Friday, December 29, 2017

Holiday Lessons from an Impoverished Retailer (Tradecraft)

I went into the holidays lean. When I say lean, it means the $10,000 I should have spent on board games was tied up in Iconic Masters. It also meant that with construction debt, I had a small appetite for risk when it came to stocking up. We had a Just in Time (JIT) holiday season and there were a few tactics I found helpful.

It wouldn't be uncommon for me to go into temporary holiday debt of up to $20,000 of solid product, primarily board games. Not this year. This year was lean, and there were lessons learned that I think could translate to other retailers, especially new ones.

The Dumping
We dumped a lot of overstock, especially on Black Friday. However, we later discovered we were getting requests for this dumped product throughout the holiday season. When we left one on the shelf, we found we were re-ordering this supposedly dead stock, often multiple times. What this reinforced was trying to corner the market on scarce product was skewing my sense of what product was working and what wasn't. Bringing in six of a product and having only one sell after a month is a disaster, as opposed to bringing in one of that same game and having to re order it once, which, is not great, but not terrible. Not everyone is tied into what's hot on release and not everyone can shop the sale.

Living with scarcity may be how we handle 2018. I really don't care if we run out, to be honest. With 10 new board games a day, something else will be along shortly. This is especially true with the reprint. Reprints sunk a lot of retailers this year, as in once the bloom is off that flower after the initial print run, a lot of caution is in order on the reprint. We got burned on so many games like this. People would ask for Terraforming Mars twice a day when it was out of print, but when it was in print? It sold fine, but not great, which is no help when you have a dozen copies on the shelf. We had a lot of these 6-12 games on the shelf in November, so we dumped them, some too early.

Breadth of Suppliers
We have many supplier accounts, all with solid terms or credit card options. This costs nothing for a store to arrange, yet many small stores seem to spend an inordinate amount of time worrying if they should have a second or third supplier. Sign up with everyone. When we couldn't get a game from our usual suppliers, we called Lion Rampant in Canada. They push the envelope on the term tertiary supplier, being someone I call for a particular children's game or a special order of card supplies. Having many options allowed me to fill in holes. There was no way I was going to set up new accounts in December.

What I didn't do this year is chase alternate warehouses. I shopped my local warehouses only to keep supply arrival predictable and orders orderly. We did well into six figures in sales this month, which meant roughly $55K in games, divided by 20 shipping days, equalling daily orders of around $2,750 with roughly $400 of games at wholesale per box. I mention this math because it meant seven big boxes arrived every day that needed to be processed by stressed out staff. Having some small order arrive from a podunk warehouse a week after we placed it, maybe even after Christmas, is a waste of time. If we couldn't get the game from an alternate supplier, we ignored it. We also ignored the flavor of the month, as in What Do You Meme? as it just didn't percolate up to Cards Against Humanity levels of desirability versus ass pain.

The Chase Card
Like customers buying a lot of junk to find that one card, we avoided the trap of putting in orders for the sake of one missing game. For example, I really wanted Codenames back in stock for the holidays, but Lion Rampant, the only supplier who had it, required a large order for the Codenames order to make sense. I could order a bunch of junk or a LOT of Codenames. I chose to put the order in late and get it after Christmas rather than buy overstock. In the past, I might cite customer service as the reason for making a foolish order, but not this year and I don't regret it.

The Daily Order
Ignoring alternate warehouses and chasing lost product meant I could methodically order every day like clockwork. Usually that meant putting the order in the night before to guarantee my order was picked and shipped on time. This is what I learned years ago smart retailers do during the holiday season, and believe me, suppliers appreciate it. We had some problems on the Black Friday restock, but all my December orders shipped on time without delay from every supplier. During the day I would create additional orders, which suppliers were free to add to the existing order or send separately whenever, but orders became a constant steady stream of those seven or so daily boxes.

Staff Picks
We created a sheet with staff picks of games we enjoyed in 2017. We used to sell a huge amount of games from the San Francisco Chronicle, but they stopped their holiday board game article a couple years ago. The Chronicle article was pretty terrible, but people would buy whatever was on that list. We replaced it with our own top picks. It doesn't drive people to the store like the Chronicle article, obviously, but it's a landing point for people who want to buy board game gifts, but don't know what to get. When you walk into the store, right in front of you, where our new release table would normally go, is a table of recommended games with a flyer for you to enjoy.

Games on the staff pick list were ones staff could actively sell (except me, because I slacked and hadn't played any of them), and were likely to be evergreen products. That meant we could go a little (but not a lot) deeper on these titles without feeling stuck with them later. Oh man, did we ever get stuck with Chronicle games. I recall games we would put on clearance on December 26th with notations never to order this piece of garbage again. But it was in the newspaper, so it must be true, right?

New Releases
As a side note, if you're a publisher putting out new releases close to Christmas, know that I hate your face. We do not have time or energy to give your product the attention it deserves, nor do we have the mental capacity to handle special orders, especially if your staff are going on vacation and we have to deal with Rudy, the overworked fill in guy, who is doing us a favor.  We enshrine new releases throughout the year, putting them on throne-like tables and showering them with marketing kindness. When you release a game in December, it goes into Gen Pop, and I can't vouch for what happens to it out there.

That's it!
We did well. Our sales are up modestly from last December. We're paying off a big chunk of debt this week and I may have money for my vacation. We hit a major sales milestone this year, pushing us well into seven figures. Mission accomplished. Overstock avoided. Open to Buy in balance.

Saturday, December 23, 2017

Crime and Commerce (Tradecraft)

One of the unusual expenses this holiday season has been security. We've had a number of car break ins, an armed robbery at our local Goodwill store and a violent vagrant who told one staff member he needed their blood to summon a demon. This week I did something I said I would never do, I installed video cameras on the parking lot. The parking lot was not my responsibility, until it was. Nobody else was going to do anything.

Our new camera arrived around 2pm yesterday, while at around 11am, an employee's car was broken into. The police don't even come out for such events, they're so common. I felt the situation around the store was so perilous this month, that it wasn't fair for the employee to be caught up in the nonsense. We ended up paying for their broken window. Since then, police patrols have noticeably increased, otherwise I would be too embarrassed to even mention this.

As an aside, I'm willing to do a lot to keep the business afloat. There are contingency plans on top of contingency plans. But when I feel I need to be armed at work to feel safe? I'm out. And I can't imagine asking other people to take that risk if I won't.  So safety is an Achilles Heel of sorts for my retail store.

There is desperation out there, enough so that breaking into a car full of junk with the off chance of finding some loose change is well worth the risk of a night in a warm jail. Other store owners report such desperation throughout the country. One of my friends stood at the door with a taser today while the police arrived to break up a brawl in his parking lot. People are on edge and I'm told once I get out of my California wonderland, the US can be characterized by a land of meth and misery. Yikes!

Happy holidays! I do hope that everyone who needs help this season gets what they need. Our minor contribution this year was a donation to the California Fire Foundation and a very generous Toys for Tots donation in our name by one of our investors. We do what we can. It's not nearly enough.

My point of writing this was a reminder that when those in power threaten to pull safety nets from society, what they're asking is for the lower and middle classes to absorb the wreckage of an ailing society. These problems don't happen in gated burblaves. One of the selfish reasons we have such safety nets is so we can sell and consume in relative peace and quiet while others get their lives back on track, since roughly 90% of people using social programs are just passing through. Let's hope 2018 is all about doing everything possible to make that happen.

Wednesday, December 20, 2017

Tacos and the Wizard (Tradecraft)

Stick to the plan. That was my mantra the first year in business. I had a solid business plan for a solid retail store. It was planned to be better than the other stores, with better service, friendlier, cleaner and better inventory that I thought everyone would want (I was so wrong on the inventory). When you're struggling, which includes everyone in their first year, it's easy to want to deviate from the plan. If the plan is good, tweak your operation, but avoid deviation. That's the theme of the Make More Tacos post by Seth Godin today, which could easily sum up a solid retail operation:
  • Keep the place clean
  • Hire friendly staff
  • Make better tacos
  • Offer a fun, connected, even memorable experience

Of course you can fail for reasons out of your control, like a bad location or an economic downturn, but for the most part, a strong retail establishment has these taco making ingredients. It would be easy to want to jump to "next tier" thinking, like opening a coffee shop, or diversifying into something unrelated, or opening an online store; questioning the plan. However, it really comes down to cleanliness, friendly staff, solid product options, and that Third Place theory of a fun and memorable experience.

If you're looking at this blog from the outside, you must wonder sometimes what's the big deal? It's a store. There have been merchants selling stuff for thousands of years. Is there anything new under the sun when it comes to retail? You could argue setting up a reasonably good store, as has been done for those thousands of years, is 90% of what it takes to be successful. That's probably true. It's just that other 10% is the difference between success and failure with the Internet pounding at the door. Imagine being the only game store in town, but half of your potential customers have discovered a wizard who will magically make their games appear at their front door. The other 10% of what we talk about is how you combat the wizard, honing those taco making skills.

Monday, December 18, 2017

All My Fault (Tradecraft)

Iconic Masters released a little over a month ago, much to the consternation of retailers. Now that I've paid that invoice (the check is in the mail), I'm more comfortable talking about it. The problem was mostly about timing, since most of our fiscal years are calendar years and our inventories need to be back to baseline by December 31st. Taking on $20,000 of product that needs to be sold through in six weeks is pretty damn tough. Seeing it sold online at cost by panicked retailers and introduced to mass market also didn't help. But you know what? It's all my fault.

I was reading the book Comic Shop last night. There's a section on alternate covers and the various incentives needed to acquire these alternates, like buying 500 books to get one alternate. There was a lot of hemming and hawing about this, but what struck me was a quote by Chuck Rozanski of Mile High Comics: "Here's a very simple thing: if you don't like variants, don't buy them." Chuck then goes on to use even more colorful language to describe complainers: "If you don't like them, just shut up. It's not your business. I make money off of them, so shut the fuck up. It's that simple. If you don't like them, don't sell them. This is America, Goaddam it."

Every new product in the market is an opportunity and what you do with that opportunity is up to you. Don't want near monthly Magic: The Gathering sets, as we're expecting in 2018? Don't buy them.  But how did this happen?

As a retailer, Magic became boring. It became a turn key product in which I could order more or less exactly what I needed of a new product based on past performance. Although my employees are well versed on each set, as an owner and buyer, it required no work or product knowledge to get the latest widget in stock at the right quantity. As Wizards of the Coast switches things up, Magic is suddenly a lot less boring. I've got to do my due diligence, understand demand and timing and the important question of supply. Problems like the November Surprise of Iconic Masters is all on me. It was a surprise because I was lulled into complacency. I wasn't paying attention.

So my inventory is finally balanced, two weeks before the end of the year. I still have far more Iconic Masters than I would like, a 55 day supply by my estimates. And it definitely meant I went lean on important inventory this holiday season. But it's hard to blame someone else for a botched opportunity. I need to shut the fuck up and either get my ordering right or bow out. I think this will leave a mark on a lot of retailers, a painful bruise, a helpful reminder. There are also those bowing out after the holidays, and I think that's also a valid choice.

Friday, December 15, 2017

Head and the Heart (Tradecraft)

Most of what I do running my business can be divided into head and heart activities, including managing inventory. I mention inventory because I'm thinking about my GAMA Trade Show presentation in March and it basically comes down to these two factors.

Head is running numbers, turn rate analysis, sales per square foot analysis and the like. If this hammer is the only tool in your toolbox, you can optimize your store out of existence. You can't run a store in your head, and if you could there would be one chain of stores in existence, all of commerce reduced to a mathematical formula. That's because there's heart.

When I say heart, it's not quite accurate, but it sounds good. Heart is really human psychology. Understanding human psychology is the second half of inventory management. And when I say "understanding," I mean vaguely having a feel. Your store has a perception in the mind of customers. That perception can be only vaguely influenced by marketing, because the heart can't be fooled that easily.

When a customer visits your store, their heart, their psychological view of your business, is imprinted upon them. Small things, like whether their butt was brushed in the aisles by a passing customer or whether the aroma was pleasing, can have a massive effect on their perception. Your store could be too small, so you make it bigger, but then it becomes too big and they wish it were smaller. It's so difficult that Americans don't even appreciate the winners of this game. They like underdogs and you are seriously screwed if you're perceived as being the bully, so everyone looks for someone they can punch at upwards. I can badmouth Amazon all day long, but I risk everything if I talk smack about that small shop across town.

When it comes to the heart and managing inventory, we work with concepts like "top of mind," as in when people think of their game, what business is at the top? This top of mind often has little to do with the head job of running numbers. For example, we have the product pyramid, in which 20% of dice make up 80% of sales, but if you drop the bottom 80%, sales plummet to insignificant numbers. You've lost top of mind. So you carry all the dice. But there is no product pyramid in board games or card sleeves, mostly, sometimes, often. I mean is there? Obtaining "top of mind" is not something you can quantify, so your mind topping may vary. You'll have to adjust constantly, and there is your job security.

So which product lines are about top of mind and which are about running the numbers? There is no right answer and I could come up with a philosophy in my store that doesn't work with another store I own across town. My guess is a master retailer sees with both their head and their heart all the time. They see through the eyes of the customer and grock what's important and what's not, what numbers can be crunched and when to let out slack for the sake of perception, an attempt to speak to the heart.

Monday, December 11, 2017

Nobody (Tradecraft)

Nobody will run my business as well as me.

This is a true statement for every business owner, but how relevant is it? Are you willing to spend your life behind the counter to provide the best experience possible when a very good experience is attainable by someone else?

I think it comes down to two possibilities. You either want to work in the business, on the front lines, on a day to day basis, or you don't know how to get good results from other people. The first option is a perfectly valid choice. I know several veteran retailers who I greatly respect who want to be on the front lines daily. I personally spent nine years doing this before I just had to step away. If I had nobody capable to take my place, my best option would have been to close my business.

The other choice, that you're personally unable to get good results from other people, can be fixed. It requires trust. It requires allowing people to make mistakes in your temple of perfection. People will let you down. They will not only fail at their job, but they will betray you. You will inevitably befriend them and you'll get a knife in the back or best case scenario, they'll walk away one day.

This is not cynicism, this is what it means to be an employer in a small business. You have to tolerate the inevitable back stab and you have to train your people for their next job as you train them for their current job. You have to be a mentor, because the other option is being a bad employer.

As I write in my upcoming book, I feel like The Doctor from Doctor Who, with a steady stream of young companions to remind me of my humanity, which after 900 years (or 13 years in retail), is a receding memory. The companion eventually leaves, to be replaced by another young companion, while I grow older and more distant. Sometimes the companion has the better solution or reminds the wise doctor of his original intent and purpose. It's good to have a young companion, even if they break your heart when they leave.

Speaking of growing older and older, how you run your business, every process and procedure, is determined by whether you believe other people can run it as well as you. If it's all about you, there's little work to be done here. When you're gone, things just don't get done. But you're never gone. How many stores can only buy Magic singles when the owner is around? My managers can all buy singles. I'm not allowed.

If you want to retire one day or start a second business or even a second store, (or you know, die) you have to build your business with the intention others will run it. This is another area where not everyone is willing or able to do that work. There is something lost in the pudding when a gourmet chef franchises his restaurant. But how important is it that the pudding be perfect? Can it be pretty good? Is it possible that if you work on your recipe for other to follow and hire the best people, the pudding might actually be better? I mean, have you had coleslaw from Kentucky Fried Chicken? That stuff is awesome. If Chef Gary has lost the spark to make the pudding, my guess is the next chef might actually do it better than him.

My point is if you want to declare nobody will run my business better than me, know that you're either making a perfectly valid personal choice to do it all yourself, or you need to admit you don't know any other way, a position of ignorance that can be remedied. You're not all that important. None of us are. Your business will never be perfect.

The problem with the low barrier to entry with game stores is we fetishise a well run operation as something more than a business. Good stores are not magical, they just have good policies and procedures implemented by skilled owners. When we reject the game store fetish and accept this technical explanation, we can proceed to build more of them.