Sunday, January 24, 2016

90% Punches and Kicks (Tradecraft)

I once studied aikijutsu in college, a kind of battlefield aikido.  We worked on holds and throws in the hopes we would one day prove worthy to advance to training with wooden swords. Our instructor showed up drunk one day, something it turned out he would occasionally do, and proceeded to yell at us. "This martial art is 90% punches and kicks!"  I hadn't learned a punch or kick since I started, so the message was, you people know nothing.

When it comes to hobby game retail, we spend a lot of time talking about things that are not the 90% punches and kicks. Retail hasn't really changed much in pretty much forever, yet we rarely talk about retail fundamentals like inventory management, cash flow techniques and improving net margins. Instead we talk about events, the hottest Magic card, and the latest employee drama (rather than how to create systems for managing employees).

So why do we practice all these complicated techniques, discussing them endlessly online, when we really don't have a firm grasp on the fundamentals? The obvious answer is money. The biggest problem game stores have is undercapitalization, and the vast majority of distracting discussions is because the real solutions to game trade problems is not only out of reach, but beyond the comprehension of the average "buy a job" owner.

Nobody began by asking what do I need to be successful with a hobby game store, they started with a small amount of money and worked hard to see where it would lead them. They need to keep their balls in the air which does not lend much time to juggle fancy new concepts, like how to actually make money. You can change this though. You can put the petty concerns of fat pack pricing and handling your latest card shark on hold and you can say to yourself, I need to learn punches and kicks.

I am no drunken master. I don't want to put myself in the position of the drunk aikijutsu instructor, so instead I'll just reiterate that we all really need a better understanding of punches and kicks, the fundamentals.  Stop being a gamer store owners and start being a business owners. If you're looking for a time and a place to learn some punches and kicks, let me suggest Las Vegas, March 14th-18th.

Sunday, January 3, 2016

Opportunity to Work Hard (Tradecraft)

Some people believe game stores are demanding price protection. In the case of the Asmodee and Mayfair, game companies are employing policies to restrict online selling or restrict deep discounting of their product. There are two parts to this. First, publishers recognize hobby game stores provide a valuable marketing service and sales channel for their product. They've said as much. Second, and this is on our end, game stores aren't looking for protection or a handout, game stores are looking for the opportunity to work.

The opportunity to work means we're looking for games we can sell and promote, through our hard labor, that will provide us benefit and allow us to leverage our talents. It's the kind of work everyone is looking for. Nobody really wants a free ride. Everyone wants to be valued and they want to use their talents. Having this opportunity is a shot at being great.

When it comes to collectible games, being great means running quality events, which are insanely resource intensive, with the expectation that we'll be a valid source of product for the majority of our customers. We run events; we sell stuff; profit. For example, nobody wants to run a Cardfight Vanguard event, only to discover Potomac is selling booster boxes near cost. The result of that scenario is events are canceled or marginalized as we shift resources to better opportunities.

When it comes to board games, our game trade experts have shown that intensive game demos will increase sales 400%. That means if we work hard, have trained staff, space to run demos and enough inventory predictability, we can leverage this opportunity with hard work to be wildly successful. It's not easy. Not everyone can do it. It takes a ton of resources and training. That's the point. That's our value proposition and our opportunity in the marketplace.

When a game is perpetually at cost on Amazon or the supply chain is weak, or there's a limited amount of inventory slosh after Kickstarter backers get their copies, then we're unable to leverage our skills. There is no opportunity. We move on. Fixing these problems on the publisher side allows us opportunity. No hand outs here, just a shot at success. What everybody wants.

Game stores are shifting away from games that don't provide strong organized play or that don't provide good in-store value. The best examples are miniatures and role playing games. These are the two areas in my store that see the least growth and energy, and it's a combination of price pressures (geez, books, right?) and poor event service. New game stores often shy away from these segments of hobby gaming. You can personally step in and champion these games as a store owner, but as a system, they tend to provide limited opportunity.

A store can survive with minimal effort. My first store had no game space, minimal demos, a sad lack (but growing at the time) amount of product knowledge, but it survived because I ran it like a traditional store. I listened to customers. I ordered what they wanted. I managed inventory like a fiend using every tool in the box. That allowed me to survive, but not prosper. Who wants to just survive?

Nowadays, game stores need to go well beyond traditional retail if they want to be prosperous. A great store needs that opportunity to work hard and do their job. Stocking the shelves and counting turns is not enough to be prosperous, which nowadays just means a middle class lifestyle. Does your store have the talents to move from getting by to prosperity? If you're a publisher, does your game provide that opportunity?

Friday, January 1, 2016

Report to Stakeholders 2015

I'm going to copy part of the format of the very good Steve Jackson Games report to stakeholders, a detailed and transparent online report SJG publishes each year. Black Diamond Games is already transparent with employees and shareholders, who often receive identical information on a monthly basis.

A stakeholder includes employees, event coordinators, shareholders, distributors, publishers and, of course, our customers.

We primarily sell through our single, brick and mortar store. 0.34% of sales are done online, comprised of junk we discard on Ebay. Yugioh, I'm talking about Yugioh. We intentionally and entirely focus on our single brick and mortar store customers. Delighting and enticing them to shop with us is our goal. We avoid the distraction of additional stores or online sales. One big store.

2015 Summary
This was a fantastic year for us, as we saw a 13% increase in sales while I personally transitioned to a more strategic role with the company. 2014 was the first time we had a down year, as we dropped our number two game, Yugioh, turning our back on $100,000 in revenue.

In 2015, we had gross sales, with sales tax included, of a million dollars. Yes, including tax is cheating, but the report showing that seven figure number is mesmerizing. This is in year 11, for those who think this was easy pickings or we're an easy target. Do not get crushed in our orbit. We will not apologize for said crushing. A million dollar store in California is enough for one owner to make a middling income while employing half a dozen part time people (probably half that full time).

We consider ourselves an alpha store, in the top 10%, a term I invented so I don't mind throwing it around. This lofty position currently has us with 7 days of cash flow. Million dollar store living paycheck to paycheck. Yes we are in touch with our customers.

My role this year is that of behind the scenes strategic planner. I sat in the Game Center and worked on the business, rather than in the business. There are many things that get put on the back burner when you're an owner-operator. Stepping back allowed me to do all those things. That lasted until the end of March. Since March, it has been a lot of small tweaking and polishing policies and procedures.

Winners and Losers
What were the winners for 2015?  Collectible Card Games was our top category with a 10% sales increase. CCGs narrowly beating out board games, which had a 25% increase. Board games were ahead for much of the year. Board games and CCGs make up 60% of our sales and this year, more than any other, it began defining our identity.

Q4 was our best quarter to date, but the poor reception of Battle for Zendikar made it a hard slog. BFZ is credited for a down December and much soul searching. It killed quite a few Magic centric stores, by some accounts. Diversification people.

Board games were driven more by card games this year than larger board games. Cards Against Humanity made an inevitable decline though. Tabletop stopped being as influential. We felt the pull of the Internet this year more than any other time in this business and we considered dropping a lot of board games, ceding to the "dumpster fire" that was the online market. X-Wing, especially, was on the cutting block. The AMA changes were applauded here in this blog.

Used and Ding & Dent games sales were up 29% and all supply and accessory categories (sleeves, dice, cases, miniatures) were up. Puzzles and Toys were up, and we're committing resources to becoming a better puzzle store, after learning how to do those better.

Losers included Tactical Miniature Games, which were down 1%. We announced yesterday we're dropping Warmachine and Hordes from the store, which performed terribly in 2015 (1 turn, for those who do inventory management). This was due to poor events, increased competition, and a change in the game meta that turned off a lot of casual players. I regret having to let it go and I will absolutely consider bringing it back, if circumstances change. It's on sale in the store right now at 40% off.

A strong Warhammer 40K revival is why this category is only down 1% and we'll be shifting inventory dollars in that direction, although there's not a lot we need. I never thought I would consider Games Workshop a worthy partner, but after the turmoil of 2015, they're a safe bet. Also, as a suburban store that caters to casual players, it makes no sense for us to chase smaller, specialty miniature games. It took a decade to realize that and the help of retailer friends.

Role Playing Games were down 12% as D&D 5 wasn't nearly as new and fancy as it was in 2014 and Pathfinder began to run out of steam. Pathfinder, like the example with Warmachine/Hordes, is also heavily event driven, and lackluster events is certainly a reason for the drop. We need more volunteer assistance in that area. It lost its "inventory immunity" this year and a lot of dead product was cleared out. We know that doesn't help that line.

Collectible Miniatures were down about 9%, as we retreated from that category. It's where we slot Dice Masters and Heroclix, games that we walked away from in 2015. Classic games like chess continues to be games we sell for some reason.

2016 Plans, Including The Mezzanine!
Our lease is up at the end of March. What does that mean? It means we figure out where we want to be very soon, or technically, we're done. That's about as dire a way of saying that as possible. However, we've got a draft lease in hand and we're slowly moving forward, trying to negotiate it, but it's mostly finished. Negotiations are mostly over.

It's a seven year lease with a seven year option that includes construction of the mezzanine expansion beginning in April. Between now and April, we'll need to decide if this lease suits our needs, and if not, what we plan to do in the short time we have left in the current lease period. For what it's worth, looking 14 years down the road makes this a career defining document. This new expression of the store will probably be as far as I personally go with my game store career. I don't want another one.

Waiting on the decision of whether to move or stay has been frustrating over the last couple of years. There are unacceptable things that can't be addressed until this decision is made. The carpets are shot. The bathrooms need remodeling. The office is a pit of despair. All of that gets torn out or changes if we move. So I smile and pretend these things don't grate on my nerves.

This holding pattern is why we didn't have an anniversary party for the first time since we opened. This was a year of waiting, a year of glacial lease negotiations, scouting properties and attempting to meet with flaky property managers. It was a frustrating year that thankfully rewarded a focus on the basics.

If you're a retailer, come see one of my inventory management seminars at the Gama Trade Show this year.  It's in Las Vegas in March. We'll talk turn rates and product pyramids and all sorts of exciting, metric based words.