Wednesday, January 4, 2017

The Two Game Stores (Tradecraft)

When we talk privately about our stores, I sometimes feel I need an asterisk next to my name. The asterisk would denote something like "coastal" or a similar notation about geography. Why? There are two types of game stores out there, and their needs and problems are different. The issue is geography.

Most game stores in this country are in markets with unconstrained geography. This means there's plenty of flat space for commercial development and the only restriction is drive time. With near limitless space, rents can be dirt cheap. The barrier to entry for a new store is therefore quite low. This works like a tea kettle that releases steam when the pressure builds up (the Internet does this too).

Rather than boom times, game stores in most of the country instead face amateur competition from pop up game stores that rarely last 18 months, with more prospective owners happy to take their place upon their inevitable failure. With a handful of cash, these store owners see opportunity to make a quick buck, but also lack the skills to keep the business going. Sometimes there are dozens of these stores in local markets. Dozens. Let that sink in for a moment.

This is in stark contrast to coastal stores in states constrained by geography. Real estate is limited, the barrier to entry is high, and pop up stores are forced way out to the margins to where they can do no harm. Rather than a month to month lease with a handshake and a small deposit, coastal stores are looking at multi-year leases with credit checks, experience required, and perhaps $15-20K down to start, roughly the budget of the entire pop up store.  Also, these are not strict geographical terms. The SF Bay Area has coastal qualities, while Southern California does not. I'm sure there are heartland areas with coastal qualities as well.

Why does this matter? When discussing issues in the game trade, much of the problems facing game stores are other stores. While the coastal shops are working on professional marketing plans and looking for where to buy the best store fixtures, most stores are trying to work out why they should bother with a Magic pre-release because the new store down the street is running them at cost -- and that's just the most current new store for them in an endless cycle. This lack of barrier to entry is a game of whack-a-mole, where the new stores pop up, cause harm to the established store while they're busy failing like a chump, and are soon replaced by a new pop up. This is not a problem unique to any one area, the uniqueness is in the coastal stores with their rough real estate markets that insulate them from nuisance competitors.

Not all of these pop ups are nuisances and many excellent retailers will tell you they started with a handshake and some Ikea furniture. That's great! The problem is the vast majority of these stores have no idea what they're doing and they have one lever, one trick they know of to survive, and that's discounting, both in store and online. They race to the bottom because they know no other way. That's why you'll hear store owners talk about good and bad competitors.

Good competitors are knowledgeable and will create that rising tide that lifts all boats. Bad competitors are ignorant and will race to the bottom, dragging down the local market to sometimes permanent levels of devaluation that makes it impossible for good stores to succeed. Any area with a blanket 20% discount on all games is dead in my book. They've salted the earth. It means an owner can't make a proper living without running a crap store. This is the state of large swaths of the country. So for most customers out there, their idea of what a game store is to them, is rather crappy. You can't argue with them, because in their world, game stores are simply not very good.

I am not arguing for artificial barriers to entry. That's not a solution. If I thought there was a solution, and I'm doubtful of this, it would to educate prospective store owners. Unfortunately, with that nonexistent barrier, that's practically educating our customers.

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