Monday, March 8, 2021

Scarcity and Profit

 It's a time of unprecedented scarcity in the game trade, combined with some rather unprecedented demand. We are allocated product from most of our major supplies: Wizards of the Coast, Games Workshop, Pokemon, and even Ravensburger, who is insisting we buy cases of their choice of games if we want extended terms. The demand is also unprecedented as we see "investors" buying up Pokemon and driving prices through the roof. We would be making bank on this if Pokemon wasn't shipping in waves and cutting allocations. I have distributors who have zero Pokemon on their shelves. A hundred SKUs and not one Pokemon item on their shelves.

Scarcity is also the way of board games. It has been like this for a while, but it's more pronounced now. I can "feel" demand of scarce product. What sells is what's scarce. Good and scarce is a gold mine. I've never felt it more acutely than right now. For the most part, the bigger the store, the higher the velocity. I try not to get jealous when I see peers with pallets of scarce product, but I know my market and its limitations. It's strong but shallow. We might sell a case of a product and it's gone for months and I just shrug, while that case might be a pallet of product for a larger store. 

Meanwhile, Kickstarter game projects have increased significantly during the pandemic, and we're struggling to find products to back. My impression is even my most loyal alpha customers across the gaming spectrum have tilted their purchasing to Kickstarter over in-store. It's probably 60-40, and they'll often ask me to back a game so they can pre order through me (or just as often back it first, and then ask). Alphas have always been omni channel consumers, but it's odd to see this so pronounced across the spectrum. Scarcity is not just a condition, it is becoming my business model.

Distributors are sometimes good at managing scarcity and sometimes bad. Those who came out of the early pandemic strong have war chests allowing them to corner the market on some product. It's not unusual for me to have a record sales weekend and barely be able to scrape together an order on Monday morning, due to scarcity, whereas I would be ordering ten times that amount in normal times. While a distributor may be the king of the mountain in one area, their fields are fallow in others. Smaller publishers with niche, one off games are often absent from their shelves, and thus absent from mine. So we get a big shipment of a thing, sell it out in a week, and we wait for the next shipment.

I've added new suppliers during this time of scarcity. I recently added the last national distributor I wasn't doing business with. I'm leaning heavily on my Canadian distributor and returning to my toy distributor. I've also opened an account with Penguin-Random House, since even D&D books are becoming scarce. I have to admit I was not prepared and I'm being reactive instead of pro active. I have left a lot of money on the table, but at the same time, I've made a good amount by just breathing and doing my usual routine. I am skeptical of anything that smells of juiced demand, since I've been burned so many times before.

I still have all the money in the world, thanks to government loans, but I generally don't have anyone to spend it with. I've told a couple suppliers to "just send it" without quantities. You have Pokemon? I will take it. How much? All of it. It usually gets me a couple cases that last a week or two. This is what's so striking about "right now." I have all the resources to buy, but the time to buy was three months ago. Some suppliers are treating such product as commodities on their end and raising prices to me. Don't care, send it all.

To summarize, we're not seeing record sales, but we're seeing very efficient sales while running a very efficient shop. We're diversified enough to be able to succeed with just a taste of product, but sad we're not getting boom time sales due to supply. We're not buying new homes with the Pokemon boom, because the supply is so very weak. We are down about 5% from a year ago, a number about to change dramatically as we're nine days away from our shutdown anniversary. 

Running one shift in the store, without gaming, means such a significant cost savings, we're surprisingly profitable. But I can't help be a little jealous of those pallets on my neighbors sidewalk. I also worry about opening in store play more than anticipate it. It's not just the danger, it's the inefficiencies in a time of scarcity. For example, why would I want to run Pokemon events with no Pokemon to sell?