Friday, December 31, 2021

Touring Game Stores

I like to visit other game stores, often traveling long distances to see them. It provides me an overall insight into what the industry is doing. Writing about the industry is by nature to generalize, and the more overall breadth of experience I have with stores, the better my analysis.

I am open to suggestions and other ways of doing things, but I don't visit stores looking to take anything. I'm genuinely curious. I get more out of touring stores than visiting a trade show at this point. This is a very expensive way to educate myself, so we like to combine our game store tours with things like national parks and monuments, making it a game store tour vacation of sorts.

I've been to hundreds of stores at this point. I've been doing this long enough to get value from visiting the same store more than once, especially after a move. I visit stores with my 16 year old son, something we've been doing since he was in a stroller. I used to report on aisle widths and whether I could make it through the store with my stroller.

We've visited stores throughout the US, Canada, Mexico, and Guatemala. My son will now give me an executive summary of each store when we get back in the truck. I've been to stores in Europe to a smaller extent: Germany, France and Italy. There are write ups of these store visits on my blog, as well as on my personal Facebook page. Yes, this has been called game store porn.

Let me be the first to say there are a lot of bad stores. The barrier to entry in any local market is essentially the lowest commercial rent rate. You'll see the most "bad" stores, undercapitalized, unprofessional, unwelcoming club houses, in areas with super cheap rent. Visit the Phoenix area and you'll see a grid of commercial building going off into the desert to infinity. Where there are no geographical constraints, there is cheap rent, and there are a lot of bad stores. An SF Bay Area bad store is a middling endeavor in most markets, due to the cost of rent. $18/square foot (annual) is the basement. Where there is construction or malaise, there are bad game stores. However, we focus on the good stores, and that's my advice to the industry. Look at the good ones. There are a lot of them.

There are many variations of stores I could chose to visit. I often take suggestions before I go, but I'll look at reviews and try to hit the store with the most good reviews. A lot of reviews, mostly good, in each market. In some markets there are no apparent good stores, but we'll try to visit at least one anyway; I'm often surprised. Sometimes not (Flagstaff). Unusual stores are also on the list, like an unusual gaming cafe, a video game store we visited yesterday in a basement, and strange hybrids. If you've got a game store-pet store hybrid, I want to see it. Interesting retail that is game store adjacent are on my list too, like the amazing Last Bookstore in Los Angeles, built intentionally as experiential retail in 2005. How many game stores do you know of with a Wikipedia page or that make it into music videos? I was once approached to use my store as a porn set, but I declined.

All stores are reflections of their communities, thus all good stores that reflect this are worth visiting. There is no store that is too small, too weird, or too diverse. If you're profitable, and you're a legitimately good store, I want to see what you're doing. I'm also not interested, nor do I know anything about a stores profitability. So everything is taken with a grain of salt, and longevity sorts out what works from what doesn't. I can say I know what a solidly profitable game store looks like, although I love to see variants.

Communities get the game store they deserve. Deserve is a harsh word, but in this context, it's where demand meets supply. You might want one type of store, but your community will let you know what they need with their money. "Build it, and they will come" requires you to adjust your store to the needs of the community. You can't astroturf a store. I went to one new franchise store on my most recent tour that had an amazing miniature and paint selection, just like most stores of that franchise. But they had few miniatures customers. That niche was filled before they got there. They are a board game store, but it has taken them a couple years to realize this. Do they continue to flog their miniatures and hope to attract new customers or do they dump miniatures and become the board game store the community wants (deserves)? Time will tell. I'm just there to observe. This is where asking about how long they've been there is important.

Here is how I visit a store:

Let's talk about my attitude. I park outside and take a photo of the store front, trying to get the best angle. I like to put stores in their best light. This isn't getting published anywhere, but I would like to write up something that store owner would be proud of. This is an important element of how I visit stores. I have no desire to put down stores and would prefer not to visit, if I know a store is bad. If a store is bad, and there's nothing to be gained from the trip, I'll generally visit, but not write it up, or put it on my personal page and mark it friends only. I'm not trying to "get" anyone. This is someones life work. Remember that every time you give a business a review.

I try to avoid disruption. After I go inside with my son, I wait until the staff member at the front counter is available, or if it's nuts, I'll stand in line. I introduce myself and hand them a business card. Often the card can turn the mood one way or another, but it's almost always positive. Game store staff are inundated with sales people and useless individuals handing them business cards. If you've never been visited by another store owner, this might be confusing for you. I have just a moment to explain myself to set the mood. 

I ask the staff for a business card and they almost always have something to give me, even if it's not a business card. A customer loyalty card with the address will do. I've got a mini flyer from one this week. If you're a store owner, please have business cards on hand for your staff. I used to take cards to keep track of where I've been, so I can write up my impressions later, but now I write up a quick synopsis in the truck, which irritates my son who has to wait. Back in the truck, we tape the business card into my mileage book, something we started with the new business truck. 
I give out a business card different from my store cards, with my name and information, created specifically for giving out to other store owners and for trade shows. I'm going to publicly talk about your store and I'm letting you know my name and cell number. I'll stand by what I write. Literally call me out if I'm a jackass.

Ahh the truck. In case you're wondering, yes, there is a business related expense to these trips. Until recently, there were "unreimbursed business expenses" you could claim on your personal taxes, and my trips would fall into that category. That's gone now, and with investors, I don't write off game tour expenses. I do get to claim the business use percentage for the truck though, which is especially important this first year of truck ownership (one day I'll write about Section 179, when I'm confident I understand it fully). The truck is a 2022 Ford F350 Lariat, known as Owl. Bear, my travel trailer, comes in 2023. I've also referred to the truck as the Iron Pig, and this damn truck, as in this damn truck won't fit in the parking garage.

After the transfer of archaic paper cards, I ask permission to wander and take photos. I almost always get permission. Maybe one in twenty will tell me I need to ask the manager or owner, which I will do. Nobody has ever told me not to take photos, although I was asked in advance not to visit a store once, by a friend who wasn't ready. I used to be squeamish about taking photos with people in them, but not anymore. People will occasionally tell me they don't want to be in the shot, or assume they're in the way (they're not). This is not photography class, I take up to 25 photos very quickly. I photograph stuff I find interesting or amusing (because nobody is paying me to do this).

I don't need special treatment. Some stores will give me the tour, which is not necessary. However, it does allow them to set their own narrative and learn more about me. If you're afraid of the dude with the business card, talk to him. I show up unannounced, even when the owner is a friend, so I don't expect anything special. I don't need to hang out or get lunch, although we had a wonderful impromptu lunch recently with a store owner friend. 

If I get a store tour, it's an opportunity to compare notes and shape my narrative. In one store this week, we saw a tremendous amount of independent miniatures and paint with a thriving miniatures community. I mentioned how my store can't support that product and the owner offered to hook me up with communities in my area who play regionally. Neat! Neat, but not necessary.

I always buy my son Rocco something in every store, usually spending $15-20. This rewards him for his patience (and now research), but it also gives me a ton of useful insight into how they operate from a customer perspective. This also makes me an unusual customer, rather than just some industry weirdo taking photos. I can learn a lot about the store from this interaction. Rocco is also learning what it means to have a quality store, whether he follows in my foot steps or not (hopefully not).

That's what I do! I'm not the only one who does this. I know industry groups that go out to willing stores as an analysis mob. My store has been mobbed in this fashion and I got some useful feedback. I am not a secret shopper, but throw some money at me, and I'll be happy to visit your store and write up something more analytical than funny signs and goofy photos. Although I would prefer you just buy my book.

2,346 miles on this most recent trip, more than half of the odometer reading

Monday, December 13, 2021

Identity Crisis

In graduate school I had a job driving cars between Oakland and Los Angeles. These were "breakdown switches" at a rental car company, often requiring troubleshooting on the road. I complained to one of my teachers at the time, "This job makes me feel so disoriented." His instant response? "Well, don't get oriented." He was a wise man who passed last year.

Over the last two years, many of us have become disoriented. For me, it's an identity crisis of sorts. I've been running Dungeons & Dragons games weekly for twenty years. I suppose you can call me a dungeon master. It's a big part of who I am, running this game for a group of people, or in the case of lockdown, groups plural. Yes, I could have run games online, but the joy I find in this activity is not found there I've discovered. It's like sex, with a condom, using someone else's genitalia. It's too disconnected to appeal to me. My first in person game since COVID starts in one month.

I've also gone from an on site store owner, derping around in the back, to a remote owner. This has been a dramatic shift, those who now work from home can understand. It's disorienting, with some guilt involved for those left behind, but I feel I've been working towards this for years. I could have done it years ago, and probably wouldn't have done it for many more years, if COVID hadn't happened. It was a boot out the door of sorts, with a slow realization that I really don't need to go back. This shift, in the eyes of some of my peers, is a final exit. What are you doing still writing about this stuff? Aren't you done? I'm not done. There are also the socialists out there concerned I'm prospering off the backs of the workers. True, but not any more than any store owner, really.

This has kicked my (semi) retirement plan into gear years earlier than I was expecting. I plan to buy a travel trailer and spend six months a year traveling, mostly in Mexico. I bought the massive truck to pull it in October. I've passed 800 days with my Duolingo Spanish, which makes me a better prepared tourist than most, but hardly fluent. This whole plan is a bit at odds with my dungeon mastering, and certainly a challenge with remote store management. I also have a 16 year old, and part of this plan, still a few years away from full completion, is launching him into his life, whatever that may be, without it feeling like a betrayal or abandonment. 

If I had to give advice, it's take it one day at a time. Take crises as potential opportunities. Examine your values to see where you belong. A lot of people seeking a remote life elsewhere lack the ties to their community. Sometimes it takes nearly losing those ties to understand they exist. 

There's a lot of fear when you court change, when you embrace disorientation. Most people won't be able to make the jump. However, if the next ledge presents itself, I say take the leap. If you're feeling disoriented, don't get oriented.

Friday, December 10, 2021

Why Magic Singles Are Good For Game Stores

There are two sides to every story. Why would you possibly want to spend your life sorting worthless cardboard? There are some good reasons:

Market Differentiation. You have a unique product selection, unlike any of your competitors. Amazon doesn't have your singles. The giant store down the street doesn't have your singles. Your single collection changes all the time, a clear draw to competitive Magic players. A store collection is a unique, dynamic product offering that takes time and energy that makes no sense, the larger the player.

Global Market. Getting an Amazon FBA account set up, or working or an online store shipping, is a major undertaking. Selling singles from your small store on TCGPlayer is super easy. Your little shop, undercapitalized with just you, can be a player with singles online. It's also a catalog where your customers can view first and buy in store. As this gets more involved, you can even buy singles centric point of sales systems to help you manage.

The American Dream. The amount of money you will make selling singles is directly related to your time and knowledge acquired related to this project. It's a massive time sink, but you'll be rewarded. If you're young and without a family, you can devote extreme amounts of time making singles a major source of your income, while your friends are busy developing their careers in other ways. The difference will be how your efforts directly result in income. You can do this with almost no capitalization, meaning you are building something from nothing.

Forced Reinvestment. While your competitor might be squandering their profits on truck parts and trips to Mexico, you are being forced to re-invest in your business. When you put it out there you buy Magic singles, you must buy all the time. It's not unusual to see a small store in a very short period of time with a singles inventory value that rivals many larger stores entire inventory value. So far, singles appear to only go up in value. As long as people play Magic or are interested in collecting, this trend will continue. Eventually, we'll see generational shifts and values will decline, but we haven't seen a hint of that after almost 30 years. If people are playing Magic, they're buying singles.

Margin Equalizer. Sealed Magic product has an awful margin, there's just too much of it printed. Market margins for sealed are around 35%, while you can get higher margins selling singles. When I sold singles, it seemed we were getting around a 45-50% margin, which makes up for the poor sealed product margin. Magic singles rounds out the bad margin of sealed product, providing a margin that a store can not just survive on, but prosper.

Community Draw. People tend to buy where they play, and they play where they can find the product they need. Magic players, especially competitive ones, need singles. If you're a tournament oriented shop, you must have Magic singles. You probably have the interest and the staff knowledge, so engage. 

Narrower Focus. Because your money is tied up in singles, you will likely not have to deal with the nonsense that comes with certain parts of this trade, like the churn and burn board game market, or the idiosyncratic RPG market. You probably won't need to worry too much about why there's another Space Marine codex after just three years. Your forced reinvestment into singles will take up a lot of your inventory dollars, and let it. Diversification is fine for large stores, but smaller stores need to focus to survive. If you grow larger, you can play in other sandboxes, but for now, focus on CCGs, singles, supplies, snacks and seats. It's a valid model for the undercapitalized.

Fungible Assets. Cards are cards. You can avoid costly buys by trading cards. You can trade to your hearts content, without creating an expensive paper trail of cash transactions. As I've mentioned, my singles weren't even insured as inventory, but as "fine art." How much are your 1,000,000 commons worth at the end of the year? Something? Nothing? You decide. They're worth what people are will pay for them, and nobody has asked to look in a long time. I'm not saying break the law, but I am saying there's some slippery ways you can horse trade that you can't do with standard inventory.

Give Your Finger to the Man. Distributor margins got you down? Publishers raising your costs without raising MSRP? Wizards of the Coast demanding monthly reports? Naw dog, you're in the secondary market now. You keep that primary market nonsense far from me. You buy from customers. You support the community and the community supports you. Power to the people.

Building the Perfect System. The true card wizards have a system of buying, sorting, pricing, tracking and selling cards. Their system includes training and delegation so that others can do the same. This is their secret sauce. You also have the opportunity to craft a singles system, bodge together good ideas, and come up with a plan that works best for your needs. Get a bunch of experienced retailers in a room, and they'll be talking about their sauce, comparing spices. It's not one size fits all, and you can't just install a system. That's job security. A system is hand crafted, bespoke. If you like the idea of making something from nothing and crafting systems to optimize your empire, selling Magic singles is going to be a dream come true.

Monday, December 6, 2021

Oh... Jigsaw Puzzles

How I want your cut up pretty pictures that take no effort to sell to work for me. It's a picture. In a box. Do you like the picture? Is the difficulty level hard enough for you? Excellent! Oh my god what a simple thing to sell, rather than thousands of boxes of things that need explanation.

Oh, you're a puzzler. You require puzzles of a particular quality, preferably a highly ranked one? I have Neuschwanstein Castle, but it's not from the brand you prefer? Here, let me buy another shelf to house all of those. Eventually I'll get this right.

The bottom line of any inventory, is you want performance. Things must sell quickly. Puzzles are high hanging fruit. Puzzles are what you buy when you feel like you have all the games fit to sell. There are exceptions. If you sell a lot of toys, cater to a "muggle" clientele, or your store is in a touristy or super transient area, you may discover puzzles work great. Maybe you have snowbound customers that don't really like games. 

For the rest of us, puzzles are a final destination of dollars. Puzzle sell slowly, require depth and breadth of stock, and right now, you can't get the right ones. Puzzles sell like less popular dice, requiring a pyramid of junk to get average turns on Neuschwanstein Castle. Let's take a look:

Brand is everything for the puzzler. Ravensburger is the dominant player in puzzles. If you can't get Ravensburger, I would argue you're chewing around the edges, trying to make puzzles work without the dominant player. It's like selling role playing games without Dungeons & Dragons. In fact, I would argue if you aren't already selling puzzles, you wait until Ravensburger can fulfill orders in a reasonable fashion. 

There are brands that a puzzle selling store owner will rush in to tell me are sure things. I've listened to them. They're wrong. A sure thing in one region of the country, is "some weird brand" in another. Ravensburger is the only sure thing. Ravensburger may dominate, but there is plenty of room for small players. We have tried many of those brands on advice of others, and I can tell you some of them even work in other stores nearby, but not ours. 

Puzzle size is important. The undisputed champion of puzzle sizes is 1,000 pieces. There's a Bell Curve, with 1,000 pieces at the top and everything else falling away on each side. 500 pieces are generally catering to children and the nearly blind (I'm moving into that category). 2,000 pieces are challenging but not unreasonable. There will always be that knucklehead who insists on a bajillion piece puzzles, and if you buy it, you will sell it in a year or two or five. I once offered a 64,000 piece giant puzzle to anyone who could walk down the street with it held over their head. If I were buying puzzles fresh, I would buy every 1,000 piece puzzle and then some on each side of that.

The puzzle rush is over. If you had heard people were going nuts with puzzles during lockdown, you were right, but as things return to normal (which varies in each region), puzzle sales have flattened out. I'm not saying don't buy puzzles, but when we talk about inventory metrics, you are likely to be disappointed with puzzles, unless you have extenuating circumstances in your favor. 

Finally, puzzles is a long game. You build up clientele over many years. You don't treat puzzles seasonally, even though they sell seasonally. You stock well year round. You listen to your customers and bring in the brands they want. You use your metrics and drop the ones that don't work. 

Fun fact, unlike games, nobody will buy a puzzle they don't want at any price. Liquidating puzzles is death. I stole the idea of putting them in blind bags. Mystery puzzles sold at cost will move puzzles. But nobody will buy that puzzle on clearance, if they know what it is. You can safely avoid puzzles, or at least save them for last, where they reside in my sales reports.

Wednesday, December 1, 2021

Why Magic Singles Are Bad For Game Stores

A lot of game stores make their money from Magic singles. They're undeniably a major part of the game store ecosystem. They aren't without their trade offs and problems. I've sold Magic singles in store for about as long as I've not sold Magic singles. I don't sell them any longer. I don't think we were particularly good at selling them, mostly because we were perpetually under capitalized. Here's my list of why they're a problem:

Required Knowledge: The product and trade knowledge required to properly sell singles is dramatic. I don't believe there is any other store trade where required knowledge is so extensive. It can be all consuming. If you come to the trade as an experienced Magic player, you likely think you have skills to run a store, solely on your Magic knowledge. 

If you aren't a Magic player, you will have a hard time not only learning the meta of the game, but you'll need to keep up with new information on a continual basis. Even quarterly set knowledge is not enough. You'll need to be plugged in daily. 

This is also a problem because you may like Magic now, but you probably won't forever. After 17 years, I've seen all of our judges and knowledgable employees get burned out with Magic. I would not want my business tied to my enthusiasm over a product. That's exactly what happens in this trade.

Time Investment: Besides keeping up on product knowledge, there is considerable time in buying, sorting, re-pricing, and engaging with Magic singles customers, many of whom are not looking to spend a lot of money. There are a ton of low value purchasers, many of whom come to your store to talk with you about Magic. This is their entertainment, but if this isn't your primary trade, it's not a good use of your time. They will reward you with their money for sure, but this is a rabbit hole that you are stuck in. There are a lot of more useful things you could be doing with your time.

Eventually this time cost is delegated to employees, who you now pay by the hour to buy, sort, organize, and price cards, as well as jabber with Magic players. In high wage states, this becomes even more untenable. $15+ an hour is a lot of money to shuffle cardboard. The same activities might be happening a mile away over the border, at $7.25/hour, and the singles market is mostly online, where you could be paying up to 15% for the opportunity to sell.

Capital Investment: It's hard to dabble in Magic singles. The cliche is the store owner who starts their store with a binder and folding tables, but that binder could be a significant capital investment in this trade. I stopped selling singles, but if I got back into it, I would want to ear mark tens of thousands of dollars to build a collection. $50K sounds like a reasonable start. There are a lot of easier ways to invest $50K. Attempting to bootstrap Magic singles is very difficult, and unlike product that can be bought from supplier, you'll likely seed your start up by opening a lot of booster cases with low resale margins.

Cash Flow Nightmare. Magic singles will mess up your cash flow, if you aren't well capitalized. Don't be surprised when you have a great sales day, only to discover there are no deposits because you had to buy a collection or replenish your cash on hand. You can't really control when this will happen. You can't buy singles this week and not next week because you don't have money for payroll. You can't buy product and promise to send a check when you get around to it (that happened around here). During the pandemic, we sold all our singles during lockdown and as organized play died, stores that did a lot of singles business were forced to decide if they wanted to continue to buy a product that nobody, temporarily, wanted. When we dropped singles, our cash flow went from a nightmare to a dream.

Potential Theft and Fraud: Magic singles are essentially a cash business. In the infamous Gaming Goat deposition, we have the claim that Magic singles, seven million of them, have no value: "It doesn't have a value. It's cardboard." We need to work on these quotes. Along with "No, I am your father," it may be the most mis quoted phrase amongst my trade peers.

Hopefully you understand that Magic singles are valuable inventory, easy to price, and taxable as inventory and compensation when applicable. You can't pay people in singles and expect that not to be taxable income. My guess is a lot of stores don't declare their singles as part of their inventory and some probably pay their sorters in product.

Singles are easy for employees to steal and self deal, for store owners to use to evade taxes, and they're likely not properly insured. I once discovered an employee was living under a gaming table, sleeping in the store. He made his food money by stealing singles from the case and selling them back to us. It was like supporting a child that wasn't mine. It's also common for employees to be customers, and when your Magic buyer is also a Magic seller, you need to make sure a third party is monitoring sales. Putting limits on the number of each card you'll keep on hand is a good start.

Do you 100% trust your employees to handle your Magic singles? Can you or should you trust them 100%? If your knowledge is lacking or your enthusiasm waning, you will have to trust your employees to handle this part of your business without much ability for oversight. I am aware when standard product is sold, missing, or otherwise being mishandled. I can feel it in The Force. I had no idea what was happening with my singles. 

Insurance is another issue. When we had a lot of Magic singles, we had them insured as "fine art," They weren't considered part of inventory like other product, despite their obvious value. How often do you think I adjusted the value of my "fine art" policy rider? 

The solution is specialized tools for selling Magic singles, which begins to dominate the focus of your business. You'll end up choosing a point of sale system based on its ability to track singles and integrate with online marketplaces. This seems a lot like the tail wagging the dog, especially if singles don't dominate your sales.

Margin Justification: Sealed product margins are crap. Since we don't have an MSRP any longer, not that this mattered, I'm basing this on market prices. Magic is a commodity good, it's no better at my store than the store in the next state over. Customers shop entirely on price. Sealed Magic margins are 30-35%, in a trade that regularly gets 40-45%. Stores make up for this with singles.

Singles make Magic profitable. When I sold them, we tended to get a 50% margin, at least with what we bought and sold, ignoring the ocean of crap that would only sell in bulk. It does work, if you do the work and make the investment. Singles make up for the sins of sealed commodity Magic.  If you sell sealed Magic and don't sell singles, it's kind of a suckers game. You're not losing money, but you're relying on volume to justify the low margin. You might get stratospheric turn rates, if you're careful. But as you try to be the local Magic store by keeping older sets in stock, you'll find your turns begin to decline sharply, as you keep slow selling product in reserve. I'm doing this right now.

Perhaps you hold the line at a higher margin, knowing you'll sell a lot less of it. I've tried both approaches for years at a time, and market pricing Magic seems to work best. It also makes up for the fact I don't sell singles. High prices and no singles would mean Magic customers only come to us because we're a good play venue. Don't forget the second part of the game store cliche, a bunch of folding tables.

Singles are integral to propping up this de-valued product and the meta is carefully managed to maintain long term values. This feeds back into requiring the store owner to once again have a high level of Magic knowledge, with huge time investments, and plenty of capital on hand, preferably rolls of cash in a safe on site. This is not a situation you can manage remotely. It's not the kind of business you can easily sell or retire from, unless you can find another Magic expert like you've become. Magic singles are golden handcuffs, tying you to not only Wizards of the Coast, but to your store counter for life.

Anyway, one mans opinion.

You can make a ton of money selling Magic singles and I love it as a game.