Second Floor Rumors

If you follow Black Diamond Games on Facebook, you may recall me mentioning the possibility of building a second floor for a game center expansion. Well, not just mentioning, I believe I included a floor plan. Subtle, eh? When we re-negotiated the lease earlier this year, that was what I lead with: "We'll sign for another five years if you build us a second floor."

Our property manager, to their credit, didn't just say no, but went through the process of getting our request evaluated by their architect. Then they said no. Their costs were almost twice my estimate, so although this second floor plan won't happen anytime soon, I do think it's reasonable to do it in the future. Rather than a second floor, we did manage to negotiate a lower, fixed, lease rate. If that had been my initial intention, to lead with a boondoggle to gain lower rent, I could claim a certain level of financial genius, but I really did want that second floor.

The cost of a second floor, in landlord, full retail terms, not in "my brother knows a guy terms" is about the cost of opening a second store. However, unlike opening a second store, which implies a frighteningly high level of risk, the second floor has nothing but an up side (no pun intended). The rent on that second floor would be zero and we could expand into a ton more events. The truth about a second store is I only know how to open a store wrong. Sure, I learned a lot by making mistakes with my first store, but I don't really want to sort that out anytime soon.

When it's not the height of Summer, as it is now, our events generally only hit 80% capacity. We looked at that closely in the beginning of the year. I do believe we have some years to grow to hit full capacity. I'm also not swayed by various mini cons and other larger events. Those are great if you have the space, but very few stores do. Also remember that events exist to promote the retail space. The tail so to speak, should not be allowed to wag the dog, and honestly only about 10% of our customers ever use our Game Center.

Value of Core

Privateer Press released their "core" list yesterday, what they consider to be a "list of models they believe "represent popular model choices for both new and existing players and showcase the core essence of each faction." That might not mean much to the players of Warmachine and Hordes, but it's a valuable tool for retailers.


Without a "core" list, retailers are left with a guessing game. If retailers know a game really well, an assumption that a lot of manufacturers/publishers seem to make, despite having dozens of game systems on the shelf, retailers can attempt to keep stock in line with what's necessary and what sells. However, when a line grows beyond a hundred or so items, that task becomes onerous and in the case of miniatures, often impossible. Providing a "core" list basically allows the retailer to leverage manufacturer knowledge to stock appropriately.


This assumes that the manufacturer is being truthful and that the list is truly core, not just a bunch of stuff they would like retailers to carry. I'm already getting some negative feedback from a couple Warmachine players, but we'll wait and see. Core, unfortunately, can't account for local tastes.

A smaller core list is probably better than a large one, something more than 3 items (traditional D&D) but less than half the line. This also assumes the list will change periodically, and not be a static list that gets stale. So with this list of "core" in hand, retailers have a couple of strategies they can employ. 

At a minimum, retailers can stock core and special order any new releases. What we usually do, with Warhammer Fantasy for example, is stock core and then stock all new releases. Core always remains stocked but new releases are allowed to fall off if they don't sell with our usual performance metrics. So some non-core stuff stays on the shelf while others disappear over time. If a game starts to take off, we can bring more of that in. If a game becomes truly golden for us, like 40K or D&D and Pathfinder, we stock the full line regardless of metrics.


The true value of core, I think, is it lets you treat a game systematically, beyond just inventory. You stock core, you bring in new releases, you promote events and give appropriate support. You then know your inventory is appropriately managed, taking the guesswork and subjectivity out of that variable and that you've done what you can to market the game. They you can then decide if the game is worth keeping or not.


For example, if I stock core and support Warmachine to the greatest extent possible (we now play on Wednesday nights and Sunday mornings, hint, hint) and the inventory languishes with low performance metrics, I can make an educated decision that the game doesn't work for me and I can drop it. That's what happened to Flames of War. Low performance metrics supporting core, low sales of new releases and nobody stepping up to run events. This saves years of trial and error and lost revenue.


The positive side of core is that I'll theoretically have everything a new player needs to get started, core product for existing players, and more confidence in new releases and the necessity of allowing non-core stock to cycle off the shelf. I'll be more confident in providing event time slots for the core game and there will be overall more confidence in steering prospective new players into that system. The manufacturer can likewise prioritize production of core products, so we're always working together.

We'll be bringing in 50 models we've dropped in the past to support Warmachine core. We'll take a look at Hordes next.

The Problem with Yugioh

Yugioh is a special case. This hugely popular collectible card game has a problem with consistency. I speak entirely as a store owner, not a player, so when I write of consistency, I refer to customer demand for the product. Demand for Yugioh is horribly uneven due to the varying quality of each release. While Magic sets might vary in quality, they still maintain a certain baseline standard of usefulness that creates a steady demand. Indeed, Magic sales have been steady, according to Wizards of the Coast, since the game first came out. Yugioh has very hot sets and very, very cold sets.

Because of this hot and cold problem, distributors, our main source of product, want little to do with Yugioh. A hot set will sell out quickly, but a cold set could take years to sell through. So distributors treat Yugioh like a one-shot, fire and forget trading card game. It's a hot potato and they want out before the kids make up their minds. Get what you want from them now, because next week (or even today, if you were too slow) it will be gone from their shelves. So what do you do if you're a store owner?

You can try to predict sales, which works to some degree, but more than likely, if you're intent on catering to your Yugioh crowd, you're going to stock up and sit on it for the long term. This is very expensive. Yugioh doesn't have the "anything Magic" sales patterns, in which there is little risk because it will always sell. Once a set, deck, tin, mat, or card sleeve starts to peter out, it's a long slog until that set is out of stock in the store. Worse, some customers want and expect older product to be on store shelves. Why? Because we're all stuck with this old crap on our shelves. There's a perception by customers that this is normal. It is not.

I want to stress that this is very unusual in the game trade. For the most part, our store uses just-in-time inventory management. What you see on the shelves is 99% of what we carry in the store, because anything we want can be brought in tomorrow ... except Yugioh. Stocking Yugioh deep, therefore, adds an extra cost to doing business. For example, if I have an extra $3500 at cost in Yugioh that I'm constantly hording, that's $30,000/year in lost revenue ($3500 at cost equals roughly $7500 at retail, times four turns equals $30k). Comparing this number to our actual sales of Yugioh explains why many stores want nothing to do with it or stock it lightly. It's deadly.

This lost revenue due to sunk inventory costs is a huge problem for us, exacerbated by all the other problems with carrying the game: difficult customers, low margin, difficult customers, extra staffing for events, difficult customers, and of course, difficult customers. I see it as a cost of doing business, but I believe Konami could make their game more popular than Magic if they addressed this issue.

I don't think Konami can make a release suck less, because that would be nothing short of a freakin' miracle, but I do believe they could stock their own product broader, deeper and easier. I don't need a case of last years release (12 boxes), but if I could mix and match a few older boxes at a time, the distribution problem would be solved. If they believe in their own product, they should be willing to sit on it like I do.

RPG Sales YTD

This was posted to Facebook on the Black Diamond Games page last week, if it looks familiar. It shows our year to date RPG sales up 60%, led by Pathfinder up 300%. Of course, the usual caveat applies that this is our store and the RPG industry or game stores in general may not be doing as well. There was a rising tide of RPG sales for us, with most of our top ten publishers increasing. 

To answer the most common question: D&D miniatures are not included in this, since we track them in a different category. Paizo accessories like flip mats are included in the Paizo numbers.

I see a clear change in buying habits from our customers. There's definitely a "new normal," but they generally are more free with their money, especially on products they perceive as higher quality. I actually think the quality and utility of RPGs has increased since the beginning of the recession. There's also an interesting PDF phenomena. 

I'm now happy to carry print products that were previously PDF. The idea is the PDF has been vetted by the online sales process. The top ones are selected as print products. The distributors then choose which ones are most likely to sell. They're generally right. Those PDF products don't get stocked deep, and many are sold in the dreaded "periodical model," where I buy them once and let them go after a single sale. Still, it's a sale. 

Most of these PDF products were for Pathfinder, and honestly it's the one with the widest base for us and the least risk.  A Shadowrun PDF, for example, is dangerous as a print product when it's likely our player base (something like four guys) are likely to have bought it already.

Magic 2012 Pre-Order Offer

We're running a bit behind, but we want to offer a pre-order deal for Magic 2012:

2012 Core Set
Full MSRP:  $143.64

Pre-Order Pricing:

$104.99 Credit
$99.99  Debit
$94.99  Cash (or multiple boxes via any payment type)

Case Price (6 boxes, cash or debit): $540

Deadline to Pre-order:  July 8th
Pre-Release Date: July 9th
Release (pick up) Date: July 15th

Privateer Press Core

Privateer Press just announced a new program to focus on keeping "core" models in stock. This has been my biggest complaint with the company, along with rampant SKU creep. They're also slowing down releases so they can catch up on back stock production. Here's what they just sent out:

Finally, in order to assist retailers and support player growth we will be implementing a new order system this fall that will ensure the core items for each faction will be readily and easily available. The new order system will provide faster fulfillment on the essential products for both WARMACHINE and HORDES, meaning retailers and players will have access to everything they need to build a complete army and begin playing these exciting miniatures games right away. Items that are not part of the core list will continue to be available but will be subject to longer fulfillment times until our manufacturing capacity can be expanded to handle the high demand.

What this means is we should be able to keep promoting the game and attracting new players. There's a retailer mental aversion to pushing a game where the core is out of stock, since it inevitably pushes new players to buy online or at competing stores. Thanks Privateer Press!

Amazon and Us

I've been with the Amazon associate program since the beginning, although I haven't sold anything in years. Like everyone else in the program, I got the email stating the program was terminated for those in California, due to the new law that requires Amazon to collect sales tax if they have a presence in the state. I am that presence, so I must go. Amazon blames the governor directly for this, not the legislators or the broke counties and cities that desperately need revenue, and of course they don't blame their tax evading customers:

Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned before today will be processed and paid in full in accordance with the regular payment schedule.

As you may know, if you buy something taxable, you must always pay sales tax. If it's in a store, it's done whether you like it or not at the register. If it's done online by a California retailer, it's likewise done automatically as you check out. But what about when the tax is not collected, like from an out of state business? You're still liable for the sales tax and are legally required to report it on your taxes. Almost nobody does this.

You could argue that there should be a federal law that taxes online sales to fix this. You could argue, quite unpopularity, we should have a new state division of the franchise tax board to track down this money. You could also argue quite successfully that states are on weak constitutional grounds for playing these kinds of games with online retailers like Amazon. The bottom line, however, is that the tax is being evaded, the states need the money, and the online retailers are the biggest targets. It's them or you.

What most people online are complaining about is the requirement that they comply with the law. There's a messianic fervor about the Internet that defies logic and practical considerations and those who preach the loudest are upset about having to play by meat-space rules. A good example of this was an interview this week on The Daily Show by the New York Times media desk editor, Bruce Headlam. Speaking about one of his messianic reporters:

"Brian urges all of us to embrace Twitter," Headlam said. "I encourage Brian to send his expenses to Twitter. That doesn't seem to have taken hold yet."

This is not just geek culture, or an inter-generational divide. The dark side of the Internet has real world consequences.  The taxation issue deepens our income divide, as those with education, money and access, including online access, continue to accumulate wealth at the expense of those without it.

Whatever scheme we can come up with to collect lost sales tax is one more step towards a level playing field for brick and mortar retailers, and a re-funding of our cities, counties and states. It's not an enormous amount of money, but it's a step in the right direction. Online retailers got a free pass in the early days, a kind of nod for fledgling e-commerce. Unfortunately, monsters were created and none is bigger than Amazon, destroyer of worlds and loser of a billion dollars of their own capital. But hey, it's an Internet company, we're willing to look the other way for a decade or so while the new world order manifests. It's time to level the playing field and make everyone play by the same rules.