Thursday, November 18, 2021

The Scalper

It finally happened to me, in a three star review I was called a scalper for selling Pokemon for more than the MSRP. Let's take a look at this:

1. How dare you. Is the term scalper not offensive? Have sports teams not changed their names for less offensive references? Maybe come up with a different term that doesn't involve a Native American stereotype. I'm not offended, but it's curious.

2. Scalper is a specific term with a legal meaning. Alright, so it's in the lexicon. Scalping is legally defined, in some jurisdictions (not mine), as buying tickets at a low price and selling them for a higher price. There are laws specifically regulating this ticket selling practice, down to how many feet from a sports venue you can sell tickets. Note that I do not sell tickets.

There is the incorrect assumption that buying product low and selling high, over the suggested price, which they refer to as "scalping," is somehow illegal. I kid you not. There are times when someone calling you a scalper thinks they are accusing you of a crime. Just to be clear, buying low and selling high is known as commerce. There is no law or practice that limits the price we can sell goods or services, except for very specific circumstances. There is nobody to report us to, no repercussions from manufacturers, and honestly no long term hate from most customers who understand what's happening.

3. The collectible mindset. Collectible infers that the cards go up in value. You are familiar with buying low and selling high, because you expect to buy low from me and sell high to others, or at least hold those high value cards over time and peer at them through plastic. It becomes infuriating for collectors when retailers sell high. We are eating into your margin, your future value. I tell people to just wait for prices to come down, but they have strong FOMO, Fear of Missing Out. Since in their mind, values only go up.

Anyway, I buy role playing books, and if my books suddenly spiked 50% in value, I would wait for them to come down in price. I will buy the book later, or I'll buy a used copy, or a PDF. That's my suggestion, just wait. But Pokemon players look at me like I must be insane. That's because they don't believe that product can ever go down in value, only up, and it's going up all the time! The collectors mind set is this product is an "investment," while I buy a book until I don't need it, and then dump it. I am not a collector, I am a player. We need fewer collectors and more players.

4. This whole house of cards. It should be mentioned that for a lot of stores, higher than market prices on Pokemon, which normally has the worst margin in the game trade, are keeping their stores open, driving expansion, and leading to profit margins never experienced before. When I look at my accounting, it just seems wrong. The margins are all off. If it makes you feel any better, the ecosystem survived and prospered over the last year thanks to Pokemon. More game stores are popping up every day. I know, you don't feel any better.

5. How much should we sell Pokemon for? It's simple supply and demand, with some market guidance. This year, it wasn't unusual to see our Pokemon supply last one week, while still selling well above the MSRP.  There were no re-supplies coming for a lot of this product. What I would like to see is product last several months until the next set. The fact it sold out in one week means I sold it for too little, based on my stated desire for a longer shelf time. Again, it's my decision to adjust the sales velocity using price as the mechanism.

I try to keep Pokemon at a reasonable market price, using TCGPlayer as my guide. At the same time, there's nothing keeping me from deciding I want this product to last three months, or a year, or forever, because I think it's pretty, and coming up with an astronomical price to make it last. I've had a suit of armor for sale for 17 years because I think it's cool. If I sold it, I would just buy another one, so the price is high.

6. Think of the children! We have held some product back for our events, which are mostly attended by kids, but my best advice for kids right now is play electronically until this market cools down. My son has switched from Pokemon to collecting stuffies and Hot Wheels. Prices will eventually drop. Which is happening right about ... now. 

7. Prices are dropping. The music stopped and retailers are sitting on a lot of Fusion Strike. Boxes sit at $117 (with an MSRP of $145, as a reminder, the price of all booster boxes when not being devalued or demand spiked). Chilling Reign, which we have a ton of, is at $98. Other retailers are trying to offload cases and pallets of overstock. Is this the end of the boom? Probably, maybe, I don't know. We're still selling a ton of product at a lower price, so demand remains while supply has improved.

Monday, November 15, 2021

Buy Once, Cry Once

I'm a "Buy Once, Cry Once" kind of guy. That means I like quality stuff and have learned to "invest" to smooth my way through life and hopefully have an extended lifespan where I don’t have to buy stuff a second time. It usually means less stuff of higher quality, because I’m not rich. One of the areas in which I've invested has been quality store fixtures.

When I started my business, I was told to expect several years out of my store fixtures. What I found was I could have a premium looking store, with better quality fixtures, for about 50% more money. I went ahead and bought the premium fixtures, mostly because I had more money than sense, thanks to a home equity boom, and have (mostly) continued to buy them throughout the years as I’ve expanded. Can I recommend that? 

It's almost impossible to square a reasonable ROI out of any store build out, let alone one where you start adding premium features. I would tell a new store owner to pick ONE premium feature, if they showed me their business plan (I don’t want to see your business plan). You can have good fixtures or the chocolate fountain, but not both! The SBA will tell you half of businesses fail within five years, which I think is where you should position your ROI. Buying premium fixtures is a vote for success, a belief those extra thousands of dollars will take you into year six. A six year ROI shows high confidence, low financial aptitude.  

Have those fixtures been worth the money? As I’ve expanded, I’ve messed around with cheap fixtures. What I found is they wore out as predicted, at around three years. Worse, as they wore out, some became dangerous, with shelves that would collapse. I had a kids section that towards the end, was probably not safe for children. I cried twice when it came to those fixtures, because they all had to be replaced with quality ones. 

Those garbage fixtures weighed on my mind, and they needed replacing when I had the least amount of money. This occurred during my Dark Night of Profitability, several years where I wished I would just fail already, if I wasn’t going to succeed. Bankruptcy seemed like a sweet release. Eventually I had some holiday money and all those garbage fixtures went over to the local thrift store. Watch your kids carefully over there.

In year 17, I’ve replaced only one of my high end fixtures completely, after driving screws into it from every conceivable angle to keep it alive. It was my Frankenstein monster fixture. Let me tell you how we destroy good fixtures: The problem with my fixtures, high end gondolas from Newood, is we love hanging things on the endcaps. These are the slatwall ends of each fixture, where we hang small items on hooks. 

If you aren’t paying attention, you’ll walk by, snag your clothes on a hook, and rip that hook out of the wood, damaging the gondola. This won’t happen every time, obviously, but over the years, like a monkey at a typewriter, someone will eventually rip out a number of hooks in high traffic areas. New staff can't possibly imagine this happen, but the veterans know, if it can happen, it will happen. The major maintenance expense of the fancy gondolas is replacing these endcaps, and we’ve done perhaps ten in 17 years. But the gondolas look new and they’re safe.

Which brings us back to ROI. As I watch new stores struggle with untested store fixtures, I’m brought back to the troubles I’ve brought myself with deviating from quality. Yet, I had a very long ROI, and maybe they’ll spend year six on vacation on a beach, while I was working, beaming proudly in my fancy fixtured store. Whose the winner at retail? Money is rarely the measure. 

We all define success differently. I’m planning to work from a beach in 2023. I’ll be 55 years old and I could be called back from that beach at any moment. I could be on the beach now, but letting go is a struggle. Others couldn’t imagine being anyplace but their sales floor, or doing community outreach, or any other customer facing service position. Most store owners would quit first, because the job is the people. I’m sure some of those people would consider my dream a sell out, and for stores just getting by, there are probably a number of asterisks next to my name. *“Yeah, but he…” If I were to give a seminar on how to run a store remotely, which nobody would attend (maybe I should give it remotely?), it would start with all the things to make your store self reliant. We would start with not having to worry about a child being crushed under your cheap fixtures.