Tuesday, December 29, 2015

The Nebulous Customer Value Proposition (Tradecraft)

A recent blog comment was basically this: I shop at a brick and mortar game store. I spend a lot of money there. I use the game space and have a great time. What is my duty to support this store? When does supporting the store become charity? What do you, as a store owner, expect from customers like me?

The answer is: I don't know.

This is a taboo subject amongst retailers. It's taboo because we're insecure in our belief that we provide a UVP, Unique Value Proposition. We're not sure we offer enough value to customers, so we tend to tread lightly in the area of customer expectations. We try light guilt, subtle suggestion, and the promise of a social good to make the sale. We'll take your card sleeve purchases, even though you bought that $100 board game online (for $60). It's good my friend; no worries. We won't say anything during the Magic pre release when the quarterly pre-release customer, who we only see this one day, sneers in a way that begrudges our existence. It's cool.

We'll take all comers. We're even afraid to offend when being abused. The abused retailer is a common theme in retailer forums. The buy nothing D&D behemoths who comes in with their 2-liter soda bottles and wreck the bathrooms. I mean, that guy might buy a set of dice one day, right? Lets not offend him. Yes, they violate the "no outside drinks" sign, but his buddy, the DM, buys books sometimes!

We're not really sure how many customers are rational actors and how many are acting charitably, possibly against their own interests.  Price is obviously what we're talking about, since our three legged stool of price, service and convenience is a bit wobbly on that first leg. We don't compete there because we can't, yet we fail to properly monetize the services that make us special, because we believe game store customers won't pay for that value. They'll spend $15 for a movie ticket, but many will balk at a nominal fee to use your space. It costs me about $250/day to have game space. Will customers pay for that? The answer for us is they will, to a limited degree. The answer for many stores is probably not. $5/week to some people is a hardship. I say stay the hell home if a fiver is gonna wreck you. The other store owner is afraid of losing them as a customer.

It's also fairly true that we, a) make gamers by introducing them to new games and talking with them about the hobby, and b) many veteran gamers graduate from brick and mortar stores and no longer need us. Somewhere between "a" and "b" are many customers who aren't quite sure they value our unique proposition. As a retailer, this ambiguity is maddening.

I've talked with staff about my magic Wand of GFY. Imagine you're in a relationship where your partner isn't quite sure they want to be with you still. They liked you initially. You had a lot to offer. You're certain they'll leave you eventually. They always do. But you just don't know when. That in between zone is a horrible psychological burden. Heck, going from relationship to relationship like this is pretty much the definition of dysfunctional. Wouldn't you sometimes want to wave a wand to make them decide?

The Wand of Go Fuck Yourself is the retailer fantasy of waving that wand. Customers who see your Unique Value Proposition will stay. Those that are wobbly will leave. Now, nobody is doing you any favors. Everybody is certain about what everyone is offering. The amazing advantage would be we could talk to all those who value us and better tailor our business to satisfy their needs. Customers assume we already know how to do this, but we don't. We do a lot of predictive guesswork.

We wouldn't wave the Wand of GFY out of anger or hatred. We would wave it to better serve customers who value us. To save the village, we must destroy it.  Unfortunately, the number of leaving people would be anywhere from 1-100%. We're uncertain exactly how much charity and how much unique value customers are perceiving.

It's also unlikely customers accurately know how they feel. If you think customers and consumerism is rational, you know nothing about why people buy. That guy on the Internet, who can't fathom why people don't buy everything online? He's a moron. He can't understand because he doesn't understand human behavior.

As retailers, we barely understand people, which is why we'll never wave the Wand of GFY. We simply don't know who would be left, if anyone. But sometimes I want to watch that bridge burn. I'm certain I could build a better bridge, if I only had better design requirements. I'm pretty sure it involves roasting my own beans.

EditRetail is basically two steps forward one step back. It's building a satisfied customer base faster than you lose customers from the many variables that cause attrition. Wanting to wave a magic wand is wanting to clear away all the two steps back in the mistaken fantasy that you could somehow freeze reality to serve the one step forwards. You can't stop the process. But wouldn't it be amazing?

Saturday, December 26, 2015

Four RPGs

I feel I need a palette cleansing after the last post. Here are the four RPGs that were most influential for me. It's a meme going around #fourRPGs. Rambling and layout atrocities ahead....

My favorite character after
Johnny B. Good who died on
 that gazebo
I think we played Top Secret more than D&D when I was a kid. We started with the original box set and moved to Top Secret/SI later.

Some were happy with the rulebooks, but I recall cutting out photos for my character sheet from the Brigade Quartermaster catalog (Brigade QM still exists) and finding cars to buy in the Auto Trader. We would destroy vehicles in that game like you wouldn't believe.

The Auto trader provided
vehicular fodder
We wanted different firearms too, and I created fake police department letterhead to send to firearms manufacturers, like Heckler & Koch, requesting catalogs for police only weapons, like the MP5 (see the video at the bottom of this post).  I got them too. Kids those days.

It was the more mature D&D of the time for us. Yet, I remember the shame when I ripped up my dead character sheet and pushed it through the slots of the gazebo where we were playing. The gazebo was over a lake, the pieces fanning out as they dispersed. I don't think I ever had that connection with a D&D character.

Baron Mughummlaminarrinarrr
Traveller was a one off for us, and its character creation system, where you could actually die in training, was intriguing. I used to generate random planets just for fun, to satisfy my imagination. I didn't play much Traveller, but it was always memorable.

Like Call of Cthulhu, Traveller usually ended in disaster, blowing the jump drives as the authorities closed in (you would think this was a pirate game). If you don't get why Firefly is a cult favorite, it's partially because it's an envisioning of a sci-fi RPG that may be Traveller. Oh, you know it is.

The Baron's World
My favorite character was Baron Mughummlaminarrinarrr, a lizard alien with an incredibly high metabolism. He would raid ships while his slave pushed a shopping cart full of canned food in his wake. He had to eat constantly or die. That's how strange the Traveller system could be. That's where my teenage imagination went.

Gamma World tapped into the 80's sense of impending nuclear destruction, long before the current zombie meme. Long before memes. It was mostly D&D compatible, so it satisfied our sci-fi itch that Expedition to the Barrier Peaks wouldn't exploit in D&D until a few years later.

Gamma World was a bit quirky, where Traveller seemed to be more serious, probably because of all the sciency things, like calculating distance between planets and attempting to understand space combat. It wasn't nearly as nerdy as Star Fleet Battles. The uber science geeks in school would play that game, calculating ship positions and firing solutions in 3D space. I'm not sure how that's fun, but they enjoyed it. One of those guys showed up to the high school reunion in his new Ferrari. We always knew you were smart, Brando.

Character roster. An "x"
marks a dead character.
Dungeons & Dragons is where it all started for me. I think I must have had the magenta box set under the Christmas tree in 1981. I mostly messed around with it with my younger brother. It wasn't until junior high school that I found a group of friends to play with, guys who are still friends to this day. That group included the older brother playing D&D in the movie E.T. (an acquaintance really) and the guitar player for No Doubt, who I tormented with my lawful evil priest of Asmodeus named Damien (I was a jerk).

My D&D  friends were more serious about school, which led to me being more serious about school, taking a few AP classes, and even choosing colleges together. "D&D got me into college" is a line I've used on more than one curious parent at the store.

We grabbed hold of AD&D as soon as the books were out, occasionally mixing older supplements, as we found them. With only three books available, we could recite the rules by heart and you could thumb to the combat tables, saving throws or treasure tables by feel.

None of my friends played beyond high school, as far as I know, but I moved on to play Oriental Adventures in college (as an Asian Studies major). Later we played AD&D 2nd Edition at a dot com I worked for; Planescape in the board room.

When Third Edition came out, I swore we wouldn't go to it, but I became an evangelist after reading the Player's Handbook. I could go on here, about the disappointment of 4th Edition, the walking in the RPG wilderness for a while before discovering Pathfinder, and how 5th Edition has been a breath of fresh air.  It's what I play now.

Overland map from this week
As for my gaming, I ran an urban, planar campaign for ten years (3rd Edition, then 3.5, then Pathfinder). For the last three years I've been running a sandbox game (Pathfinder, then 5th), mostly because I missed trees and nature. You can read about my sandbox campaign by searching for it on the blog search feature.

Bucket List: Shooting an HK MP5 on full auto

Friday, December 18, 2015

Fixing A Devalued Market (Tradecraft)

I have written much lately about the despair of attempting to sell games in a market where my peers are dumping product online at cost. It was pressuring me to move away from the game trade, to consider investing in things like coffee shops and survival gear stores rather than in the trade I've spent 11 years learning and to some degree, mastering. So it was a Christmas gift of sorts to see the Asmodee Group announce a new retailer program that prohibits sale of their games online.

Asmodee Group, as I've talked about in this blog, is the big player now, comprised of Asmodee, Days of Wonder and Fantasy Flight Games. In my store, that's 36% of all the board and card games I sell. A mature market usually has an unassailable player of over 50% market share. Asmodee is on their way. I wrote about this last May.

Why do this? I'll let Christian Petersen, the new CEO of Asmodee USA explain it from this recent ICV2 post:
“The marketplace has long been distorted by providing one-size-fits-all sales terms to every retail account, regardless of its channel of sale,” he said. “The growth in demand for games over the last decade, in our view, has been fueled not only by fantastic product, but by the support of specialty retailers who incubate personal connections between players, facilitate tournaments and leagues, provide instant product availability, and increasingly provide a ‘third place’ that is instrumental for so many gamers to enjoy and discover our products. The retailer cost of providing such channel services is significant, and so we’re now making policy changes to ensure that the sales terms provided to those retailers, relative to other channels, are positively reflective of the value they add to our distribution chain.”
He gets it. Christian Petersen has decided pure volume of sales, at any price, is not as valuable as thousands of retailers growing their market by building relationships with customers.

This will not end all online sales, but it doesn't have to. What it does is prevent dumping. It ensures that retailers will not speculate, will not over order, will not crap all over the marketplace because they lack the skills to budget, purchase and sell properly. Some retailers won't be happy, because this is their standard business practice. I wanted to come up with a nuanced response to them, so here it goes.
"Fuck you guys."  -- Gary Ray, Black Diamond Games
You may quote me on this. I'm not going to win friends or board elections, but if you're one of these guys, you are the problem. The reason Amazon sells this stuff at near cost is because you, the dumper, have driven the price to the bottom. I wrote about this a couple weeks ago in a post entitled We Have Met The Enemy. With any luck, other companies will follow the Asmodee Group example.

What will the consumer get out of this? Well, if you're just a get the thing at any price consumer, prices will return to normal, or more likely no more than 10-20% off MSRP as we discover the chinks in the Asmodee armor. On the plus side, I'm suddenly much more keen on running X-Wing and other events AND recommending such products when Asmodee Group games are not sold at cost online.

There is a lot to this. It won't go into effect until April, so I expect a lot of dumping before that. It allows for retailers to apply for exemptions to sell online for various reasons, which might undermine this. It ends the exclusive for Days of Wonder with Alliance and it specifies that only five distributors will get access to Asmodee Group products, all large ones we have accounts with. I see this as a victory for brick and mortar stores that do brick and mortar activities and support the community rather than the mercenary activities of faceless online commerce. Now we begin strategizing how to step up our game in supporting Asmodee.

Wednesday, December 16, 2015

The Game Store Venture

We begin with Jack Turner, game store entrepreneur in the offices of Poplar Capital. Meeting with Mr. Turner today is the founder of Poplar Capital, the often grumpy, Mike Heart, the wild card, Jack Lee and the enigmatic Janet Neapolitan.

Heart: Mr. Turner, I see here you're looking for $50 million to start a chain of hobby game stores.

Turner: Yes, that's right.

Neapolitan: How is that different than Game Stop? They closed thirteen stores this year and their position is uncertain in a digital age.

Turner: Oh, this is hobby gaming. It's completely different than electronic gaming. We won't sell anything electronic.

Lee: You mean like Settlers of Catan? Love that game! We play it with the guys over at Google.  I haven't done the market research on hobby gaming. Tell us more about market size. Half the electronic gaming market? A quarter?

Turner: Well no, it's roughly... uh, slightly less than one percent, maybe approaching a billion dollars? It's hard to say. Nobody in the industry really knows. That's compared to $111 billion for video games. Everybody knows the Gartner numbers. Unfortunately, there's no game trade Gartner.

Heart: Such a tiny market, why should we care?

Turner: Well, it's growing rapidly, 20% a year at last count.

Heart: Look, I'm a really smart guy. I know what people want. I know what sells. So I'm going to tell ya, 20% of nothin' is still nothin'.

Lee: The Internet is tiny in comparison to brick and mortar and we invest heavily in that because of the rapid growth, no?

Heart: The Internet is exciting. It's not wood for sheep!

Neapolitan: I see here that you plan to open 100 stores in markets that we normally consider secondary. Smaller cities with half to three quarters of a million population for the most part. Why these regions? It looks like you're intentionally ignoring the biggest markets.

Turner: Yes, we searched for areas with a proliferation of small, undercapitalized game stores, places with cheap rent, suburban sprawl and low barriers to entry. Our feeling on that is they're priming the pump for us, and we can swoop in with a well capitalized operation and crush them in our orbit. The more game stores per capita, the better.

Neapolitan: And I see you're looking at purchasing real estate?

Turner: Yes, our research shows the biggest barrier and threat to game stores is not the market as much as it is poor property management they're forced to deal with. By avoiding landlords and their skepticism and biases against hobby gaming, as well as the down market locations made available by that bias, we're able to avoid many of the common pitfalls.

Heart: Got something against massage parlors and nail salons? I met my first wife at a massage parlor. Great Chinese lady.

Turner: We've also determined that there's significant savings versus leasing, enough to pay our managers market salaries, which is unheard of in this trade.

Heart: Your market analysis shows small turn rates, like in the three range, compared to eight with big box. How do you plan to manage this operation when you're essentially running dozens of tiny boutiques? Small turns say boutique to me and boutiques are incredibly hands on. I don't get how you'll nail that market fast enough.

Turner: Good question ...

Heart: Of course it's a good question, I asked it.

Turner; Ah yes, well, with savings that come from buying a building rather than renting, as I mentioned, we'll be able to hire store managers at the market rate of around $45,000 to $50,000 a year. That means we can poach all the best store managers from around the country who never dreamed they would be able to own homes or put children through college. These are people with a huge variety of skills who accomplish great things on tiny budgets. They're all guerrilla marketers. In most scouted locations, we've already got our eye on that special guy or gal.  These experts are adept at building customer bases, marketing directly to the consumer and gauging local markets and doing it quickly.

Heart: I like it.

Neapolitan: I'm looking at this $500,000 per store. I see a down payment on buildings for roughly $100,000, then $150,000 in inventory, another $100,000 for what looks like high end FFE (furniture, fixtures and equipment). What's this other $150,000?

Turner: Our market research shows the importance of Third Place Theory, meaning a gathering place that's not work or home where people can congregate, socialize and spend money. It needs to feature concessions, comfortable seating, and a friendly atmosphere.

Heart: I know about Third Place Theory. I practically invented it with my hotels!

Neapolitan: I see here the creation of a holding company. Turner Game Supplies? What is this?

Turner: Oh yes, we plan to create our own distribution company. With our purchasing power, we should get 60% off most games, rather than the industry standard of 50%. We can go direct to publishers and twist arms for a better deal. There's an economy of scale that offsets a lot of the costs associated with a premium boutique operation. The publishers will be begging to get into our stores. Even one copy of a game per store is 100 copies.100 copies might be half a print run!

Heart: Twisting arms. Now you're talking! Twisting arms is how you build a business.

Lee: So whatdya got going on besides just games? Coffee shop? Restaurant?

Turner: Our market research, primarily on the Internet, showed our customers want a full bar with coffee, beer and hot food, so that also includes a kitchen.

Lee: Cool. Cool. And you've seen this done before?

Turner: In various configurations, mostly in the Seattle area. It works if you can get the right people working for you, and I think we've shown we're doing that.

Heart: They're nuts for coffee in Seattle. In fact, I once dated a woman who want me to put my ...

Neapolitan: (sigh) Yes, we've heard your Seattle dating story, Mike. Now what concerns me is your ROI.

Heart: That's Return on Investment.... She wanted me to dunk them right in her coffee!

Turner: Um, yeah, that's where it's a bit rough. The fans know exactly what they want from a game store, but the ROI on that is slightly less than ten years.

Lee: Whoa, that's a long time. Did you look at what a more standard three years looks like?

Turner: Mmmm, it's mostly milk crates and a Keurig machine. Kinda how it is now.

Heart: I think maybe you're wasting our time Mr. Turner.

Turner: But if you look at the plan, in ten years we'll have $3,000,000 in real estate equity and we'll begin to own the market. Jeff Bezos at Amazon relies heavily on real estate to ...

Heart: Turner, I've met Jeff Bezos. Jeff Bezos is a personal friend of mine. You are no Jeff Bezos.

Lee; Yeah man, I'm sorry, ten years is a long time, even to dominate a market, but a billion dollar market? Why bother? Be careful listening to Internet trolls.

Turner: I was afraid the ROI was going to catch me up.

Heart: Also, what's this in your competition analysis? Your competing with your publishers, your distributors and even your customers? What kind of crap is that?

Turner: It's what allows all the fly by night stores to prime the pump for us. The barrier to entry is really just some card tables and folding chairs. Everyone sells to everyone and even the customers sell to customers in the secondary market.

Heart: (speechless, his mouth hanging open)

Neapolitan: I'll tell you what, Jack. You've clearly done a lot of market research in a ... challenging ...  industry. Come back to us with a real estate plan and maybe we can put something together. Your work on that section is top notch. Or tap into that coffee shop trend. I hear roasting your own beans is the competitive advantage.

Tuesday, December 15, 2015

The Book (Ramblings of Madness)

I have a great respect for books. It's something I learned growing up, where books were expensive, hard to get and often destroyed by my siblings. Before the Internet, books were hidden knowledge, and as a boy, they were a gateway that may or may not get past the gatekeeper (my mother). At one point my mother made me return my copy of Eldritch Wizardry because of the cover. I had to make the bike ride of shame back to the cookware store where I bought it. The distinct smell of cookware stores will always mean Dungeons & Dragons to me.

I still have books on bodyguards and knife fighting (in Japanese) I bought at the martial arts store and hid under a desk drawer in my bedroom, next to a pair of Bruce Lee nunchaku and some shuriken (my juvenile record has been expunged, thank you very much).

Books are also something I learned to venerate from spiritual traditions, growing up Catholic and finding my way to Buddhism. In Buddhism, for example, you don't place books on the floor, step over them, or put them where people sit. It's not just ritual, it's a reminder of the value of the text, basically instructions on how to not have a horrible life. Maybe get that 2,500 year old text up off the floor.

In grad school, my dog ate my Tibetan dictionary. It was my prized Jaschke from India and probably had some tasty animal derived glue on the binding. She basically licked it to death. I kept using it though, carefully opening it with half the binding gone. I felt guilty and the least I could do was continue to employ my dog licked dictionary, a sign of my own carelessness in letting her get to it. I still have it on a shelf, mangled, discolored and smelling of dog mouth and animal glue. Back then, there were three Tibetan dictionaries available (we were told) and you had to know someone who knew someone to acquire one. Teachers were invaluable for this. Today you can get a Kindle edition Jaschke for ninety nine cents.

My gaming history is mostly role playing games, and I still have my original Player's Handbook and Dungeon Master's Guide, covered in tape with the inside cover sporting Wacky Pack stickers, like Hiccups' Milk of Amnesia (respect is learned over time, it seems). My Monster Manual has the line drawing monsters embarrassingly filled in with colored pencils. My son asked me why I kept such beat up books, and it was hard to describe the value of a text to a boy who has a vast amount of human knowledge at his fingertips in a pound and a half electronic tablet, at least the knowledge a ten year old needs. Bootleg AD&D PDFs can be found and downloaded in about 90 seconds, if he so desired.

My veneration of books took a hit shortly after opening the store. The D20 boom led to a glut and I was buying pallets of books from Marcus King by the pound. It came out to something like fifty cents a book, which I then flipped in the store for a few bucks. Great margin and happy customers. Not only did I buy my venerated texts in bulk, but I profited handsomely from it. If I were someone who believed in a soul, this is where the process of losing it would have begun.

We've been buying used RPG books since we opened 11 years ago, and 2015 was the year of the purge. With an expansion or a move in the works (looking more like a move), we needed the space they took up. After our expansion activities, we planned to resume buying them.

The stuff was never inventoried and honestly, if the tax man asked me how much value was there, I would have said zero and carted them to recycling before his eyes. To paraphrase a well known game trade deposition, it's just paper. Because they weren't inventoried, there was a lot of what we ended up calling sludge on those shelves, a decade of unloved crap that nobody wanted and probably was never very good. A full bookshelf of new RPG books is worth approximately $12,000. Used RPG books? The blue can is over there.

We grab books off the shelf, mark them down to the nearest denomination of $1, $5, or $10, and put them in bins. A month later, like turning compost, we re-price them down to the next price point, moving them to the next bucket over. The $1 books get put in recycling. It pains me to do it, but they really have no value. Plus, the most picky, obtuse and irritating customer you'll ever find is the one who comes for free stuff. Can you take a photo? Can you tell me what edition that is? Are you brain damaged? It's free. Free things cost gas and time, unfortunately, so people are picky.

Today, most of what's in the $1 bucket is unpopular White Wolf setting materials, like Vampire: Dark Ages. I would like to think there's a "circle of life" kind of thing going on and all books will one day end up in the dollar bin. There are quite a few venerated texts of the Pathfinder variety in the $5 bucket that may make it there soon.

The boy had been using my iPad far more than me, and on his birthday in March, I walked over to him, took my iPad from his tight grasp, and handed it right back to him. This is yours now. He's now a cyborg with that thing connected to him at all times, including a power brick that he carries in a pocket to handle his range anxiety. He doesn't do as much reading as I would like, but it's not because he doesn't have dozens of books on that thing. They're just competing with so much else.

Me? I'm back to print books. I just finished reading The Golden Compass and I've just started One Second After. Next to my bed is an embarrassing stack of books to read, ranging from fantasy to survival to business. It occurred to me that the stack is a psychological burden and what a relief it will be one day to have it go away, that is, if it doesn't fall over and crush me in my sleep.

Wednesday, December 2, 2015

We Have Met The Enemy... (Tradecraft)

The game trade is in a massive boom right now, between Magic and board games, so of course, we're prognosticating doom. The usual narrative is that once the trade gets big enough and attracts big box stores, along with a commodification of hobby games on the Internet, there will be a transition to mass marketization, followed by the demise of small stores. The Internet issue is the big one, with a lot of board games selling for close to cost.

On (Cyber) Monday I was buying D&D books on Amazon at cost, to the very penny, the exact price I buy them for from my supplier. Due to an inventory error, I needed them faster than Wizards of the Coast could ship them. That's great if you're a consumer, but as a store owner it has me reading up on coffee roasting, the competitive advantage of small coffee shops. Turning away from the game trade is only natural when it's eating its young. It's too gruesome to watch. But whose to blame? I mean, we like nothing more than to place blame, so who is the culprit in this deepest dasterdliest discount scenario?

It is us. Amazon will always discount to stay price competitive, but their algorithm has a lot to do with their independent sellers. Those independent sellers are none other than our game store owning peers. As game store sellers on Amazon lower their prices, Amazon drops to stay competitive, resulting in the impression that Amazon is the sole bad guy. The reality is the race to the bottom has a lot of participants and the vast majority are game stores.

When we demand the publishers fix this problem, we're really demanding they protect us from ourselves. It's not an entirely unreasonable request, just know the nature of it. Ironically, the counter example that proves this case is Cards Against Humanity. This game has close to zero access to game store owners. There are, I believe, ten authorized sellers.

Without an easy acquisition channel through the game distributors, some of whom, by the way, sell by the pallet to Amazon themselves, there is little to no online price competition with the parent company. Instead, game store owners buy it online and mark it up, leading to the most successful card game, possibly ever, for game stores. It's because of its limited access that it's successful. They've prevented us from fucking it up for ourselves. Once it becomes widely available, CAH will loose the vast majority of its value in the marketplace. Never change Cards Against Humanity.

There is a way to prevent catastrophe and it's a lot like the CAH model. I can't tell publishers how to maintain their brand value, and it turns out it may even be illegal for me to do so, but there are plenty of examples of companies who do this through MAP agreements and similar, legally acceptable, methods for maintaining price controls to preserve value.

I'm confident my store will survive into the future, unless I screw up somehow (we're looking at leases right now, so it could happen). Meanwhile, everyone is looking for their metaphorical coffee roaster, that unique value proposition that will allow them stability in turbulent times.

Monday, November 30, 2015

The Expansion Paradox (Tradecraft)

Hobby board games have penetrated deep into the mass market. The general public has discovered board games and the hobby is growing quickly. Our own board games sales are up 35% this year. Publishers tell independent stores multiple sales channels are for the greater good. As mass market shoppers discover new games, they'll naturally gravitate towards independent stores to pick up expansions and follow up games, items the mass market stores don't carry. It's a gateway sales channel.

The expansion paradox is this: As board game sales increase for independent retailers and the number of great board games proliferate, why does an independent store want to carry slower turning expansions and secondary games? Inventory being a zero sum game, an independent store owner can cherry pick the good stuff, you know, like the mass market stores.

But doesn't the independent game store have a duty to its customers to carry these games? Absolutely not. Our duty is to our employees and our shareholders (in that order). Customers vote with their wallets and they've shown us they're overwhelmed with good board game options.

It might be a competitive advantage to carry the slower turning expansions and secondary games, but if the market is hot, that advantage is much, much smaller. It's like the advantage of having a wide role-playing selection when role-playing games are 5% of your sales. It sounds good, and you might do it anyway, but that's not how you pay the rent.

The end result should be that the board game market changes. The market matures. Fringe publishers are marginalized further and find a home as perpetual Kickstarters. Or maybe they keep their day jobs, like role playing publishers. Larger publishers work on new games, rather than making half a dozen expansions that can now only be sold through their own sales channels. Dominant publishers emerge in the marketplace, the last frontier of hobby gaming. We're already seeing that begin to happen.

Friday, November 27, 2015

Don't You Wish Your Girlfriend Was Hot Like Me? (Don't You?)

The independent game store has no better friend than Wizards of the Coast. They communicate well. They take our needs into consideration. They value us as partners and work with us authentically in that capacity. There is one thing they do that bugs me though. If I were the kind of person to be easily insulted, their series of articles telling me how I could run my game store better would definitely rub me the wrong way.

First, Wizards of the Coast is the 500 pound gorilla. Having your much larger partner start telling you how to run your business feels a bit, well, like bullying. Hasbro, of which WOTC is a division, is a $4.2 billion dollar company. Most game stores are small, as in the $200K a year model (although some will tell you the average is even less). Having a behemoth tell you how to run your little business feels a bit overbearing, even if it comes from a place of trying to help, which I believe it does.

Second, Wizards of the Coast is not who you want giving you advice on how to run game stores. As you may recall, Wizards of the Coast massively failed at running game stores. They closed all 80 of their stores in 2003, many of which were known for extravagances that demonstrated they had no idea how difficult it was to run such an enterprise, let alone 80 of them. They also took down The Game Keeper, which they acquired, ending what was the only national chain of game stores, with over 100 locations. The game trade hasn't seen a national chain since and probably won't.

Third, and this is a big one, the state of game stores in this country is entirely an expression of Wizards of the Coasts policies in the marketplace. The vast majority of game stores exist because of the success of Magic: The Gathering. The absence of this one game would crater the game trade. If the game trade were the banking system, Wizards of the Coast would be too big to fail.

If Wizards of the Coast would like to see game stores up their game, there are several policy changes they could make that would not only improve the lot of game stores, but up their brand. Here's where I smugly suggest how they could improve their business. These policies are:

Fix Game Store Margins. Wizards of the Coast recently reduced the margin game stores receive on Magic: The Gathering, rather than raising the price. They reasoned that the consumer could not stomach $4.99 Magic booster packs, despite inflation, but retailers could eat a margin decrease without any trouble. That move cost my store $2,000 a year. That $2,000 could go towards new carpet, better fixtures, and more inventory to better serve my customers. Raise the price of boosters to $4.99 and return the margin to 50%. I'll up my game.

Implement MAP Pricing Policy. Specify a Minimum Advertised Price policy that dictates how low Magic products can be sold for. Online and brick and mortar stores regularly undercut the market by selling boxes of Magic for a few dollars over cost. This has greatly devalued the game, forcing game stores to sell Magic for well below what it's worth. Some Magic centric game stores subsist on a 25% or less gross profit margin, barely getting by while stinking up the market place and ghettoizing a good number of metro areas around the country. Do you think those stores have clean bathrooms and nice fixtures? Hell no, they can't afford it. Take this market defining product and restore its value in the marketplace.

While we're at it, put a limit on case purchases by retailers. There's too much incentive to flip cases for a few bucks over cost, perpetuating the devaluation. Tie case sales to organized play participation. WizKids just did this with Heroclix and it put a floor on their incredibly devalued product and reinvigorated the game in a number of game stores. Adjust supply, put a floor on minimum advertised price, and you'll see game stores make more money and up their game (if not, the ones that do will run them out of town, also a good thing).

Enforce Street Dates. Start penalizing big box stores and their suppliers for selling product early and undermining independent stores. Cut off a Target if you have to. Penalize a Wal Mart. It's such a regular occurrence, there's a series of Facebook threads with photos every ... single ... release. Also, beat down the independents who break the rules and cut off the ones who do so repeatedly. You know who they are. Why do you allow this to continue?

So there you have it, coming from a failed publisher of role playing games (our expensive to produce Pathfinder adventure netted us tens of dollars) to a failed game store chain owner. Again, I'm sure they're just trying to be helpful, but it's awfully condescending.

Thursday, November 26, 2015

Top Board Games

We're starting to see holiday board game articles online. Some articles have a lot of junk on them. Some show some solid, top selling games. Here's our list of top sellers at Black Diamond Games for the last six months.

Rather than just list a bunch of games, I'm putting an asterisk next to a game if it shows up in a holiday board game article or a top games of 2015 article, along with games featured on Tabletop. More asterisks means it's on more lists. Games with asterisks are definitely games worth checking out.

This is an interesting year for board game sales, as we're seeing a huge variety of games sold; lots of breadth and not the usual amount of depth. Some highly reviewed games have sold zero copies for us, so don't make our list. Other games are just hugely popular everywhere, like Codenames and Mysterium. Some evergreen games fell of the map as well, partly, I think, because of their strong appearance in big box stores.

Here's our list:

Cards Against Humanity *
Sushi Go! *
Star Wars X-Wing *
Coup *
Boss Monster 
Codenames *****
Betrayal at House on the Hill *
Boss Monster 2
Dead of Winter ***
Pandemic: New Edition *
Love Letter *
Gloom Card Game
Ultimate Werewolf: One Night
Star Realms: Deckbuilding Game
Catan 5th Edition ***
Love Letter: Batman
A Game of Thrones Card Game (2E)
Star Wars: Imperial Assault
Smash Up *
Mysterium ****
Munchkin: Nightmare Before Christmas
Gloom: Fairytale
Marvel Legendary DBG *
Epic Card Game *
Horus Heresy: Betrayal at Calth**

Monday, November 23, 2015

Amazon Price Matching and the Angry Beaver (Tradecraft)

We don't price match with Amazon. We don't do this because we like the finer things in life, like food and shelter. Also, our investors would like us to one day make a consistent profit, unlike Amazon. I'm the primary investor and I can vouch for that. I understand some customers would like us to price match Amazon. It's the season when they come in and get angry that we don't. This getting angry I find interesting. What is that about?

I'm going to apply a little Buddhist psychology here. If you don't want a dose of Buddhist psychology,  you should move on. Buddhism is all about human suffering: coming up with causes and conditions, defining your particular type, and prescribing some spiritual medicine. It's all in your head, but there's so much of it. I just want to know what this Amazon anger is all about. What is the psychology of getting angry in this bizarre way?

It's a stew of ego of course (what isn't?). Primarily it's the category of being separated from what you desire. You really want this box of cardboard, or more accurately, you yearn for the experience that the board game promises. As I explain to staff, don't sell a colorful box, sell the experience the box promises. Sell the sizzle, not the steak. A board game promises connection with friends and family, intellectual stimulation, and the ego boost of victory, shared or by yourself. As you get older, most of us don't get too many victories in life. How wonderful you can buy that in a box.

I will not price match, so they can't have it, which causes suffering, even though they could theoretically buy it right now. This is the easier part to understand. Their desire for the game is in conflict with their desire to keep more money in their pocket. But we deal with thwarted desire all the time and we simply move on. If gas is too high, we go to another gas station, we don't yell at the gas station owner. Rational people don't do that. That brings us to the second part of our stew.

The second type of suffering is being forced to be with what you don't like. This is where it gets interesting. The price on the box is full emm ess arr pee! Outrageous! Have these Luddites not heard of the Internet? Are they unaware of Amazon's lasting testament of the slow-burn model of sustaining a business? We are clearly infuriating because, and this is a big thing, they want to support us from a gut level, but their head won't let them. We are convenient, we're polite, we're reasonably knowledgeable. In fact, the nicer we are, the angrier they get.

Nobody is forcing them to be in the store. Nobody is forcing them to buy from us. We don't sell diapers and cigarettes, we sell a luxury product. Why don't they go to another store? It's because they greatly desire the store to work within their parameters and it is refusing to do so. Their ego vision of the store is not matching the reality of the store. It's promises, well beyond colorful boxes, appear unattainable in its current configuration. This is a frustrating thing. If only the world were not like it is, things would be great. The store angers them, yet the desire for the game forces them to be there. Being there makes them angry. The circle goes around and around.

There are other types of suffering that play into this equation, the usual stuff like the crushing baseline dissatisfaction of being alive, old age, sickness, and impending doom. Insert Monty Python quote about people not wearing enough hats. So with all this suffering, how do we provide a solution? How do we come to a cathartic conclusion that brings happiness to our deeply conflicted customer, wracked with an endless loop of suffering?

We demonstrate what we provide has value connected with their life. We bridge the gap of their desired price and their perceived value. Although it may appear we sell the same thing as Amazon, we sell something different; more. We show them buying from us supports the local community where they live, not just the community of like minded gamers, but by supporting us, they help provide for the roads, schools, police and services that sustain them every day.

We demonstrate that the convenience they find maddeningly attractive is not without its costs and it's worth paying a little extra for that. The tables and chairs that allow for the community to grow and provide enjoyment has a cost. The extra rent on that open space has value, even if we don't expect them to pay for it like every other entertainment venue in their lives. We explain that right now, they can take that game home or in the back and satisfy their game related desires.

We make them realize that we are real people, living among them in their community, not NPCs or cogs in their machine, or as Amazon employs, hapless location tagged warehouse runners, timed and measured in their ability to find your discounted item in a sweltering warehouse while being short changed on their pay. We are real people.

In reality, we'll never end suffering by selling boxes of things, but we can turn an angry situation into a pleasant one, and hopefully win over a new customer.

Tuesday, November 17, 2015

Some RPG Numbers (Tradecraft)

We've been selling role playing games for 11 years now. About 75% of what we sell is D&D and Pathfinder with the other 25% being the top dozen game systems and a smattering of indie games. Just a smattering. I think we're fairly normative when it comes to RPG stock. We're not an RPG powerhouse, but we do sell an above average amount for an "alpha" store. Take that with a grain of salt.

We have had 4,005 titles in stock over the years. We currently have 498 titles. If you've been working feverishly on that RPG for years until it's perfect, know we've already dumped 88% of everything that has come our way. It comes in. We sell it. The market is saturated. We dump it and move on. Just put out your book already. We spent thousands of dollars professionally developing an RPG adventure for our Kickstarter capaign. You can buy it on the Paizo website right now. We've sold 15 copies since March. It's pretty much tapped out now. Moving on.

A successful product in the game trade reaches and maintains a turn rate of three or more per year. That means, in a year, we sell three or more copies. More accurately, we divide the sales by the number of copies on the shelf. Usually that's one copy, but in the case of a very popular book, it can be 3-8 copies. We'll get to that at the end.

The 3,507 RPG titles we no longer carry couldn't maintain that "3" sell through rate. That's just a fact of retail life. If you've ever wondered why a Wal-Mart or a Target doesn't carry RPGs or at least more than a reasonable selection, it's because they need eight or more turns on each product. Less than 10% of our titles achieve that.

Looking at our existing 498 titles, here's how they're fairing with their turn rates:

352 titles, or 71% of our RPGs, sell less than 3 turns a year. The vast majority of RPG products under perform. You might wonder why we bother carrying them with such poor performance metrics. The reason is the top 29% round out the numbers, bringing the overall total to an acceptable level, usually around 3 turns total. You can't just carry the top 29% and expect to accomplish this, and you can't even sell those without a lot of specialized knowledge, organized play and hand selling.

That's why game stores exist, to provide those services to make the unworkable majority of RPGs workable. If this sounds like a lot of work, it is, and it's why many new stores don't even bother carrying RPGs. We love them, so we do the work.

So the take away numbers:
  • 88% of RPGs get cycled pretty quickly.
  • 71% of RPGs underperform
  • 29% of RPGs sell so well that they prevent the system from crashing
  • The only way to make it work is specialized promotion
  • Many game stores are abandoning this model because there are more profitable ways to make a living.
Also, because I know you guys like lists, here are our top 10 titles with the extremely high 17-40 turn rates:
  1. D&D Next: Dungeon Master's Screen
  2. D&D Next RPG: Dungeon Masters Guide
  3. Pathfinder RPG: Strategy Guide
  4. Unframed: The Art of Improvisation for Game Masters
  5. Star Wars: Edge of the Empire Dice
  6. Fate RPG: The Secrets of Cats
  7. Pathfinder RPG: Ranged Tactics Toolbox
  8. Dungeons and Dragons RPG: Druid Spell Deck (110 cards)
  9. Dungeons and Dragons RPG: Arcane Spell Deck (230 cards)
  10. Dungeons and Dragons RPG: Cleric Spell Deck (106 cards)
  11. 5th Ed. Fantasy #2 The Fey Sisters Fate
Alright, so 11 titles because I wanted to show off Goodman Game's D&D 5e adventure, Fey Sister's Fate. You'll notice no D&D 5 Player's Handbook. That's because we're talking turns and having to stock deeply on this title (8 in stock at all times) means it has a turn rate of  only 10.

Wizards of the Coast has created a bit of anxiety with the D&D 5 release and early shortages mean we stock deeper which hurts our performance. The 5E Player's Handbook is actually the best selling RPG title in the store (119 copies sold in the last year). The Pathfinder Core Rulebook used to be number one and it's now number fifteen. It once sold as many as 90 copies a year, but sold a sad 18 copies over the previous 12 months.

Enjoy the crunch.

Thursday, November 12, 2015

Shoplifters and Thieves

I'm not a violent person.

If shoplifters knew how close I was to bashing them with a bat, rolling them in a carpet and burying them in the desert, they might think twice. I would never do that. I'm almost certain of this. Like 99% certain. Maybe 98%. Well, the situation could escalate out of my control, lets just say that. If you ever do it and I'm on your jury, I don't think I could convict.

How can I possibly joke about killing another human being, who by definition, committed a petty crime? It's the little things in life. If you talk to a loss prevention specialist, they'll tell you that 10% of your customers and employees will always try to steal from you, even with cameras, security gates and guys with guns. They like the challenge. They'll do it until caught, and then apologize, and if you let them, do it some more. 10% would never steal from you. Don't pretend you know who they are. 80% of your customers and employees will steal if given the opportunity. This is where you put all your effort, attempting to dissuade the vast majority of people not to rip you off.

So imagine you work in a field in which 90% of your co-workers and customers will steal from you, if given the chance. They'll take food from the mouths of your children and shrug when you chain up your front door. Business is hard and full of unexpected challenges, they'll say. Imagine watching it happen again and again, proving the ratios more or less true.

Imagine not knowing if a friend at work is in the 10% never or the 90% maybe, or perhaps they're stealing from you right now. Imagine finding out the dark truth, again and again. Betrayal as a matter of course. More than one retailer has talked to me about losing their soul over this. Losing your soul, crushing your spirit, leads to burying bodies in the desert. It at least leads to contemplating it. Also, nobody will understand this, except other retailers. Not your wife, your kids other non-retailer business owners. There's just that fraternity of bat wielding retailers who understand.

There is no justice here, by the way. The police are not interested in your petty crimes. We had a shoplifter on site and the cop showed up (an hour later) and asked me what I wanted to do about it. By the way, he said, nobody is going to jail. In other words, he would mediate a solution that did not involve him using his law enforcement capacity. When society decides victimization is the cost of doing business, well, you buy a shovel.

Don't take this personally, people will tell you. It's the cost of doing business. I don't agree. Those are just some words people say to keep you out of the hardware store. With more of retail going towards big, corporate owned stores, many people believe it's just the cost of doing business. Thieves like to think that. It's why people don't take shoplifting seriously. They'll joke with me about the stuff they stole as kids, as if I would find that amusing. It's sticking it to the man. Yeah, Wal Mart and Target have 3% profit margins, but those CEOs! They make millions! Stick it to the man. It's the cost of doing business. Then they'll post their outrage to Facebook when the line employees of those stores get laid off.

I'm really not a violent person, but the threat of violence is a necessity to running an independent store. Professional thieves have visited and asked about our affiliation, whether we're part of a larger chain of stores. Why? Larger chains of stores have clear policies regarding bashing shoplifters with bats, rolling them in carpets and dumping them in the desert. I've had them ask that question while they were actively shoplifting. Is my stealing from you the cost of doing business or will I end up in a shallow grave? It's important they know the bat is on the table. Or the counter, if you will.

But this is all just talk. I'm not a violent person.

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.