Friday, June 23, 2017

New Facebook Page

I have a new "Gary Ray" Facebook page for posting my videos, blog posts, and writing updates. There's a book coming at the end of the year and I've agreed to write a column for Wizards of the Coast. The first article is already done. I've got a lot going on and it makes sense to separate this stuff from my regular posts about my wonderful son and my beautiful Jeep. Or is it beautiful son and wonderful Jeep?

Why a Facebook page? I don't do Twitter, which is the best method for communicating with a vast number of people, so that means folks default to finding me on my personal Facebook page, a very limiting thing. I've got a couple hundred followers and about 450 friends, most of whom are game trade acquaintances. I know my content is extremely niche and I'm not pretending to be some sort of rock star, but this should help sort my electronic life.

The down side to a page versus a group, is Facebook monetizes pages. That means you'll want to set it for See First in your news feed.

As I don't make squat writing or making videos, there's no ad budget to promote this page. So, something I almost never ask, please tell your friends!

Thanks!


Thursday, June 1, 2017

Protecting Brand Value (Tradecraft)

The game trade eats its young. It's a painful realization that the mechanisms of the trade are designed around the pump and dump, the acquisition of new product dumped out as quickly as possibly to anyone who cares, so the lever can arc upwards once again for the next pump. Publishers are impeded from building long term businesses as their product life cycle is measured in months rather than years. They can have good intentions, solid sales policies, but there are bad actors at both the retail and distribution tiers that undermine their efforts.

So today Asmodee exerted control over the process by consolidating with Alliance, the biggest game distributor. When your product is devalued in the marketplace, it loses long term viability and sales begin to fall. When you try to maintain that value through policy yet you still see your suppliers selling to companies that devalue product on release, be it to Amazon or Cool Stuff, it's reasonable to consolidate suppliers to a single, capable, trusted agent, ensuring long term viability. 

Will they sell less product? Probably in the short run. They know that. Will it maintain long term profitability for the company? Absolutely, as the brand value is retained and the product life cycle preserved. Will it hurt game stores? The inefficiency and slop in the system benefits retailers, no doubt. We have multiple suppliers sitting on stockpiles of multiple products allowing us to pick and choose our just-in-time inventory at our whim. Without slop, product will be harder to acquire and possibly at a lower margin. So yes, it's not good for retailers who think short term, but what about long term?

Maintaining strict control of supply maintains brand value and increases long term viability. This rewards stores that build community around these games. It rewards stores who forecast sales and order accordingly, a skill made even more complex without the exhaust valve of the Internet (because of publisher policies). This all works to maintain brand value and increase sales for everyone, provided you have skills. If you don't have skills, if you don't pre order, if you don't forecast and budget, if you don't build community, if you can't dial in your purchasing without dumping on the Internet, well you're kinda screwed. But I'm alright with that. This trade has a barrier to entry lower than a snake full of buckshot. That low barrier to entry allowed bad actors to get us to where we are today.

This is the point where customers bemoan their inability to purchase deeply discounted games. I have to ask, could this possibly benefit you as well? Is it not possible that you too are the victim of the pump and dump? Are your X-Wing ships collecting dust? Does your game store shy away from running all but cardboard related events?  Do you have games still in the shrink wrap on the shelf because you've been convinced to hold a giant bucket for the pump and dump? Perhaps your so-called "investment," is actually more valuable when the pump is given a rest.

Wednesday, May 31, 2017

Dialed In (Tradecraft)

When I first started the store in 2004, I recall some odd conversations with friends. One friend, an executive at an Internet start up asked me:

"So you're going to sell video games?"

"No, it's hobby games."

"You're going to sell hobby games online?"

"No, just brick and mortar."

"And you've written some sort of system to optimize that?"

"No, customers come in, I tell them about a game, and they buy it."

(Blank stare)

Why anyone with an education and an IT background would want to engage in old fashioned brick and mortar was beyond his understanding. I get it. I was looking for a slower lifestyle. I expected to be like Mr. Olsen of Olsen's Mercantile on Little House on the Prairie. A slower life. I was so wrong about that, but that's another story. Bottom line though: The Internet and technology of the 21st Century would never allow a Mr. Olsen to exist without it.

The Internet and online sales existed before I had a store. I don't get to complain about the ecosystem that existed before me. I chose to exist in that reality. Still, there was constant tension and the worst was the inability to communicate with customers unless they were right in front of me.

My first couple of years, I created a mailing list and sent post cards of new releases to every customer. I spent about $500 a month on printing and postage. I had to pick which items would most likely appeal to my customers, even harder because there was one list and gamers are fragmented into at least four departments with limited and unpredictable cross over. I would create posters printed on an 11x17 color printer that would get updated weekly; high tech.

The Internet was essentially the enemy, with some unknown amount of sales eroding and seemingly growing over time. Discussions and activity happened amongst customers that I wasn't tuned into. They would go to conventions and I would pump them for their interests and inclinations. At one point, I was privy to some online sales data when I started advertising online and was told the hottest online seller in my zip code was GURPS. I couldn't sell a GURPS book to save my life, yet GURPS was the hot seller. The disconnect was astounding.

That was over a decade ago, and I'm happy to report the Internet and I are now getting along swimmingly. Social media, namely Facebook in Group format, has allowed a level of communications I could have only dreamed of before. I can not only mention every new release, but I can gauge demand, tweak policy on the fly, and create opportunities in real time, rather than waiting weeks for customers to arrive with wrinkled post cards.

The store is fine tuned with social media, the Internet finally assisting rather than impeding our progress. I'm not sure what I would do without it. Even the boogeyman of Kickstarter is becoming a bit more fine tuned, with retailer programs available to let us participate in cost effective ways. We generally pay at the time of shipment, stretch goals are included in projects, and we've got enough time to collect pre orders from customers. That's a win-win for everyone.

It's amazing we survived as long as we did, deaf, dumb and blind to the demands and needs of our customers. Even GURPS is selling well after some discussions about what customers were looking for.

Tuesday, May 23, 2017

Now with Video (Tradecraft)

In the past, I would have never considered creating a video for anything other than something dire. You know, like a plea for cancer treatment money for my dog or a Kickstarter video. I am not at all comfortable in front of the camera, but my views have changed. This is mostly because my viewing habits have shifted towards YouTube for many of my hobbies. Anything technical, for example, is much easier to understand with a solid YouTube video.

One of my favorite video series is Oh Hey There! with Jeff. I'm sure Jeff and crew does a lot of work to set up and plan his videos, but the core of this series is a basic topic, demonstrated in a straightforward manner, without the usual endless futzing around you find on YouTube videos. Jeff has my undivided attention for the 2-4 minutes his videos usually play. So Jeff is my inspiration for making my own videos. If I had to plan them any more than what was in my head, If I had to buy equipment, if I had to script them out, I honestly wouldn't do them, which means I need to make these crude productions quick, useful and to the point.

I've done three so far, posted publicly to my Facebook page, but I just uploaded them to YouTube so you can watch them here. I think the best topics are areas where we've managed to do something clever, but where there's also room for improvement. I can talk about great store fixtures, because I'm also stuck with some crappy fixtures. I have a great setup for CCG play mats, but my set up for miniature mats is abysmal. My card dispensers look great on the wall, but they probably lose me sales and I don't recommend them. I could do this all day, as most of retail is a compromise. How you compromise sets your tone and your style.

Anyway, here they are! They're in order, and I know the first one is probably the weakest:


Choosing Slatwall Gondolas

How to Display Mats

Pros and Cons of Booster Displays


Friday, May 19, 2017

Narrow Windows (Tradecraft)



There's an interesting article here that talks about the aspirations of employers and what they actually get. It's exemplified with the chart above, which I would much rather riff off than the actual article. I've managed people as a line manager in large companies and it's significantly different in a small business. There is the obvious difference between skill sets in say, an IT department, than your typical minimum wage job, but the basic issues remain.

To start, as a general rule in this country, just about everyone without a severe cognitive disability, is employable somewhere. This is important, because as a small business owner, I regularly employ across the spectrum we see above. My problem, the problem most small business owners have, is we have a much narrower window of compatibility compared to big business. We have fewer positions and they're not fillable by most people.

I need an employee to master half a dozen important skillsets while showing competence in customer service. A bigger business can always shoehorn in an employee into a narrower slot. I did a lot of those jobs in my life, from word processing specialist, to chauffeur to car washer. Those jobs required you do one thing, and had little customer facing interaction and a low bar for competence.

My business tries hard to find the right fit, like every other business, but inevitably we hire employees outside the upper right box. We need competent and outstanding nice guys. If you're incompetent and nice, there's no car wash position to shunt you off to. If you're an asshole but great technically, there's no back office word processing job to keep you away from customers.

Parents regularly suggest their children apply for positions with us, but the reality is our needs and requirements are far narrower than larger employers. In fact, we never hire someone as their first job. There's too much baseline employment training we don't have time to teach.

We can train people for the job, but there are those for whom competence will be elusive, even as they master some skills. We might love that a person is great on the computer and is great working on technical tasks, but if they can't smile and develop customer service skills, or if they can't put their ego down long enough to let those skills shine through, there's not much we can do with them.

While a larger business will employ the entire spectrum, we essentially have only two viable categories: nice and competent (line employees), and nice and outstanding (managers who will eventually shine elsewhere). All others need not apply, or if they're already hired, they're usually on their way out or we're exasperated they're still around. There's exasperation with the large employer too, but in our case, we're far more likely to fire the assholes and we're always looking for an excuse with nice incompetent guy. Large employers will always keep the assholes if they're competent, while the incompetent ones can often outlive their managers.

If this all sounds arrogant and demeaning, let me tell you, nobody recognizes they're an asshole more often than store owners. Amongst my peers, it's pretty much a given you self identify if you've survived more than a few years. You've had to make hard decisions, often because people try to regularly take advantage of you.

Myself? I needed to step away from daily work at the counter because I was most definitely becoming an asshole. Just ask my manager. Don't be so surprised. To stay in the same exact job for nine years, you've either found your true calling or you've reached your level of incompetence, which for me was competent asshole in need of something else to do. I was lucky as owner to be able to carve out a new job that fit my skillset, but others aren't so lucky. It's a good enough reason as any to close your store.

Tuesday, May 16, 2017

So, You Need Some Money (Tradecraft)

One of my minor claims to fame is I'm one of the few store owners who has succeeded in leveraging the hell out of my store, while still surviving to profit from it. This is what happens when your Intelligence stat exceeds that of your Wisdom. So let's talk about the need for cash and how to go about getting it.

The worst way to acquire cash is an equity stake. This is when you seek investors to take a permanent chunk of your business in exchange for operating capital. Why is this bad? Wherever you are right now, you're betting your business will be more valuable in the future. In fact, that's what those investors are expecting. Once you take them on, they will be there until you buy them out or you close your doors. Every month I send checks to these guys. It took a lot to get them on board, and a longer than reasonable time for them to see their ROI, but you would have a hard time dislodging them now.

Ironically, equity investors are often the easiest people to convince to give you money when you're starting, since you've got little to offer other types of lenders. If you're just starting out, most will be wanting this to be a professionally structured investment, but in the back of their minds they're probably thinking this is more charity than an investment. It's a great way to get your friends wives to dislike you.

It's your job to prove them all wrong. If you do decide to take them on, spend the first grand of their money to hire a lawyer to craft a shareholder agreement (I waited ten years to do this). This document will explain how to (dynamically) value the business, how to buy out partners, and what happens to shares in cases of divorce and death of investors. You don't want their angry ex wife as your new business partner, she already hates you.

Also, the best investors are silent investors, meaning you own 51%+ of the business and they don't work in it under any circumstances. Keep them away, as it ruins relationships, pierces the corporate veil that protects them and generally leads to arguments and dissolution. Form an LLC or corporation and buy them lunch once a year at your annual shareholder meeting. That's a good degree of contact.

Although I say you should own 51% of the business, consider your business plan to determine if that level of income is enough for you, assuming profits down the road will make up a big chunk of your income. What I see out there are successful businesses with near equal partners, where none of them are capable of earning an income because of how value is divided. They rely on the SWGJ (Spouse With a Good Job) to make ends meet. I'm at 75% and I think that's about as low as I would want to ever go.

The next best way to generate some cash are private lenders. This works best if you're already profitable but have a great plan to generate more income with minimal risk to the business. We did this with our mezzanine expansion project. If you can show you can currently make the loan payments without your plan succeeding, you'll have a much easier time convincing private lenders. Honestly, if you need your plan to succeed to survive, you're better off saving up some additional capital before taking on lenders.

Private lenders will want a Promissory Note and perhaps an additional agreement they'll get their money back. They are high up when it comes to dissolution payments, so they're not in a bad position to start. Some of ours wanted security agreements, with liens on our furniture, fixtures, equipment and inventory. One was crafted as "senior debt" which put it before other loans. Some loans were reduced in interest by offering games at cost for the loan term. All of these loans have me as a personal guarantor of the loan. The goal for us was to take out these loans for a five year term, but pay them off early at our convenience. We're in our second year of loan payments without any missed payments and our sales are up 15%, so it has paid off so far.

Make sure your investors are aware of their new position with any new loan you take out. They are generally last in line when it comes to winding down a business. In the event your business closes, the required order of payouts goes like this:

  1. Employees (wages, sick and vacation time)
  2. Government taxes
  3. Lenders with Senior/Secured Debt
  4. Other Lenders
  5. Shareholder loans (something to consider when a shareholder is a lender)
  6. Shareholders (including you)

Crowd Funding is a way to generate some cash, but it's a poor option for store owners. You can read about my successful Kickstarter in this blog (and in the upcoming book), but it only succeeded because I leveraged industry contacts. In general, a new store has nothing to offer a non existent community of backers. An existing store can sometimes succeed with a Kickstarter with a promise of future services, recognition of goodwill,  and various tchotchkes. Our $26K Kickstarter generated about $15K of cash and a whole lot of entitlement for a project that ended up costing $133K. On the plus side, we met most of our private lenders from the Kickstarter project.

There are other methods I write about in the upcoming book, such as community lenders (we got a loan through one, but paid it off before construction began), SBA loans (available to existing businesses or new store owners who own a home), and traditional tricks of the trade, like credit card cash advance checks and the now nearly unobtainable HELOC (Home Equity Line of Credit). The best way, by far, is to be smart and stockpile a bunch of cash.

From Sperennial Financial





Saturday, May 13, 2017

Benevolent Dictatorship (tradecraft)

I hear stories all the time from retailers who have had their stores hijacked. Perhaps it's the customer using your RPG section and generous return policy as a library. Maybe it's the players who come to your Magic events decked out in your competitor's t-shirts and playmats. Then there are rogue employees who manipulate employee discounts to game your system. How can you possibly manage this chaos of your own creation?

Luckily I have this useful tool for you to use, a magical utterance. It goes something like this: "No." The store is yours. We work with people who enjoy games and gaming systems. They often see reality and your store as a game in itself, a system worth gaming. They like to skirt around the ragged edges of the rules to define their own win conditions. As a gamer yourself, you may feel this is normal behavior. In fact, it is not. You are the benevolent dictator of this banana republic. Policies, procedures, rules and general codes of behavior exist to serve the needs of your business and protect the inhabitants. When the system is being gamed, feel free to flip the table.

This assume you understand your needs. A good benevolent dictator needs a vision. You have to understand what a well functioning benevolent dictatorship looks like. Otherwise you're just insisting on an extra scoop of ice cream because you can. Because benevolent dictator. A solid vision means you're building community, profitability, and have an idea of the unfolding of your plan. There will always be someone who wants to challenge the plan, but that doesn't mean you need to re-write it. The return policy is just fine. There's no need to write a customer dress code because of one jackass. You don't need to re-write your employee manual regarding employee discounts. You just say no.

To balance this, the benevolent dictator has the bonus Feat of being able to say "yes." I never contradict my managers who are following policy, but there are occasionally situations where a simple yes will enhance a customer or employee experience. You want to buy a $200 army bag but you would like to substitute a two inch foam tray for a pre cut one for your army? Yes. You're a well meaning customer and you need to make a return after the return period because of a mix up? Yes. You need to leave work early? You're willing to buy those Age of Sigmar models I can't get rid of at a larger discount? You would like more comfortable work shirts? Yes, yes, yes.

The benevolent Yes and No are why a "4-Hour Work Week" is bogus, why there is really no such thing as a successful absentee store owner. Someone has to say No and Yes and if it's not the owner, it has to be someone with a nearly equal amount of power. That's a rare thing in a dictatorship.



Monday, May 8, 2017

Dance of Desire (Tradecraft)

When I think about long term plans for the store, whether it means keeping it well into retirement, selling it later, or keeping it going after my death, I'm reminded the value of the business is the dance of customer desire. It's an elegant, free form dance of constantly shifting movements in which your partner is thousands of people and their desire for joy. Sometimes we forget we sell joy and happiness, since after a while our passion for games can wane. This dance creates waves throughout the organization that informs sales, purchasing, finance and personnel. It's the finger on the pulse, the ability to listen to the music and adapt in time.

The tendency is to think of a hobby game store as a static business, in which we sell the same stuff day in and day out. Sometimes customers will walk in and try to get a deal on some box, since it's been there for months, not understanding that this static, unmoving box is a vibrating string in our symphony of retail, having been sold half a dozen times since they last visited us. The dance is dynamic.

The movements are constantly changing. Our ability to dance and change to the music is our strength, our security even, as large stores can't possibly hope to adapt as quickly as us. If we were static, for just a moment, we would be devoured. We don't just dance for customers, we dance for our very lives. We move to avoid being devoured by the slow moving leviathans of retail.

It's not just stock that's dynamic, it's every element of the business process. There's no better way to see this than visiting a store that has lost its manager. The staff go through the empty motions, the dance they've been taught, without any connection or understanding of the movements and their purpose. I was at a store once that continued to demo a board game that hadn't been in stock for months. Their manager had set up this demo program and then disappeared. They showed me this great game, I asked to buy it, they declined. It didn't exist. They were dancing without a partner.

My goal as an owner is to teach the dance to my managers who will then teach the moves to staff. There's no way staff will grasp all the nuance of the dance, only the movements with correction needed occasionally. I can't claim to have mastered this model, as I still dance myself, rather than fully focusing on developing the dance and passing it along. That's the problem with game stores and determining their value, as they really don't have any unless the manager is entirely off the dance floor. The dance instructor does not come with the sale of the studio.

Removing yourself from the dance floor is a Catch-22 of sorts. It assumes you have someplace to go, another dance to engage in. Yet, until you do it, until you're off the dance floor, you don't know if your choreography was properly transmitted to your dance troupe. So you disengage slowly. Your troupe thinks you've lost interest and have abandoned them, but it's the only way to build value, to let them do the dance. Does your staff know how to pivot and turn to the rhythm of the music, to the response of the customer and the trade, or are they just going through the moves, like some stiff and empty karate kata? Do they listen and adapt or do they use demo games to sell false promises? You don't know until you disengage. You can't really disengage until you have a new dance. You can't have a new dance until you decide to stop dancing.



Wednesday, May 3, 2017

Sales vs. Discounting (Tradecraft)


Sales

I believe, for a variety of reasons, that the only good sale is a clearance sale. A clearance sale should be like putting down a rabid dog. You want to end this situation quickly without delay. That dog is not getting any better. It's unsavory work. This means a clearance sale with a deep discount up front. If I could perform this unsavory task out in the woodshed, even better. For some stores that means the Internet. There's no shame in doing this. It's the circle of life.

As I've mentioned many times, purchasing is a zero sum game. If I buy $100 of Games Workshop product today, there needs to be $100 of stuff I sold I don't re-order. When that $100 of sold product doesn't happen, I'm in a purchasing deficit, something my Open to Buy spreadsheet will tell me. Sometimes it's like this example and it's only $100, in which case I don't worry about it. Sometimes it's $5,000 like I found with Modern Masters last month. Now I care. There's no way I'm going to have a clearance sale to make up $5,000, but I need to do something, right?

A more mature store would go $5,000 in debt on purpose, a hedge on what's clearly a long term profitable product. My maturity level is not that high, mostly due to risks taken with construction that has left me cash poor. So I have a clearance sale. I look around and see what needs to go. I say look, but it's mostly my retailing nose. There's a metaphorical odor to departments that need pruning. It might seem instinctual, but it comes from being the head buyer while watching sales reports, every day for years. "When's the last time we sold that?" turning up my nose.

We take the stuff, mark it down, usually 40% or so, and put it in our clearance section. Then we contact our painstakingly created network of people interested in these things. If you just put it on a shelf and let it linger without such a network, that dying dog will haunt you. Through the miracle of social media, we're able to ask our community for help and they'll show up to take this stuff off our hands, often within minutes. Now I'm wishing I started this post with a barn building metaphor.

Here is where some retailers will not be happy with me. "Are you not discounting, Gary?" "Did not the venerable Dave Wallace tell us not to discount?" "Aren't you training customers for the sale? "Why didn't you get Old Yeller his shots?""Old Yeller's death is on your hands, Gary!" Other than the questions about the dog, these are all things I've actually received.

Discounting

Discounting is different from sales because it's a systematic, day to day, low margin activity on product you intend to keep around. It drags down your bottom line. This is unlike a clearance sale, which is a one time hit to your margins, in exchange for cash flow to build high performance inventory.

There are some things that will never sell for MSRP, like boxes of Magic. However, my CCG turns are 10 a year, and a box of Magic takes up as much space as the box of tissues on the counter. Selling some boxes of Magic (ours are $120) is better than selling no boxes of Magic (at $145). I do make the value judgment that selling some at $120 is better than pissing in the pool and selling them for $95, but that's a whole other post and an experiment Lincoln Erickson of Rooks Comics & Games (in Bozeman, Montana) might share with you if you corner him at a trade show.

You can certainly discount and survive, but why would you want to? There are stores that regularly discount board games 20%. I just did a sales per square foot analysis of my store for the book I'm writing and board games are space hogs. They take up twice as much space as RPGs or miniature games and ten times more space than CCGs. Why would you take a giant space hog of a department and then give away nearly half your gross profit?  Give up already and sell some used video games. Since GameStop wants to eat our lunch by going deeper into hobby games, used video games, the only thing they do well, is my new go-to. Eat that lunch.

The bottom line on discounting is it kills your bottom line and it wastes vasts amounts of your energy. It's a failure of creativity. It's hanging onto a category of product that you have no business selling. Let it go and find something more profitable to sell. If your community is a bunch of savages and everything is discounted, perhaps there are too many stores.

Below is a chart that shows the tremendous amount of work it takes when you go down the discounting road. We'll assume this quarter million dollar a year store is profitable now and wants to maintain that same level of profitability. A store with $250,000 a year in gross sales, with just a 10% discount, now has to sell $321,430 of product to make the same amount of gross profit. You have to work a third harder for the same money. Bump that to 20% across the board and you have to sell $450,000, working 80% harder for the same money.


Those doing this will argue that their sales go up when they began discounting, but when you press them for the numbers they usually don't see the increased sales needed to justify discounting. Also, costs don't stay the same. It's likely staffing and other costs will increase to handle this load. Giving away the store isn't cheap.

So sales are putting down a rabid dog, quick and with as little drama as possible Discounting? That's a recipe for overwork and lost opportunity. Find what works at full margin or find something else to do.

Monday, May 1, 2017

State of the Store

It has been six months since our big construction project completed. Our store square footage is now at 4,300, an increase of a third, all directed towards event space (with a 10% loss of retail space). We've added many new events and expanded existing ones as we moved from a very crowded 65 seats to a much more casual, fire and building code rated 121 seats. Even when full, there's plenty of room to get up and move around.

Measured by seats, this is not a huge game center, although it's a far more comfortable place than many stores. We were complimented yesterday on actually being able to see when playing games. The design process included architects, designing the game center to code as a public assembly area, exactly as we planned to use it. Design also included a lighting engineer. The lighting engineer went over the entire plan, including vetting brands of fixtures.

The result is our game center is a comfortable place to be, for sure. We experienced it at capacity for the first time Saturday, so I know we'll have a discussion this week about what that means for events and staffing. As we know from researching whether to build this space or not, at around 75% capacity, customers perceive a space as "full."

We have increased staff to keep up with the added event traffic. We now have nine people on payroll, mostly part time, some still being trained. To be honest, some I haven't met yet. I'm sure they're great. Before this year, we had six employees, so I guess increasing by a third tracks with the square footage (not that this is how staffing works). Our theft level has also gone up, with a regular parade of thieves and rip off artists, some of whom we're still waiting to return so we can inform them of their status. I've moved product out from behind the counter in hopes extra staffing and traffic would result in higher sales. It has, along with higher theft. Our staff needs loss control training in a big way.

Money wise? Sales are up 15% for the year, an astounding number for a teenaged store. Sales are up across the board. The goal of the expansion was more people coming, more people spending money, personal hopes for a more stable income, and that seems to have come about. I can't put my finger on anything special as the driver. Magic hasn't pulled its weight for a while. Board games haven't quite recovered from the Wheaton Effect upswing. One day I dream of bringing back Warmachine, because I know people are still playing and it's sales model is structurally different, but the money isn't there for us (I figure about $10-15K).

With most games doing just fine, but not great, the only thing I can point to is the fundamental change in our business model, Third Place Theory delivering on its promise. Events lead to stronger sales overall. We still have some running debt from construction that we'll need to address this month, since brushing it under the carpet with credit cards is getting tiresome. It's possible to defer bills for quite some time with a card, and although I enjoy the frequent flyer miles, suppliers charge a small fee for this service, and it's time consuming. I've been in denial and it's time to admit we still have some debt from the process. Overall though, we're profitable and we're hoping for our first seven figure year. We've flirted with seven figures for a number of years now, pulling back to drop Yugioh (a six figure hit), a year transitioning from chasing gross to shoring up profitability, and of course, missing our mark last year due to six months of construction.

2017 is a wait and see year, as we hope to stabilize from a major shock to the system. We just bought new store fixtures, a row of gondolas. It was a large, but necessary expense, since we've got a row of fixtures that promises to murder a small child at any moment by collapsing. We've made small investments in getting our Magic singles online, a new thing we do that has resulted in a little extra income but a huge opportunity to increase our in-store offerings through more aggressive buys. We'll likely need to upgrade our iPad kiosk as the new TCGPlayer software overpowers the hardware.

I finished the first round of revisions for the book last week. The book is turning out as I imagined it, thanks to my excellent editor, Jeff Tidball. Jeff added excellent editorial insight, including making me better explain things. I can't just mark a concept as "Tradecraft" and assume everyone is in the know. About 25% of the book resembles blog content you see here, but even that has been improved upon beyond recognition. Another 25% is personal, behind the scenes stories, some of which are only known to my business partners and close friends.

The process so far has taken about two months, with the revisions far harder than the initial writing, since I had to answer some tough questions and develop a lot of new content. I think I've maintained the focus on my core competencies which means I've avoided areas that you might want to know about where I would be speaking from ignorance. This is not the ultimate guide to game stores with a comprehensive, how to on how to run a store. There are a couple e-books on running stores out there, and they're certainly complementary and aren't in any danger of being replaced.

That's it for now! Let me know if you have any questions.



Monday, April 24, 2017

Ptolemaic Retailing (Tradecraft)

Everyone is trying to get the best deal, be they retailers, distributors or consumers. In the game trade, we go through this twisted psychology of denial where we pretend Amazon doesn't exist, since our trade is so fundamentally devalued. It's clear something like half the market, half the people in our area playing games, are buying online. It's such a dominant force, it's amazing we have conflicts with other brick and mortar store owners.

A retailer, not a "game store owner" would look at this and pivot. Pivoting means selling something not devalued. There are plenty of areas of commerce where the manufacturer takes responsibility for their product value. They don't allow it to be dragged through the mud for short term gain.

If I want to buy a Smittybilt bumper for my Jeep, it's a free for all and the market has no bottom. Smittybilt gives zero effs and retailers will race to the bottom with ridiculously low prices on Amazon, along with every off road shop in America. If I want to buy an AEV bumper, I must choose from several approved retailers, all of whom will charge me exactly the same price, and it won't be cheap. AEV can do this because they protect their reputation and their brand value. People complain, they claim AEV is overpriced, but customers enjoy a quality, prestigious product with superior engineering, because the company has the extra cash to do their job. The off road equipment market is mature enough to have both types of manufacturers.

The game trade has very little brand value protection. Just about everyone allows their product to be sold online for less, especially the 500 pound gorilla, Wizards of the Coast. It's a choice they make. Consumers have identified the Amazon price with the MSRP, claiming retailers charging over this price are "gouging." 

Getting back to retailers, what we have is a constant mental crisis as we wrap our heads around the equations necessary to make it all make sense. The game trade is what I call Ptolemaic Retailing. Ptolemy was an astronomer who created this incredibly complex, convoluted theory of how the Sun rotated around the Earth. His math was complex, but entirely correct in describing what he saw. However, the underlying reality of what was actually happening was entirely wrong. Ptolemaic Retailing is attempting to stuff our complex set of wrong observations and assumptions into a business model that works from sheer force of will. 

We guilt customers. We entice them to shop with us with Things Not Retail. We have arguments and worries about authenticity and reputation and even issues of love. We squabble amongst ourselves for the crumbs that fall under the table. We build exotic edifices to the pursuit of ancillary reasoning. We're told the game trade penetrating mass market is good for us, as sales of affected games evaporate. It's madness and it wears you down, let me tell you. A retailer, a dyed in the wool retailer (to paraphrase Jean-Baptiste Emanuel Zorg ), would look at the trade, a sea of Smittybilts, and look for the AEVs in the rough. Perhaps it's specific product lines. Perhaps it's moving on to a different line of business altogether.


Friday, April 7, 2017

Magic Formula vs. Pump & Dump

There is a magic formula to board game sales. It assumes you do everything right as a retailer. It goes something like this. You become the primary source on what's good in board games. That means playing these games before most of the public, attending shows, reading forums and knowing, not just hearing, that a board game is solid before release. This is the traditional role of game store taste maker. You will figure out first hand what is good and you will provide that to your customers.

Next, you go deep. You have properly capitalized your game store because you're a damn professional. You don't buy one and wait and see if it sells. You buy fifty or a hundred. You're not going to stock it and hope people notice it. No, you will demo this game. You will own this experience and sell it with you and your employees with the enthusiasm that comes with being a true believer. You know it's good because you did the work to gain the knowledge. This will result in selling all those copies. Maybe not right away, and that's OK, because we're not buying in hopes of clearing inventory by the bill due date. No, we're in this game for the long haul. Just in time is for chumps. One and done is for chumps. Wait and see? Yes, for chumps.

The problem with this model is the pump and dump. Not only are you being pro active in your choice of games, but online retailers are also out there, possibly standing next to you, with dollar signs in their eyes. They have deep pockets, often enough to achieve discount levels undreamed of by retailers. They will buy deep too, just like you. That's where their work ends, however. They'll discount that game on release and sell it deep, way deeper than dozens of game stores combined could manage. That's the pump.

Next comes the dump. Once sales begin to slow and they need to regain that capital, they dump that game hard. The market price plummets (or spirals) and it's now a game of hot potato. Stores not using the magic formula watch sales dry up. I might order six copies and when the dump occurs, I might sit on two for an extra few months or even a year. Those using the magic formula? Oh man, are they in trouble. They've got twenty five or fifty or more of this hot game. They've done everything right. They're model retailers. They're also screwed.

The pump and dump online folks are clear cutting the forest. Rather than evergreens, we have rotten stumps. The publisher suffers. The other retailers suffer. The distributors? They feel it as a weakened ecosystem, but there are known suppliers to the pump and dumpers. When we talk pump and dump, we're talking a deliberate strategy involving new games. We know many retailers accidentally over order. We know online retailers are stuck with large quantities of end of life stock. That's not what we're talking about. I'm talking about pump and dump as a business model. It's legal. It's also reprehensible.

Now lets look at a retailer like myself. I sell hundreds of thousands of dollars of board games a year. I'm a prime candidate for the magic formula. Will I drink the potion? Hell, no. The risk is too high. The opportunity costs are far more expensive than other, easier to deploy options. The formula is beautiful in that it requires me to be a model retailer. It requires I do so many things right. By it's nature I'm growing the hobby! The problem is the handful of pump and dumpers who ruin it for everyone else. It's going to be up to publishers to decide they want a future, some evergreens rather than rotten stumps.

Wednesday, March 29, 2017

Retail Apocalypse (Tradecraft)

There is much talk about the demise of retail. We have Sears, JC Penneys, Macy's, Radio Shack, K Mart, GameStop and many other big chains closing shop this year. It has been described as an apocalypse, with over 3,500 stores closing. But what's it all about and what does it have to do with specialty retailers?

The first thing to know when assessing the victims of the Apocalypse is the number of stores starting out. According to the National Retail Federation, there are 3.8 million stores. This bloodbath of end times stores therefore accounts for .09% of retailers. So why the hyperbole and rush to declare retail dead?

Business reporters are only interested in publicly traded stocks. Unless the entirety of retail were to be feeling some sort of stress, they'll focus instead on companies with well known stock tickers. Nobody cares about my store because you can't make a buck buying from selling bits of it. You can't predict the future by reading my annual report. My CEO compensation is definitely not worthy of a social justice meme. So no, this is not a condemnation of retail and I don't even think it's condemnation of the venerable shopping mall. It's a failure of UVP.

UVP is Unique Value Proposition. These stores lack one. In fact, they're so far away from a UVP, the concept of UVP isn't even used in the conversation. Unique is instead changed to Useful. They need to have a useful Value Proposition (uVP), with a small "u." While their online competitors battle it out for Unique, they struggle for relevance, for Usefulness. These legacy stores are unable to come up with a uVP, and are simply waiting to die. They are so big, so entrenched in the 20th Century, they actually take a long time to expire, like a dying star going supernova. The only question is whether they'll become white dwarfs or black holes.

The main reason they're not useful is they've failed to change with the times, something specialty retailers are especially good at. Millennial customers, in particular, are about experiences rather than acquisition of goods.  Specialty retail has embraced concepts like Third Place Theory to take the experience economy into account. Barnes & Nobles is known for Third Place too, with their in-store coffee shops, but with a 30,000 square foot store footprint, there is no way to use specialty store tactics with big box real estate. If Barnes & Nobles was 5,000 square feet, sure, but they're doomed with 30K and a business model that can't adapt fast enough.

So no, retail is not dead. Business reporters like to report to their investor community, meaning we (the public) are not the target audience for apocalyptic visions of the future. As specialty retailers we need to stay nimble, stay useful, but aim for unique.


Sunday, March 19, 2017

Competition (Tradecraft)

Here's the thing about competition, a well run, well rounded store is shielded from direct competition. You can't generally steal customers. It doesn't work that way. If you could steal customers, game store owners would have endless online debates about their favorite Zippo lighter style rather than preferred brand of point of sale machine. The tool would be fire. Just burn down your competitors store and voila! Instant customer base. Instead, we see this figurative burning down, petty back and forth bickering and low ball giveaway events, between small stores.

This is because a poorly run, narrowly focused store is entirely vulnerable to having customers stolen. Customers will be taken and their store will die. If all they sell is Magic, their tool chest consist of a calendar and price. That's not even a tool belt, more like a pair of hammers in your back pocket.

So the same customer base runs back and forth between stores as each store owner races to the bottom with customer appreciation events for unappreciative customers. Here's a tip, run customer appreciation events after customers have shown loyalty to your store, rather than trying to constantly bribe them. What a clown show.

I know all about this because we experienced the clown show first hand. I had competitors open to steal my customers because of their superior pair of hammers. However, because we were well rounded, and sold many other things, we shrugged and waited for them to implode. When they imploded, the competitive Magic community came back (which were really perhaps half the people who bought Magic). You can't build a game store with a pair of hammers.

If you're looking for a solution to this problem, it's pretty clear. Your construction skills are weak. It's not about pounding with your hammer. A solidly built, diversified game store is built to weather the storm of the ups and downs of the game trade, as games and customers ebb and flow. If the need to succeed at any one game or the need to cater to any one community is enough to sink your store, you are a slave. Your stated goal to run a small business and be independent is a lie. Put down the hammers and start building value for yourself and your customers.




Thursday, March 16, 2017

A Path To A Middle Class Income In Five Years

I've been writing the book since the last blog post. As you might expect, it's a lot of work. It is not a bunch of blog posts turned into a book, although the core of it is a re-written and expanded section on how to start a game store, complete with numbers and examples.

A bunch of meat is then hung off those bones, such as marketing, selling online, third place theory and the cafe model, and similar themes you've probably read here before, completely re-written. A blog post is a nugget of ideas, but it's rarely a starting point for writing a book chapter. In fact, it has messed up my writing style quite a bit. Lets just say I'm brief.

The book is essentially two parts, a how-to book on opening a successful game store, and a narrative portion of my personal experiences doing so. This is stuff I only share with close friends and fellow store owners. According to my buddy who has written a personal finance book, the book could have the sub title: A path to a middle class income in five years. That's kind of sexy in a mass market way. You've got a path towards a real, sustainable future in this book, and you've got a narrative that hopefully makes you think twice before starting. Or maybe I'm just crazy and you'll see that on display.

The narrative parts are the behind the scenes of starting a small business, the fear and loathing, the sense of freedom, the crazy things that happen along the way. If you already own a store or are just curious about starting a small business, this narrative part is likely the appeal of the book. I honestly can't read a book on starting a business without falling asleep. The narrative portion should cure your insomnia. When I ask people outside of the trade, they want to hear more about this stuff.

I've been posting teasers on Facebook. Here are some of the sections I've written. Most have been re-written after posting, but I'll post the draft versions for now. I've completed most of the how-to and I'm about a third of the way through the narrative. Then it will likely get thrown in a blender and re-written to some degree. That's my guess. I hope to finish by the end of April so we can have a book by the end of the year. Gameplaywright is my publisher on this. They're a small publishing house in the game trade.
















Thursday, February 23, 2017

Growth and Books and Miniature Games

I'm on vacation, so of course I'm writing a blog post. Here are a few updates on what's going on:

Post Construction Growth
We spent $133K to build our two story game center with the hopes this would increase sales, grow the business, and solidify Black Diamond Games as a regional gaming hub. The ROI on this project meant we needed modest growth of around 5% to cover our costs within a five year window, our loan period. That didn't seem like a big ask. When I approached lenders, this 5% number is what I pitched, and since cash flow could already cover our loan payments, risk was minimized.

What we've had since construction completed is a sales increase of around 16% (February has been phenomenal, by the way). That's pretty good, considering our average growth was around 10%. That extra 6% is right on target for our ROI.

Expanding the game center has allowed us to run many more events, thanks to a legion of volunteers and our employee organizers. Magic went from one night a week to five nights a week. Board game nights are now twice a week with lots of activity. New events are being added all the time and existing events are growing, with some nights already packed like before.

We're poor, having paid off over $20K of cost overruns in December, but we're healthy and looking forward to the next challenge.


Writing the Book
I've got a publisher for the book I discussed writing. The book will have a dual focus. One aspect of the book will be a how-to of opening a profitable, hobby game store making a reasonable amount of money -- my way, as you've read about it here. The second focus of the book is a running commentary on all the mistakes, problems and surprises of starting and running my own store over the past 13 years. I made a ton of mistakes, almost lost my marriage and my house, and in the end survived, even managing to leverage an international bank over a barrel to get my way. Business taught me that.

There is a "do what I say" aspect to the book, combined with a "not as I do" element. The goal is to write a book my peers would want to read while also writing a book a prospective business owner would find useful. I personally can't read a business start up book. The letters don't even register as words any more and my brain shuts down.  Usually these two types of books are two very different things, but we'll try to combine them. Together they may even form a cohesive whole that's of interest beyond the game trade.


Miniature Games
We came to the difficult realization last year that we're not a miniatures store. We dropped Privateer Press (mostly) and stopped bringing in the miniatures game flavor of the month that inevitably brought heartache and a clearance sale. But have we really stopped selling miniatures?

Talking with other store owners, their concept of miniature games is a much expanded category. My category is narrow, comprising of unpainted models with rulesets. That leaves out a lot of pre-painted miniature games, not to mention things like Reaper Bones and D&D/Pathfinder miniatures.  I ran the reports and here's a pie chart, because everyone loves pie:



So when I look at this, I see what I see in every other game category. A strong market leader (40K) with half the pie, a strong secondary game encroaching on a quarter of sales (X-Wing) and everybody else. So maybe we are still a miniatures store.

Thursday, February 16, 2017

Tariffs and You

With a proposed 20% import tariff, I was wondering about the game trade exposure and specifically my store. Only six of my top 30 best selling game companies manufacture exclusively in the US. As with everything nowadays, a lot of companies have mixed content, like boards printed in the US and pieces manufactured in China. All that could change with a stiff tariff.

* Battlefoam confirmed all their products are made in the US

My guess is there's an economy of scale advantage when manufacturing large quantities in the US for the US market. The good news is some of the top game companies are in this top six, especially Wizards of the Coast and Pokemon. Around a third of my sales are products manufactured in the US. For some game stores it's much higher, considering how Magic (Wizards of the Coast) dominates.  If prices do rise dramatically, it may mean a shut out for the smaller manufacturers who can't afford US production, meaning a consolidation and thinning of the herd. This makes a lot of assumptions, so maybe some publishers can comment on that.

If prices do go up and manufacturing continues abroad, the likely scenario for retailers is higher prices and more market erosion, with sales moving online. A $50 board game is expensive enough. Make it $60 and a portion of our customer bases will break off in search of cheaper options. Perhaps publishers will respond with more economical games, either lower quality parts or less content.

This tariff is all speculation, since this is being debated at great length. It's also unclear if a "pass through" tax reduction would follow. That would help someone like me, as I make a good portion of my income on my S-Corp profits, but most small retailers make their income via their salaries. That is, if they make any income at all. So like all things proposed with corporate taxes, the more money you earn, the more the proposed legislation helps you. Personally, I like a steady, even playing field without the massive disruption these schemes entail.

Friday, February 10, 2017

A Book

This week I've spent time thinking about writing a book. Let me tell you up front, I find nothing particular amazing or noteworthy about writing a book. I love books. Some of my favorite things are books. But I also have giant stacks of unread books. It's just a written medium, no more important than any other.

I used to publish a small magazine that had national distribution in Barnes & Noble. Part of that role was writing many articles, including when we were short content and sometimes under pseudonyms to hide this fact. Seeing my name in print is no big deal. Seeing my hard work published without credit is no big deal. Writing and publishing is kind of a slog, especially if you aren't making money (most writing). Publishing a magazine takes not making money to dizzying new heights, let me tell you. At least when I'm sucking at running a game store I know right away.

I learned the Ten Tricks To Magazine Article Writing, using lists and other magazine industry crutches to generate prodigious content. One time I wrote a completely fictional article about a Tibetan lama living in the hood, under the name of my Top Secret character and channeling my inner lama. I was just trying to fill pages with something true to my spirit, even if it was completely fabricated.  The article was re-published as a truthful account in Harpers, which I found terrifying and hilarious at the same time. I ended up fielding calls from Leno and Letterman for interviews, or at least interviews with this fictional street smart lama. Eventually the buzz faded and the reality of magazine publishing set in.

To help pay for the magazine, I got an entry level job in IT. The magazine eventually fizzled, doomed from the beginning with no proper research that would have been performed with even a rudimentary business plan. This left me in an IT career during the exciting and ridiculous dot-com days, where I quickly discovered adapting and learning new skills meant new opportunities and compensation. Don't know how routers work? Read a book. Take a class. Eventually I transitioned from IT to owning a game store. I read some books. I took some classes. Here we are.

What kind of book would I write, nobody asked? There are two possibilities. One type of book is a nuts and bolts book, similar or possibly just including blog posts massaged to be helpful to new or existing store owners. There have been books like that before and there are a couple out there now.

The second type of book is a more narrative style, "tell-all" about the trials and tribulations of owning a small business. This has broader appeal. It's also much harder to write and could go in many directions. The first type of book is more assembling existing content in a meaningful way, while the advice I got for the "tell all" is to just write it and pitch it, a more daunting task. The end goal is to leverage this exposure towards consulting, but to be honest, writing is a lot more fun, if there was a path with some modest income.

If you're a publisher and reading this, I'm ready to talk. If you're a reader likely to buy my thoughts in dead tree edition, please let me know what you would like to read. Here are my most popular blog posts, showing that even a cursory review of the Imperial Guard codex is vastly more popular than most of what I write about the game trade. Maybe I need to write Game Store in the Hood.


Monday, February 6, 2017

The Order Narrative (Tradecraft)

This is a nuts and bolts article about understanding where a product stands at any given moment. Before an order is placed, even while talking with a customer, I like to run down this flow chart so I have an idea of product availability. I have it in my head, but it's worth printing out until you get it down:



The flow chart may seem complicated, but once you do it a few times, it's quick enough to perform while speaking with a customer. All my sales associates should be able to do this for every item we sell. Where we get hung up though, is information at distribution. The part of the flow chart where it says "tell them it's not available and why" is often a bit of guesswork. If you don't know, tell them you don't know, but there should be a product narrative available from distributors.

This starts with product codes. When I look up an item in a distributors system, it's more than likely by product code, especially if their keyword search is janky. One of my pet peeves is the seemingly arbitrary changing of these codes.
*Often, code changes are manufacturer driven... There are other reasons that codes get changed. But at least in our case, the majority of the time it is either dictated by the manufacturer or done to move to "code synergy" in the industry. One example of manufacturer-driven: Warlord is switching their codes from the long mostly alpha codes to very long mostly numeric codes. Liana Loos-Austin at E-Figures.
GTS has their own codes for a lot of products, especially Ultra Pro, but the standardized code is searchable on their order site. For example, Top Loaders is inexplicably UPTLX at GTS, but I don't care because the description includes the standard Ultra Pro code of 81579. This is smart. Usually when a code is changed, the item is difficult to find. It would be helpful if other distributors kept old codes searchable (Alliance does this sometimes).

Getting back to product narrative, I need a story when a product is no longer available. I need to know why. Some distributors just delete products from view if they're sold out and not expected to return. Others don't add pre-order items to systems until fairly late in the release schedule. This breaks my narrative and results in often not ordering from these distributors. This is because my staff uses the system with the best narrative for pre orders and special orders, which can sometimes lock in that sale to that distributor. The best story teller gets my business.

Alliance tends to be the best story teller. They recently added "X" marks for items no longer carried in a particular warehouse, either because it's discontinued or just not coming. This extra bit of nuance confused some retailers, but it added to the product narrative. I won't be waiting any longer for the "X" product, so I know to order it from another warehouse, another distributor, or give up on it.

Any other status indicators is also helpful: Limited, Discontinued, Pre Order. The goal here is to provide retailers good information to make us informed customers who can help our own clients. I am assuming all this information is true and accurate. This has come a long way in the last decade, where there used to be a lot of disinformation, laziness and accusations of outright deceit regarding information from sales reps. More than likely, they were just as clueless as us and trying to create their own narratives.

Saturday, January 28, 2017

Reasons For Your Unearned Success (Tradecraft)

This is a harsh trade. When I first started, employees of other stores would come over and tell me how badly I was gong to fail. Their store had been around for decades and there was no way I could compete. So you say? Another competitor would come once a quarter and give me the bad news that the game trade was failing and there was no hope going forward. So you say?

Eventually, you outlast those people. There were six local competitors when I started thirteen years ago. Every one is gone. There are some new ones, but the original ones are ancient history. You usually don't have to do anything to fight competitors, if you've got a sound business model. Failed business owners self exit. The primary key to living is not dying. Then just do a little better tomorrow.

After a few years, they stop taunting you about how you're going to fail. Instead they give you excuses why you succeeded. They will come in and tell you this. I get it in my store reviews sometimes. Most people, including game store employees, have no idea what it takes to run a small business, so they have no idea what decisions are necessary to be successful. As store owners, we work exceedingly hard to set the stage. The audience arrives and gazes at our wonders. They leave and tell their friends. Most assume we stand around watching them gaze at wonders all day, having no idea what it took to set the stage. How hard can that life be?

I've compiled a list of excuses you're likely to hear. I've heard just about all of them. By the way, I would like to think I'm not a hardcore narcissist who believes success is all mine, acquired in a vacuum. I do believe many people have been instrumental in our success, including a community that provided me opportunity to succeed, be it this great country, which encourages small business and offers a safety net for failure, the state of California with its many opportunities that have enriched my area, or the SF Bay Area, with a culture of appreciating small business and quirky endeavors. That's what President Obama was getting at in his infamous "You didn't build that" speech. I'm grateful and aware of this assistance and it's a major reason I live where I do. That said, nobody succeeds without smart, hard work. So here's my list.

Reasons Your Success Is Not Your Own:

  1. Luck. Right place, right time. Ignore the feasibility study and the business plan, it was luck. I'm about to run a Norse D&D campaign and nobody is a hero without Luck. Nobody is noteworthy without snatching victory from the jaws of defeat. That means Luck is risk taking. It's not something that just happens.
  2. Easy Local Market. Anyone can succeed where you are. Over here? Much harder. This is true in the SF Bay Area, which is sheltered from a lot of Game Trade concerns. However, it also requires overcoming tremendous barriers and costs, along with high taxes and fees. I had to interview with my first landlord and the answer was no until I revealed the nest egg I had ready to invest. The barrier to entry is why we don't constantly fight pop up stores. Start with six figures or GTFO.
  3. Timing. Something was going up and you road the coattails. After a few years, my main competitor retired. I also started at a time of relative calm. Imagine starting your store the month of 9-11, or in 2008 during the financial meltdown. That said, timing is just one factor.
  4. Bad Competitors. Clearly since they're all gone, they weren't very good. Now if you had real competition, bam! Running a store is like flying. To paraphrase Douglas Adams, the goal is throw yourself at the ground and miss. Making sure you miss is where the work comes in.
  5. Staff Are Smarter Than You. The brains behind this operation is clearly not you. In fact, you're holding this place back from its true potential. This might be true, but it's also true hiring smart people is a management strategy. Bottom line: I can't run my business the way I want without smart people helping me. Thankfully I have them.
  6. Volunteers Smarter Than You. You've built this on the back of organized play and coordinators. Again, it's a team effort, and we're grateful for the assistance.
  7. You're Rich. The "you think you hit a home run, but you started on third" argument. One of my well known competitors was thought to be a dot com millionaire. I asked him and he laughed. "Ha! I'm sitting here in my back office eating my tuna fish sandwich." Ask Wizards of the Coast about this. I recall a story about the local Wizards of the Coast store manager installing a six figure mosaic in the front lobby of the store. There's no amount of startup capital that can save a business from a bad model. 
  8. You're Lying and You're Not Successful. I have one competitor who couldn't believe my sales covered the expenses I revealed. I must be lying on one end or the other. Then there's the question of defining success. My definition at year 13 is very different than year 6 and year 2. The definition of a 20 year veteran is likely very different than mine. Do I have to wait to be a 20 year veteran before I'm allowed to speak? Most 20 year veterans I know would rather just take a nap. Also, I can think of a combination of not inconceivable events that could easily destroy my business today. That's just the life of a small business owner.
  9. You Cheat On Your Taxes. This is usually the excuse successful store owners give for why pipsqueak start ups haven't failed yet. They're often not wrong. Having a really conservative accountant and business partners looking over my shoulder helps keep me honest in this area.
  10. Your Business Model Isn't Pure. Perhaps you've diversified into another area like used video games or cell phone repair. Perhaps you've vertically integrated your distribution or publishing business with your game store business. There are people who do this and offer a reverse excuse: The game store is only possible with such a model. 
  11. You Get Special Treatment From Suppliers. This might be true, as business relationships are not entirely transactional. In the game trade, your margin is determined by your purchasing loyalty and there are side deals and opportunities if you know where to look and who to ask. Opportunity doesn't just knock on the door.
  12. The Internet. Either you sell enough to survive on the Internet or they'll tell you the Internet will crush you any day now. Only a fool shops at the LGS. Notice they drop the "F".
And there you have it. Feel free to add your own to the list. I hope you'll excuse the negativity. I would like to think the vast majority of this blog is not about excuses but talking about how to succeed in this excruciatingly difficult field. 

Wednesday, January 25, 2017

Too Many Board Games (Tradecraft)

There are too many good board games on the market for my store to carry, and I think this is true throughout the trade. 2016 was the first year I stopped carrying board games that met all my performance metrics. The primary metric is turns, with three being a minimum turn rate for this category for me. The average is now around six.

With sales so strong, there just wasn't enough money in the purchasing budget to carry everything good, so good games gave way to great games. Inventory, whether it be store inventory or distributor inventory, is a zero sum game. There is only so much money in the pie and if I have to bring in one thing, it means something else has to go.

You might be reading this and thinking, well sure! That's just common sense. However, that's not how this trade usually works. It's often a case of stand out hits propping up a lot of crap. An enormous pink pond of pig poop, surrounding a few prize hogs. For my board games, there is no crap, no propping, the market is on fire. It's all tasty bacon.

I can't find enough product like this in RPGs or miniatures, it's fairly unique to this one category. I would throw thousands of dollars at RPG publishers, if they had something for me to sell. They just don't, at least not without a lot of time consuming farming.

This embarrassment of riches has migrated to purchasing. I've begun using the same strategy as my customers. All things being equal, games are bought on pedigree. A great board game from a top publisher not only gets picked over a great board game from a one off publisher, but it gets bought deeply. And if budget allows, very deeply. There are break out hit exceptions, but we have top 30 publishers where it's not a question of if I'll carry a game, but how many. By the way, this does not mean mediocrity from name brands sells well as in the past. Customers are well researched and don't buy entirely on brand. A solid brand is a guarantee of no surprises, like poor component quality or rule sheets ran through Google translate.

I'm planning a larger board game budget for 2017, but it's not about expanding my breadth, it's about jumping on board game intelligence when I get it. Games like Terraforming Mars and Scythe were hot in 2016, but we couldn't get them without a deep order.  We didn't have the cash, so we lost out. We had an angry review recently from a customer because we lacked product knowledge about Terraforming Mars. That's because we had it for 10 days in October and never saw it again. What can I tell you about that? It's rectangular with nice artwork, as I vaguely recall.

What does this likely mean for the game trade? I think it will mean increased balkanization, with Kickstarter games lacking penetration into brick and mortar. I think it will mean distributors will take the same approach as us, essentially not taking new clients and using their budget for big hits. Small publishers are likely shut out. Metrics for picking up a new game will increase. Good is no longer good enough, we all want great. It should also mean retailers like me need to dig deeper, go to more shows, play more games and network with like minded individuals to crack the code of hotness.


Gloomhaven is one of those "go deep" games in 2017. It's a $120 Kickstarter game, currently at the number one "hotness" spot on boardgamegeek. It's sold out on release but still open for pre order at distribution (I'm encouraging my customers to put theirs in).  I'll get my copies and won't expect to ever see it again. I could be wrong. Also, someone will point out there are areas of the country where a $120 board game is a non starter. I think if you consider it an RPG cross over, with legacy game mechanics, $120 isn't a big commitment for a group. 



Saturday, January 21, 2017

The Struggle is Real (Tradecraft)

I've got five days of cash flow, a huge sales tax payment due, a massive credit card bill, payroll, and the need for a new cars worth of sales in the next ten days. This makes me happy.

"The struggle is real," is a popular meme, but the struggle is often the only "real" part of this business. Success is ill defined. Money in the bank, real money, capital expenditure money, is a rarity for most store owners, at least until they've become well established. The need for things far outstrips cash flow. Entropy is a bitch and she demands replacement fixtures and an endless flow of toilet paper.

We're poor because we just paid off tens of thousands of dollars of construction debt, enough to enter the new year with a sliver of a chance of making it through January without dipping into some form of debt. But it's a pleasant place to be, especially knowing I won't be writing some of those monthly checks ever again. It's mostly pleasant because it removes decisions from my life. You work, you get paid, you pay the bills. We sold the van and tweaked our insurance to save $400 a month. This is the comforting work of the ancestral merchants. Wash, rinse, repeat. Routine has a warm embrace.

It's far easier to obsess over what's in front of you than forecast the future. It's like that person whose always busy at work, who has to constantly work late to catch up with what's in front of them. Those of us who've gone beyond that level know they're just poor planners, that resources haven't been allocated, that they're poorly managed in one aspect or another. It's a weakness of sorts, a comforting one that enshrines them in long suffering work and avoids the complications of social interaction or happiness seeking.

What I should be doing is planning. I should be working on a marketing plan. I should be setting up our demo programs. I should be planning those mini cons I talk about wanting so badly. I should consider a path to a book, but I question the value of such things. I should really find a way to swing the GAMA Trade Show this year. What I really should do is go on vacation. But five days of cash flow, man. I better put my head in the sand and and get back to the grind.




Monday, January 16, 2017

Less is More (Tradecraft)

Much of the last several years has been more about dropping games than adding them. This particular post is about saying it's a viable strategy for a profitable store. Don't be afraid of making hard decisions. I'm not talking about culling the herd, dropping slow board games or low performing SKUs. I'm talking about identifying broken game trade participants and showing them the door. The end result has been slower sales growth, since it's turning your back on gross, but much higher net.

Our net income topped out in 2015 at an astonishing 11%, and that's without significant sales in used product or other (highly profitable) cheats. It was straight up game trade retail at MSRP. This does require you to stop the genitalia measuring, which is gross, as in gross sales. I've written about that before, so no need to go into the "nothing but net" mantra again. Gross is a lie. You can't pay your mortgage on gross.

This is, of course, one way to do things. It's saying it's not necessary to be the one stop shop for all things games, because all games are not worth it for you, personally, to carry. We're talking big titles like Yugioh and Warmachine and for you, it might even be Magic. There are no sacred cows. There is nobody worthy of your unquestioned loyalty. This is also about crafting your store identity, admitting to yourself where you stand in the marketplace, acknowledging the limitations of your demographics.

No publishers are immune. If Wizards of the Coast can't protect their brand value and you can't make a profit selling it, drop them. If Warmachine can't discontinue SKUs in their creep towards infinite models, well, let them go. If Konami can't address the violence inherent in the system, send them on their way, give up their low margin product and troublesome crowd. Also, because this is business, it's not personal, so don't take it that way (your customers will). Also because it's business, reconsider if companies change.

Focus on net and the slow roll to higher profitability. Like fertilizer, take the money you get from dropping the bad actors and spread it liberally where it's needed to enhance growth. What you'll likely find is a lot of pent up demand in cash starved areas. We put our Warmachine money into Game Workshop and it paid off wonderfully. You might do the exact opposite and have the same results. It's a weird field. What you'll likely find though is a lot less cash crunch, a lot more time to explore new opportunities, rather than the churn of low margin, high gross nonsense.