procedure so they can sit on a beach, they do it so they can implement process and procedure on the Next Thing. I've talked with my business owner friends about this, and we're in similar situations. Quite done with business number one. Not ready (or able) to retire. Not sure what to do next. It's the best of problems you want to have.

Most people work and (hopefully) save for retirement all their lives and eventually they get to the point where it's rather obvious they're done. They've saved enough. They've hit social security age. Their peers are doing the same. In small business, there is no perceptible stopping point. There is nobody there to say you're done. In large business, shareholders want to see value creation, which adds additional perverse incentives to take something that's already working and muck about with it.

But what about Zen, you ask?

Nobody ever asks that.

You could take a more wholesome approach to work. You could divest yourself a bit of your ego. You could work for the sake of work. Wax on, wax off. You could vacuum more floors, talk with more customers, and find the joy in the work again and stop striving to be successful. You could re-integrate yourself into the business that you've worked so hard to internally outsource. You could be content as the ultimate expression of the community business you set out to build.

But honestly, if you haven't had that outlook from the beginning, you're not likely to put down your war metaphors, your tools of battle, and simply relax. You've learned the wolf is always scratching at the door. Whistling a happy tune will not make it go away. Regardless, you might need to give it a try.

Saturday, October 10, 2015

Gondolas (Tradecraft)

This is one of those blog posts I'm writing rather than pontificating about store fixtures on Facebook. A gondola is a common "double sided shop shelf" found in many game stores. It's popular because they're modular, usually with casters (wheels), free standing, and hold a lot of product. The gondola fixture is named after Giovanni Montessori, famous Venetian merchant who looked out his window for inspiration. No, I made that up. I have no idea where the name came from, but it is kind of a boat.

You can buy many kinds of gondolas, but the most common in game stores are wood (slatwall) and metal gridwall. I'm rather opinionated on gondolas, having to put them together, repair them, clean them, and stock them for years. So what makes a good gondola? 

Stability is key. Game stores sell a lot of board games that sit up on a short edge, often in shrink wrap, often (because publishers don't care) with the shrink wrap seam on the bottom of the box. You want a fixture where the shelves are always flat, not just when you've got the brackets placed in the right position. 

Good gondolas use pegs, not brackets. Pegs allow for stable shelves, high shelf weight, and removes the bracket obstruction from the shelf below it. 

Strength is important. If your gondola uses brackets, a heavy load can make the shelves sag over time as the wood slats begin to separate from their backing. Sagging shelves mean unstable products. Even worse, it means an entire shelf can collapse or entire sides of a gondola. I've had this cascading catastrophe happen to me, and thankfully nobody was injured. It's enough force to kill a child. Did I mention I bought cheap, shelf bracket gondolas to hold my new toy section? 

Durability is related to strength. Endcaps are the ends of the gondolas, where you can put additional slatwall hooks. If someone comes around the corner and snags themselves on an endcap slatwall hook, a cheap gondola will see that hook ripped out of the endcap, along with part of the cheap wood. A good gondola has stronger construction and the hook will instead move within the endcap slatwall slot. It might seem like a minor point, but almost all my cheap gondolas are moved around to hide this damage.  

I was told when I started in this business that fixtures will last about 3-5 years. My good fixtures have gone 11 years without any replacement. We did an audit of our fixtures a few months ago, in anticipation of an expansion, and all the original, high quality gondolas were fine. My poorer fixtures were damaged within 3 years and I was wishing I hadn't bought them. 

Your Gridwall Buddy
Look and Ease of Cleaning. This is a category that basically says I don't like metal gridwall gondolas because they look industrial and they're hard to clean. If you're going for an industrial look, or your budget is small, it should work for you. I've had them in the past and they don't mix well with wood gondolas, show their dust quickly, and generally don't look as nice unless you hide the fixture with a lot of product.

Cost. You can get a metal gridwall gondola for around $100. A low quality wooden gondola starts at $200. A high quality gondola, like you'll find from Newood, starts at around $300. The size of the gondola will effect the price, obviously.  Don't buy bigger ones than you need, it's easy to do and you'll lose sales space. You should try to find a fixture manufacturer near you. Newood is in Orgeon, which works well for my California store, but freight is still very high.

ROI. If you're planning a small store in a small town and expect $100,000 in sales, the return on investment for $300 fixtures is going to be very long. If I were going low budget, I would happily buy used fixtures and do what I could to spruce them up, repaint them or whatever. The nicer your store, which often means matching, high quality fixtures, the more people from the general public (not just hobbyists) will shop with you. If I were starting a new store, I would figure 10-15% of my non inventory budget for store fixtures.

Before You Buy. Layout your store. Consider buying your fixtures in stages. My first layout had too many fixtures because I didn't understand traffic patterns well enough and didn't budget for additional space needed to navigate the store. By the time I was doing my fourth or fifth layout, I had it down. You also don't need fixtures if you don't have product yet to put on them. 

Wednesday, October 7, 2015

Aiming High vs. Punching Down (Tradecraft)

I have an irrational approach to competition. It's something I learned from reading Guy Kawasaki's How To Drive Your Competition Crazy. My competitors are not other game stores, they're Amazon, Barnes & Noble, and Target. I want to take down Amazon. I want to offer better service, a better selection of what's hot now, here now, and a shopping experience that delights customers. Do I succeed? Sometimes, but that's beside the point.

I do not care one bit about other game stores that happen to be in my immediate area, although there are occasions when I feel compelled to address their actions. I don't visit these stores. I don't look at their calendar to schedule events on or around theirs. I generally don't care what they're selling. Amazon is my competitor, along with big box stores.

Why do this? Two reasons. First, it keeps me sharp. It keeps me looking for technological and managerial advantages that are cutting edge and modern. The game trade has a lot of big stores and a lot of really, really small, "buy a job" stores. Rarely does the game trade have something to teach, compared to cutting edge retail (a potential oxymoron).

There are excellent processes and procedures to copy and borrow from the game trade, but I generally look for The Next Big Thing from large retailer organizations or consultants. Looking outside means I focus on being a retailer and not a game store owner. A game store owner can be a retailer, but is often an apologist cheerleader, reluctant to make money, cut under performing product, or potentially turn away a game playing customer, of whom the game store owner is but one step removed. They came from the customer base and just one misstep and they could be back with them.

A retailer wants to be selling in 20 years. A game store retailer hopes they'll be selling games in 20 years, but it might be women's shoes, because they are a retailer first and a game store owner second. Retailing is what they do, a multifaceted trade with enough variety to keep things interesting and enough to do that delegating uninteresting bits is common.

Come to the Retailer side
Most game store owners will tell you they would bail if they couldn't sell games, or possibly the games they like. When D&D 4 was flailing and I wasn't yet into Pathfinder, I had a game store owner existential crisis. If I'm not selling RPGs, why am I doing this? It broke my game store owner spirit, and I became a game store retailer.

Second reason, you can't punch down. That's a Guy Kawasaki lesson. Americans like the underdog and they hate the 500 pound gorilla. Nobody wants to see a 500 pound gorilla beating up a small dog. Picking large competitors, sometimes impossibly large, keeps me from being petty, from getting into scuffles with store owners. It keeps me focused on retailing and not game store owning.

Being the underdog also means not feeling the need to apologize for being successful (a game store owner trait). It means I can focus on serving customers, bringing in the next new product line, and expanding into other areas of retail or services needed by my customers and not responding to what my local competitors may be doing.

So what's the future of game store retailing? I think the competition is about to get fierce. Those big box competitors that you laugh at me listing as competitors? Those are my future real competitors. If Target, Barnes & Noble and the various regional chains can find a way to include tables and organized play in their stores, they will do it. They will stumble around for a while, but they will crush the legions of "buy a job" stores.

As for us bigger stores, we will need to adapt quickly. We will need capital and the right plan to grow our offerings, to grow our locations, to generally compete for real with big box. Big box wants to go to war with us. Publishers and distributors are happy to sell them the weapons. Game store retailers will weather the storm. Game store owners will not.