Thursday, March 31, 2022

Bending the Line

Let's say you read my last post about bending the line towards customer desire or obtainability. Most store start by offering product from game distributors and perhaps a couple direct accounts, like Games Workshop. That's a fine place to start, but what if you want to go further? How would you go about having the funds for seeking out the obscure and arcane? How do you bend these products towards your through line?

You need money for the unobtainable. Let's assume, since you have a game store, you don't have money. Where could this money possibly come from? Consider an experiment in creating desirability. Take a product and go the extra distance. Select a solid, value oriented mainstream product, and teach your staff to sell the heck out of that product through game demonstrations. Set a baseline of what you would consider normal sales. Anything over that baseline is wonder money, money to invest in the unobtainable. Meanwhile your staff now know how to demo a game and will sell the heck out of that game for as long as they're employed by you. 

This extra money you made goes to inventory that's not normally available through distribution with the hope of differentiating your store from competition, delighting your customers and most importantly, making money. There are safe bets in this sphere, such as bringing in the top brand of jigsaw puzzles, finally establishing a Games Workshop or Asmodee account, or perhaps some direct to store sales. My big winners direct to store in the last couple of years have been wholesale accounts with Foam Brain and Squishables. You could decide to spend a portion of your money speculating on retailer friendly Kickstarter projects. I probably back one in five projects of the peers I follow. If you backed one if five of what I backed, they would be obvious choices.

Now that you have new blood in your ecosystem, make sure you continue to order, paying careful attention to stock levels. It's easy to let new stock become absorbed into your ecosystem and not re-ordered. Keep promoting, delighting and marketing your customer base. Make sure they know of the new wonders in your emporium. Pick another or perhaps multiple items to promote and reinvest. You are the ring leader of this circus and the size of your tent is entirely up to you. Create a system of promotion and reinvestment and you'll really be on to something. Eventually you'll need to new and unusual to fill your circus tent. But start with one game demo.

I assume you're familiar with Mystery Loot?

Tuesday, March 29, 2022

Desirable and Attainable

What does a modern hobby game store do? What role does it play in serving its customer base? You have two major factors, what's desirable and what's obtainable. These are elements of demand and supply, but not quite the same.

Desirable. What generates desire is often outside our control. Most of what is desirable is locked down in existing markets. For example, we have 30 companies that make up 80% of our sales, despite having several hundred on hand. What Magic players want is not something we control, generally. In fact, the desire for this is product is created externally from us. The publisher and its designated agents create the demand. As a store, we can run events to foster this excitement, make social media posts, and generally get excited, but for the most part the desire for this product is external from us. When you think you'll open an "X" store and sell particular products, you are hoping your small bit of enthusiasm will translate to strong desire. You'll sell what they let you sell.

You can also create desire through experiential retail. Events are the obvious Useful Value Proposition. Demo tables with active selling will take well vetted product choices and exponentially increase sales. More demo tables, more sales. Without experiential retail, you will not have a value proposition and will probably fail. With just events and no active selling, you'll be working a passive retail model that will be determined entirely by foot traffic and population base. Creating desire for product is often the difference between break even and profitability. The bar is high.

Obtainable. Obtainable product is stuff you can get, at a margin or price you can deal with, in reliable quantities to meet your needs.  You may overcome some of this with enough capital or size. There is no margin too small, only a price you mark up to that people are unwilling to pay. There is a huge swath of consumer goods, that you would think we should be selling, that we're locked away from because of lack of distribution, direct sales, or our volume is simply too small. We're are often second choice for a lot of products, so the more niche the product, the more likely the alpha customers will have it by the time you get it. If the product is entirely niche, the market may not exist at all. I have this problem with many Kickstarter games, especially role playing games.

Mainstream vs. Niche. This means our real role in the marketplace is to have the most mainstream products for the most mainstream customers. Niche products serving niche customers is something we engage in, but it's a sideline to carrying the top products for the average customer. As store owners, we like to be niche. We like to delight customers. We do end up spending a lot of time and money differentiating ourselves by seeking out niche product. Just today I had a niche RPG arrive (which everyone loves, but nobody will buy) and a long awaited, classic board game (which everyone loves, but nobody will buy). These make me happy. They send a message about the kind of store we are. They will not pay the rent, and thankfully both publishers took my money over a year ago.

If you are a customer looking in, you probably only see the things that interest you, the niche product probably. As a store owner, we are much better off putting our thumb on the scale, so to speak, than seeking out new product to weigh. Tweaking my Magic prize support or drumming up a Yugioh event is likely more profitable than my next five backed Kickstarter projects. It is our enthusiasm for cool stuff that keeps us driven to find new, delightful product for our customers.

The 45 degree slope. Finally, imagine a chart. You have desirability on the vertical access and attainability on the horizontal. A line runs at 45 degrees, cutting this graph in half. Everything on this line or slightly adjacent, you can sell. Everything else is either not desirable to your customer or unobtainable. Each product could be charted on this graph. At least, it could be if we knew what they are. Each desire is likewise a mystery. We don't know where customers spend their overall entertainment dollars. The stuff that aligns along this narrow corridor is the stuff my store sells. Sometimes I grasp for items far out in the distance of attainability. Sometimes things are game store exclusive and we see demand that hints at a larger universe we're barely part of. Sometimes we can channel desire to what we already have, but far less so than we would like. 

Surviving in this trade is acknowledging your line and working to bend desire and product towards it. It's also realizing when you're being played, when you're being asked to create desire for the unobtainable, or promise the unobtainable in ways that won't satisfy desire. Pull desire on top towards the line, attain product from the bottom towards the line. This is maddeningly difficult. This is the work part of the job.

Friday, March 18, 2022

The Single Store and my 4.0

I have one store. I've had one store for over seventeen years in various configurations. If you ever hear me giving advice about opening multiple stores, you may slap me square in the face. I know nothing about that. My first store was small, and I outgrew it in three years. Some would consider that store a mistake, but my needs for additional income grew when we adopted a child. 

This was my 1.0 store, a test really. I don't think I passed the test. I don't believe I would have invested in a 2.0, if I had been on the outside. "Your business is bad Gary, and you should feel bad." I tell myself in my imagination. Over its three years, it never made a profit, although revenue grew and a stunted, potential community was definitely interested in what I would do next. I learned how to "store" and wanted more. I doubled down on a foolish endeavor when I opened store 2.0, using the last penny of my home equity before the entire housing market shuttered.

My 2.0 store was three and a half times larger. We included 1,000 square feet of game space, and we instantly grew revenues 45% in the first year. It wasn't enough. Store 2.0 was a struggle, as it was simply too big at 3,300 square feet. It took years to grow into that space, as we watched competitors fall by the wayside. Often I wished for a quick death. I would try something new, it would fail and lose some money, we would retrench and jump out later to try something else. It would fail and lose money. Smaller changes and improvements had small effects, that eventually added up to really good retail practices. Those big initiatives? They rarely worked. Eventually we grew into that spot, partly with the help of all my competitors leaving the field, some just temporarily.

In 2016, feeling both cocky and burned out on store 2.0, we launched store 3.0. We created a Kickstarter project, raised funds through private investors, and built a mezzanine with a complete store re-model. We now had 2,000 square feet of game space and we aimed to be a regional event center. That never quite worked out, but it was a Unique Value Proposition that loaded the store with roughly double the customers from before. It got peoples attention. Store 2.0 was good, but Store 3.0 was special. It was beautiful, comfortable, and purpose built. It was also stupid expensive and with a 15% bump in revenue, it was a kind of place holder to keep me interested in the field. We could pay back our loans, and there was profit, but there were also good and bad months. Our problem was the promise of ever larger Magic events never materialized, in the wake of a Magic slump. In fact, the Magic judge, right before construction, told me our proposed space was too small

2021 saw the somewhat desperate launch of store 4.0, which featured double the store inventory. This doubling happened over time, sometimes unintentionally as we attempted to get ahead of the supply chain shortages. It was hoped that with COVID we might make up lost sales through additional offerings. That seemed to work! We had a 60% increase in sales from our dismal 2020, with its missing quarter. We also had a 20% increase from a very good 2019, before the crisis. This 4.0 feels fundamentally different than 3.0, as we have a depth of stock I've only dreamt of. I've chased breadth of stock my entire professional retailer life, but never imagined depth would pay off for us. I believe 4.0 is as far as we can go in this location. If you had asked me in 2019 how much stock I could add to the store, I would have told you, with industry pros agreeing, 50% more. We soared past that to 100%. I've got five more years in this location before I can consider a 5.0, but I would rather not.

So how do you know if you should open a second store or just a bigger one? I don't know. I have a competitor that has had something like nine stores while I've had my one in various incarnations. We're in the same area and have a completely different mind set. His new stores open, they close, he buys a store, it closes, he opens two more. It's like a confidence shell game. I have no idea how many stores he has right now. I have no idea his thought processes, but apparently a new store is low hanging fruit in his mind. He also wouldn't believe me when I told him my single store revenue. Impossible. We have different goals and objectives. I want perfection in one entity. I will never get it. I will try and fail. This is fun to me. An exasperated reader once asked, "Is this just a game to you?" Now you understand. It's the best game.

There are certainly low population areas of the country that can't support a giant store, or a rapidly growing one. I've seen roughly ten percent a year growth over 17 years. I have peers that blow by me and make me look like I'm wasting my life. I'm no genius, just stubborn. My "one" store did roughly four times the sales last year of my same store in year three, mature in its first location. We grow slowly. We improve processes. We create a company culture. We attract customers and dissuade others from coming. We try to innovate without losing what we have. The net result is growth, but not without troubles. 

Slow, organic, seat of your pants growth is not for everyone. I was once told by a high powered business person they coveted my slow growth life of daily challenges. I was building a thing, while they managed people and processes in a rather abstract manner. Sure, they got paid a fortune, but my life looked fun. When I first started I had some difficult conversations with tech friends who couldn't quite understand brick and mortar. Why would you do that? Why would you limit yourself in this fashion at the dawn of a new world? Because it's slow. Because it's mine. Because I decide when it's time to upgrade to a new version.

Tuesday, March 15, 2022

Running the Store Remotely

I've been the buyer for my store well, forever, but I've done it from home for the last 22 months. Two years ago, almost to the day, I sent everyone home and shut down for two months. I ran the store mostly solo, did home deliveries, ordered everything we needed, installed a brand new POS system by myself, and when we re-opened, I handed the reins to my manager. I needed this two months to realize I still had it, as my confidence had waned after stepping away from the counter for six years. I could step back anytime and make the business thrive. I went home, but retained purchasing and finance as my roles, but everything else was handled by staff. This crisis gave me my freedom, or as usually happens, allowed me to see I was the only one keeping me chained. So what did I learn?

Tactics vs. Strategy

When you are in the thick of things, when your inbox is overflowing, customers are streaming in and there is a mountain of receiving in the back, you are more focused on getting through the day than thinking about purchasing strategy. I gave up counter work in my ninth year, but I kept coming in to engage in the battle for another six years. Sitting at home, I don't experience any of this. 

At home, I don't worry about finding time to research new product. I don't worry about where a product will go once it arrives. We've always found space, although we're now objectively out of space for new product without cycling out old. I also don't worry about the work I'm creating, since other people are doing the receiving. Since I'm providing excellent buying services, there is little to no data entry for them when orders show up, with purchase orders accurate to the penny. It's turn key. Nowadays, if an order arrives without a purchase order in our POS, it's a bit of a crisis. Two years ago that was a Tuesday.

I have to admit, the idea of a truck full of product arriving in a day is something that would have made me take pause if I were there. At home it's a logistics problem for my manager to handle. My personal feelings about products are also removed. I'm likely to order something when it sells and not order it when it doesn't. At this stage there are products I've ordered, sight unseen and clearanced, without ever putting eyes on them. There are some products that always irritated me when they arrived for various reasons, often packaging. Not being in the thick of this battle, means I can think clearly about product mix, supply and demand, and objective sales data. 

Budget Concerns and Sales

I only have two levers to pull from home: input and output, purchasing and clearance sales. I can buy product and watch the results as it streams into the store. I can put items on sale in our online store and watch the feeding frenzy (or lack thereof). Because I only have two levers, I probably pull them more often than I should. 

I've found regulating purchasing to be difficult, mostly because of supply issues. Having a huge bulk of holiday goods arrive in January and February devastated a lot of holiday savings, although it also resulted in February being our best sales month ever. We have doubled our inventory over the last two years, thanks to government money, but now it's time to stop. But I like pulling that lever when I want. I like researching the new coolness. Sometimes I need to go for a long walk and realize my work for the day is over. Stop pulling that lever.

The other lever is clearance sales. Working from home, I primarily use my Open to Buy spreadsheet to know when I'm over budget and my POS to tell me what that stuff is. I've been grossly over budget for a very long time. I rarely look at turn rates nowadays, as my fancy POS analytics provides me a screen with GMROI. Gross Margin Return on Investment tells me how many dollars I'm getting back from every dollar I spend. 

Having an online store resulted in segmenting many categories, so I can now tell you I get back about 90 cents for every dollar of Citadel Air paints, even though Citadel paints overall give me back $2.83. You guessed it, I'm blowing out Citadel Air where before I would have a vague feeling they sold poorly. There might be a hole in the rack, but losing 43 cents a pot is unacceptable. Note that a lever I don't have from home is good old fashioned sales and promotion. I can't drum up excitement for airbrush paints from my dining room table.

The other mechanism for figuring out what to put on sale is my Dusty Inventory report. There is some inventory you'll want to blow out immediately, some within a month, but Dusty tells me when something hasn't sold in six months. I can change that to a shorter period, but my current strategy is to keep inventory longer. With a 5.52 turn rate, I think I can afford to do that. Once a week I get a Dusty report (a report from Dusty?) emailed to me automatically and I start pulling that lever. That $7,450 of Dusty stuff (above) rarely moves. There is eternally more or less $7,450 of dusty stuff, as new stuff gets added to Dusty and old stuff sells. I have this lever next to the purchasing lever, so you can imagine I use it a lot. I have poor inventory control when it comes to clearance sales, and that's something we need to work on. A lot of things are Dusty because they don't exist. Schrodinger's Inventory.

What About Customer Input?

Do I need to listen to customers? Yes and no. No, because I've been doing this a long time and although we have 300+ publishers represented in the store, about 80% of sales come from 30 of them. Most of those 30 are on auto pilot, the question not being whether to carry a product, but how much. Working from home has me far more dependent on listening to peers, following Kickstarter projects that are retailer friendly, and stretching outside the game trade for product. I certainly carry a wider product range than the Before Times, and that comes from active listening and breaking out of the insular bubble that you can get from customer interactions. That's right, listening to customers can also trap you into complacency.

I do listen to customer though, and it's through the Internet. We have a variety of Facebook Groups for each game category and a Discord server. A customer asked me about a pre-order on Discord yesterday, I let him know we had them on order, added it to our online store with a 10% discount, and he bought it. Ta da! Listening to customers. I also have SMEs I listen to. A SME is a Subject Matter Expert. If an RPG SME tells me they just got in a new Kickstarter RPG and I should carry it, I put extra weight on their judgement. I allow SMEs to co-buy with me, to some extent. I've got SMEs in RPGs, board games, miniatures, etc. Some of them I knew before I started working from home, but some have developed after. I have a new SME who is an expert on kids board games. Whatever she asks me to bring in, I make sure to get an extra copy.

Not having events for nearly two years has removed that huge customer input from the equation. You can learn a lot from what people are playing in the back, what they're talking about, the accessories they use. Without strong events, due to COVID, that input doesn't exist. I'm not there to hear it anyway, but as things return to normal, this will be a loss on my part.

In Conclusion

This works for me because I spent 15 years previously working in my store, talking with customers, developing friendships and contacts, networking in my field, and understanding this trade. There is a chance that I will become out of touch. There is a chance that the trade will take an unusual turn and I will be making course corrections. I don't have to be first, but I don't want to be last. There is always a chance and it happens often, that I'm buying product that no longer fits on shelves, that sits in storage or is forgotten in a cabinet somewhere. I am delegating customer service, cleanliness and organization, human resources and safety. Having a manager who can handle all of this requires training, communication and a lot of faith. When that manager leaves, it may require weeks or months of returning to work in the store to start over. This is not a perpetual motion machine. But it's a wonder to behold when all the pieces are moving.

Sunday, March 6, 2022

What You Should Know About Our Mask Policy

We don't like masks either. Masks suck. They're uncomfortable. Masks discourage customers from shopping in our store. They turn people away from in store play and have a detrimental psychological effect on our community. Masks cost us money. 

If you are rabidly anti mask, you probably have reasons. Your reasons are in your head. You have principles and ideas and theories. Our reasons are in our bodies. We don't have ideological reasons, we have health reasons and yes, economic reasons. Our reasons are solid and real and unquestionable, because we live them. They are informed by science and enforced by the government from agencies you've probably never heard of. If it's not entirely clear by now, I don't respect your reasons, not when you insist they be taken seriously at the expense of other peoples lives and livelihoods. 

You may safely play the odds as an individual. What is the percentage chance you'll get COVID with your limited circle of contacts? What is the percentage chance you'll get seriously ill from COVID? As a business, we see hundreds of people a day and we have nine people on staff. Unmasked, someone will get COVID. How do I know? It has happened already a couple of times with a mask policy. We have been forced to cancel shifts and close the business early. 

Anyone on staff working with an infected person is assumed sick unless proven otherwise. At one point, there was a good chance we could be closed entirely for days. I was the backup plan, working from home, and I was in the middle of a COVID quarantine. I also have skin in this game in the form of a backstop loan from the government. I pay 3.75% interest on a large loan because I frankly don't trust you, anti masker, not to screw up this country further. I could pay it back, I have the money sitting in a zero point nothing percent account, but I don't trust you. My lack of confidence in you can be measured to the penny, paid as interest to the federal government. You are literally a drain on my finances by your very existence. We should call you the 3.75 percenters. 

You may see the odds of getting COVID as small and the symptoms inconsequential. For me, COVID is a reality that will 100% infect staff, harm their health, and potentially cost thousands of dollars as we close. My personal feeling is everyone will eventually get COVID, it's just a matter of delaying it until the variant is inconsequential and the vaccines super effective. I think we're almost there, unless you screw it up by spreading a new variant. 

I think masks will disappear by the end of the year and you'll go back to chemtrails or crop circles or whatever it was you obsessed over before masks. Or maybe we'll get a new variant. Maybe it will kill someone you love and we can watch you cry and admit you were wrong. I hope that doesn't happen. It will bring me no joy. We will remember your reticence though. We will remember that your twisted ideology was more important to you than our lives. Your freedom without responsibility can die in a hole with the nearly one million people who have perished from this disease, almost all unnecessarily.