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Tuesday, May 23, 2017

Substitution of Cases for Video Game Disc Media

In preparing to go large-scale with video games and especially on the expectation that some online aggregation system is likely a-brewing, I recently took a look at disc media cases to see what the outlook was for improving the condition of high-value games and making low-value games look better out of the box for general audiences.

It goes without saying that any marketplace-tied sellers are going to be expected to provide authentic cases.  However, what happens if the authentic original is generic, and no different from a substitute?  Well, let's take a look.

Here are empty cases, made in China.  Even if I never use them to substitute, they are still useful.  They can be used with printed liners as shelf proxies for shopping and you keep the real games backstage; I think this is ultimately their strongest use.  When you have a loose copy of the game, just having it in the proper color and type of case can make a good buyer impression, even if you don't have a liner.  But can they substitute?

First, let's look at Sony.  Here is an empty Amaray (DVD standard) case next to a Playstation 2 game.
As you can see, this will not substitute at all.  Most PS2 games use this case type with an offset-low spindle and a slot for the memory card that mostly never got used.  There are still things you can do here to add value; if you have a $500 Rule of Rose with a thrashed case full of dog bites, Gamestop stickers, and a broken spine, absolutely buy a $5 factory-sealed copy of some old sports game and swap the (identical, first-party) case over.  But there is zero substitution of standard Amaray cases to pass as PS2 originals here.
Not to mention the endless variations of games with multiple discs.  Even if you're going to swap authentic parts, you need a matching part.  Good luck with that.  It's still possible, of course.


What about its successor?  Playstation 3 used a clear translucent blu-ray case.  Here is a generic version next to a real game:
 Uh-oh, what's that on the top band?
The Playstation logo has to be there on any game that was packaged that way, meaning no substitution.  A shame, because the interior was a dead-on match, including having no Sony-branded fine print or anything:
But wait!  Not all Playstation 3 games have the embossed logo on their cases!  Here is a factory-sealed game that does not have it!
And just to show it was no fluke, here is a factory-sealed, brand-new Greatest Hits series PS3 game with no embossed logo, though of course you'd need a solid red blu-ray case.
So for any PS3 title that does not have the embossed logo on its case, it appears the blank cases are fully substitutable without having any effect on authenticity.


What about the newest generation, Playstation 4?  The good thing was the case has no distinguishing attributes.  No embossed logo, neither on used games nor new factory-sealed games.  No fine print of note.  It should be possible to substitute here.  The bad thing is that these particular substitutes are actually made with the spindle offset low!  So if I can find better substitutes, we may be in business:
Can you believe this?  It's dead-on match externally.
 So this one is going to rate a green light, but you have to get the right materials.


I looked into the Playstation Vita and unfortunately I did not have any used complete to test, only loose cards and new-in-box software.  No distinguishing characteristics appear on the outside, and I Googlenetted up some photos and there appears nothing on the inside.  I'm going to call this a qualified yes.
I'm going to call this a qualified yes.

PLAYSTATION PORTABLE: N/A (I was unable to find a substitute case.)

Let's take a quick look at the Playstation 1, given that it used jewel cases for most of its system lifespan.  The early "tall boy" cases are clearly not substitutable.  But later?
There's a generic case, and now the inside of Vandal Hearts, where you can see a Playstation logo in the center and obviously we cannot use any substitute whatsoever for that.
Also, with many games in the PS1 catalog being multi-disc and various different jewel case configurations for single- and multi-disc games alike, I think we're not close here.
So we have a hard "no" for the granddaddy of disc-only console games.


Those generic jewels might yet be useful for other systems, but we will have to evaluate it case-by-case and see how well it matches.  Turbografx is no good as they used custom cases.  Sega CD and Sega Saturn in the U.S. used "tall boy" cases.  But Saturn Japan, Neo Geo CD, and Dreamcast:
This one is not a match for Crazy Taxi 2 and I would not use it as a substitute.  But my guess is there was likely enough production variation that you will find exact and permissible matches from generic substitute cases for "standard CD" packaging.


Switching now to Nintendo, we have basically zero substitute ability across the line.  Here is a generic Nintendo DS game case.  Mostly pretty accurate, right?
Except oh wait, the embossed logo.  Well, so much for that.
It was a little clearer that we were out of luck in the 3DS generation, as the case has more differences (no "air holes" as well as the logo absence).
 So I'm going to call these both a hard "no" for substitute cases matching authentics.


The home systems are just as inimitable.  Check out an Amaray DVD standard case next to a Gamecube standard single-disc case:
And that's an easy one!  Memory card slot, small disc spindle, official logo.  None of this is going to show up on a substitute case, so there's no substitution whatever here.
That's without even considering multi-disc games, some of which have a top/bottom spindle in a single-width case, a configuration not seen anywhere else at all.


How about the Gamecube's much more successful... successor?  At first glance, it looks good.  The substitute cases, aside from being excessively shiny, look very similar.  But oh...
It's an embossed logo, which is the end of that inquiry.  If your original factory-sealed game you are certain does not have an embossed logo, maybe you can substitute freely.  I am going to say that probably isn't happening here.
Nor is it happening on the Wii U, as you can see here on Breath of the Wild.
Nintendo, ever on lockdown, and no surprise here they do the same for packaging.  You need authentic original material, and substitutes will not do.

NINTENDO SWITCH: N/A (I was unable to find a substitute case.)

Finishing up with Microsoft, we've got better news, but not right away.  As you can see, the Xbox One has an embossed and colored logo right there on the case top, and there is no substituting a blank band for that.
In this case the substitute didn't get the texture right anyway, so even without that logo I would not have felt comfortable subbing in a generic case for the X-Bone.


Not much luck with my existing generics with the Xbox 2001 either, except that there's no reason it couldn't be; the original cases have no apparent embossed logo, trademark text, or other characteristics that imitation cases would have to omit.  If you can find cases that match, you should be able to use them.
Again, for multi-disc games you're on your own, but as you can see, there's nothing strange going on here.
For the Platinum Hits series, you'd need to source the correct color of case, as you can see, but once again there's no infringing element to fail on.
So I'm going to call this a qualified "yes" like I did for the PS4.


The Xbox 360 is where we really hit paydirt.  You can't see it as clearly in the photo because the sub case is very shiny and there's no paper behind it, but it's very, very similar, close to identical.
Here is a closer look where you can see only some variation on the interior spindle, and even that may not be consistent across versions.  I'm not sure it stops a substitution here, for most titles.
Of course, you need to take into account multi-disc games with tabs...
And multi-disc games with a multi-disc spindle...
And you'll need grape purple for the Kinect games...
But thanks to the lack of embossed logos or marks and the apparent standardization of manufacture, most Xbox 360 cases appear to be the same as generics, and substitution is likely to be possible in many cases.  When in doubt, research the title!  But I feel good about a Mostly Yes here, which I'll downgrade slightly to match the PS3 that shared this system's generation.


Let's wrap it all up with our conclusions and I'll let that be it for the week.


3DO: NO, MOSTLY ("Tall Boy" boxes regardless of CD jewel cases).
NINTENDO SWITCH: N/A (I was unable to find a substitute case.)
PLAYSTATION PORTABLE: N/A (I was unable to find a substitute case.)

Hope someone out there found this useful!  See you next time here on The Backstage Pass.

Monday, May 15, 2017

Chasing Tornadoes

Talula, Talula,
I don't want to lose it
It must be worth losing
If it is worth something...
And I never cared too much for the money
But I know right now, honey
That it's in God's hands,
But I don't know who the father is.
-Tori Amos
In the "games" business there are products that go white-hot seemingly without warning, that become instant unobtainium, and then either just jump beyond reasonable presence, normalize and meet demand, or fade out into obscurity, their moment wasted and demand withered on the vine.

The Nintendo NES Classic has never been readily available on retail shelves for longer than minutes at a time, and that's reasonably mainstream.  Here in our niche we have games like Star Wars Destiny, Gloomhaven, and Scythe that never came close to meeting market clamor.  We have games like Dice Masters that went thermonuclear on day one and never caught a second wind because the longshoreman's strike kept reinforcements away for too long.

And then there are times when the stars align and something blows up in the mainstream market and crosses over into ours.  And it makes the NES Classic and Gloomhaven seem moribund by comparison.

Have you ever heard of fidget spinners?
These plastic ball-bearing doodads have blown up to the point at which any amount we can put on the shelves sells out within days or less.  China is already making them in staggering quantities, so for a brief and scintillating moment, we can order huge-margin items, wait with trembling hands as our crates cross the Pacific Ocean, and then turn that money into much more money as soon as customs is done with its customary striptease.

The fidget spinner, like its spiritual cousin the fidget cube, was originally developed as a sensory toy for people on the autism spectrum.  Autistic neurotypes are known for "stimming," short for "stimulating," making repetitive muscle motions such as snapping, flapping hands or fingers, cracking knuckles, grinding teeth, rocking back and forth, and so forth.  The self-stimulation actually has a calming effect, paradoxically, because it helps deaden the autistic person's high sensitivity to external stimuli.  Thus, it helps them focus, in the same way that closing your office door helps when you're trying to decipher a complex document.

Naturally, the neurotypical mainstream can't let anyone have anything to themselves, so ordinary kids who are hyperactive and accustomed to a high-stimulus environment have apprehended the joy and contentment of stimming.  Fidget toys then blew up at a rate that's staggering to behold: in February we started to see distributor offers from our various overseas factory sources; in March the first few stores to gamble were getting their boxes full and selling out; in April those box orders turned to cases, and in May those cases turned to master cartons.  And since my stores are like mediocre NBA point guards who can't create their own shot, it took until April before I was finally ordering them.  Within hours of their arrival earlier this month, they became the top selling items in the Toys & Figures subcategory.

And it's already over.  The Asian supply chain has already caught up to big box integration.  The spinners we readily sell for $10-$15 are showing up at Wal-Marts for half that (but disappearing fast enough that we still get business).  No carton or case or box of fidget toys that I order now is going to appear in time to get ahead of mass market entropy.  By the time I adjust to half the price, Wal-Mart will be at a quarter of the price.  And then they'll start getting container loads from Guangzhou for a tenth of what I've been paying, or less, and in half the transit time.  And then the public will stop caring and the fad will have passed.

I've got near-zero risk here with Phoenix Comicon and a slate of convention and movie release table dates coming up for the store, and there's no way we fail to clear a table of fidget toys at an event where we already sell out of every doodad we bring.  But for ordinary small specialty retail store shelf inventory purposes, the window of opportunity for these things opened, and now it is closing.  It was that fast.

It was incendiary hot for the shortest time you can imagine, and we were basically printing money at the speed these things moved, but now it's over.

This has been a good lesson for the hobby game trade because there was some money available on the table for anyone with the prescience to act quickly, but a store that simply stayed the course and focused on fundamentals probably did just fine and had less work to do and less uncertainty and less credit card balance tied up in a transoceanic supply chain.  A store that just stood pat probably ended up very close to breakeven with the stores that, you know, did anything with regard to fidget toys.

An ideal scenario is perhaps a full-line game store that plans to keep the fidget toys around regardless of the fad, perhaps to supplement an existing deployment of educational and construction toys.  They'll become like other products that the mass market has destroyed, where we have them in stock but most people gripe that our $9.99 spinners are $2.99 (by then) at Walgreens.  Our mainline distributors will have the really nice design-print spinners and cubes, at the awful margins we've come to accept, and they'll fit right in next to the 65% COGS Diamond statues.  We'll tell stories to new retailers about the margins we got for two brilliant weeks when the fidget spinner trend first exploded, and they'll call bullsh*t and won't believe us.

Chasing tornadoes, attempting to catch the leading edge of a trend, is something that feels very right and appropriate for a hobby game store, and especially for a comic store where trends and the product are often one and the same.  But it's akin to speculation.  It's something less than a "spec," while still being speculative.  It's like a steakhouse adding in a trendy fish entree to capitalize on publicity.  They may sell some, but the reality is they disrupted their menu and added process and created exceptions and did all this despite the reality that most of their patrons came in because they wanted steak.

Fundamentals.  Make sure you're still selling steak.  Make sure your steak-eating customers still get what they showed up for.  And if you think you have that mastered -- well, none of us do, but if you think you've got it under control -- then sure, be my guest.   The occasional dalliance with some market darling can be excused, but don't let a cheap thrill cost you your marriage.

Wednesday, May 10, 2017

Stabbing Westward

It's happening: Desert Sky Games: Gilbert will be moving to nearby Chandler!
We know this is a big announcement and will set off a lot of questions.  It's too soon for some of them but perfect for others:

Q: Where exactly in Chandler?
A: We are not at liberty to give an exact address until (I think) July 1st.  The destination space and the lease arrangement involve existing businesses.  We don't want to start off our relationship with our landlord by upsetting his tenants, who have their own location moves, upgrades, and potentially closures underway.  It is not far from the current store, and is close to the freeway.

Q: How much room will you have?
A: When fully built, the new store will be five times the size of the current store.  Our gameplay area alone will be more square feet than the entirety of each other store in the East Valley.

Q: When exactly is the move?
A: We have to be clear of the Gilbert location in just under six months, so we're aiming for a late-summer opening knowing it's likely to be more of an early-fall opening.

Q: So why announce so early?
A: An explanation is warranted.  The trendy thing right now is crowdfunding (Kickstarter, Gofundme, Indiegogo) when a store needs to expand, or move, or survive a downturn.  We don't believe in that kind of thing.  Panhandling just isn't our way.  We intend that our clients always get their money's worth.

Meanwhile, construction always costs more than expected, and we intend to fund this entire move out of operating capital rather than borrowing.  (And if we do end up having to borrow, we will still have that option open.)

Therefore: We are starting our MOVING SALE... NOW.

With the plan being that the sale will supplement the construction budget at this early stage.  This also gives us the flexibility to refresh the sale a couple of times every week as we go, adding new deals to give our customers something more to discover.  We have even more merch stored away that there hasn't even been room for us to floor, and now we can bring that out.  Doing all this meant announcing early was best.

Q: So, what kind of deals are we talking about here?
A: We are offering 40% to 90% OFF all items in the moving sale.  Look for the yellow tag.  Prices are good in-store only and are while stock lasts. We are not messing around.

Q: What kind of merch is included in the moving sale?
A: Almost everything, but especially toys and collectibles, board games, miniatures, CMGs, apparel, and accessories.  You know, stuff that takes up room and is bulky or fiddly to transport.  Deep sales on lines like Warmachine/Hordes and Guild Ball, HeroClix, Ultra-Pro, and Funko.

Q: Wait, are you getting out of those categories and games?
A: NO.  In fact, at the new location we're going to have more of them than ever.  It's a paradox of retail finance that it makes more sense to sell off an item, even at a deep discount, and reorder it at full wholesale six months down the road, rather than conveying it.  It's kind of like how you're better off holding a big garage sale before you move, reducing costs for transportation and/or storage.

Q: So you're not dropping board games?
A: Nope.  Keeping them.  DSG Chandler will have room to feature a huge array of board games, including a demo library for players.  The way we always hoped to do it.

Q: And you're not dropping WarmaHordes and Guild Ball?
A: Not at all.  Miniatures players will finally have room to roam at DSG Chandler.  And Warhammer is hotter than ever right now.

Q: What about HeroClix?  You canceled your upcoming events.
A: We are rebooting HeroClix this fall at DSG Chandler.  We saw two straight years without player base growth, which is atypical for a game that is successful at many stores nationwide.  This tells us our processes for HeroClix were not working and not serving our player community.  We're going to give all local Clixers a parting gift with this blowout sale, and then rebuild from the ground up later.  Meanwhile Clix is strong at Imperial Outpost and Game On Prescott to tide you over.

Q: What about comics?  Gilbert moved them all to Tempe.  In fact, what about Tempe?
A: DSG Chandler will have room for all comics, but that's phase two or three.  Phase one is getting DSG Chandler open as a replacement for DSG Gilbert.  DSG Tempe will continue to host the vast comic inventory in the meanwhile.

Q: What about Gilbert?  DSG has a lot of customers east and south of the store.
A: We're still going to be close with easy freeway access.  But this move also gives us an option we didn't have before, that East and South Gilbert customers may like.  The San Tan Village Mall opened its first leases in late 2007.  That means the next 12 to 20 months will see initial 10-year and 5+5 option leases expiring, which opens up an opportunity for a perfect DSG Gilbert branch location at the STV in 2018+. I'm very excited about this as it's a strong commercial property.  It's possible this supersedes the Superstition Springs plan.  We'll reach that question at a later date.

Q: Isn't it going to be weird having a bunch of empty aisles and racks?
A: We have it covered: Another purpose of the sale is so we can take some racks down and move them to Chandler ahead of time.  This will also allow us to open more of the room to gameplay, and make DSG Gilbert a little more comfortable in its final months.

Q: Sounds awesome.  Thanks for explaining all this.  But wait, did you... did you just...
A: Yes, I have been waiting to use that article title for years.  Had we moved in the other direction, I would have used "Eastbound and Down" from Smokey and the Bandit.  North and South weren't really in play because I wanted to stay close to the freeway.  But we're loaded up and truckin', and we're gonna do what they say can't be done.

That's it!  Hope you're as jazzed as we are to move forward into the DSG future with our enormous new hub location and headquarters!  In the meanwhile, we hope you will visit DSG Gilbert and take advantage of deals that, honestly, we will probably never be offering again.

Tuesday, May 2, 2017

Thoughts, Part 7

Yesterday was the first of May, and in addition to what JoCo would recommend we be doing, this meant the beginning of a whirlwind cycle of releases, convention appearances, and oh yeah moving the Gilbert store to adjacent Chandler, as is now about 98% likely.  Basically barring some critical lease problem, we have moved forward working on DSG New and look to wrap construction in time for a fall opening.  I'll post updates sometimes.

MTG Amonkhet launched very well, especially for an off-cycle large set, and pound-for-pound basically did better than Modern Masters 2017 for us.  In part I think this might have been a bad time to hold the line at MSRP.  I felt stung by having pushed so hard with Eternal Masters and seeing other dealers scoop up MSRP with ease, and I wanted to hedge in any case against the softness that we saw after Modern Masters 2015 landed.  This time I didn't really need to hedge so I figured, OK, I'm going to take the approach I saw the larger and more stable dealers do.  Only to have most of the market dump the set.  I vented a little bit of it at market but with my last dozen cases I'm off that plan, I'm going to sell it a pack at a time now and follow the market price up... eventually.  I still have Eternal Masters in stock.  Magic is stabilizing for me after Aether Revolt underperformed in the early frames.

Games Workshop's new policies go into effect tomorrow for hobby retailers.  A minimum advertised price of 85% of MSRP as well as permission to sell online under assorted guidelines.  I think a lot of stores will rush to sync their stock to Amazon or eBay, and since there can be no price competition really, we won't actually see that become a revenue driver.  I am going to hold off on that and instead work on mastering the buy-on-your-phone-and-pick-up-at-the-shop process through our website that has already proven a winner for Magic and Destiny singles and event registration.  DSG's existing wargamer community is pretty healthy the way it is and we want to keep that focus local.  Getting the staff accustomed to minis and especially paint and supplies orders through the web system will be good exercise and a chance to get some more efficiency of scale there.

Hasbro has quietly been ingesting some classic Avalon Hill and Wizards of the Coast titles, moving them from the subsidiary catalog up to the main imprint.  Acquire and RoboRally are already done, and we'll see which games get tabbed next.  My two tabletop distributors, GTS and Alliance, are both selling Hasbro-branded merch firsthand now.  GTS already had a deal in place with Diamond that included Previews Exclusive SKUs, and Alliance is, well, part of Diamond.  I am stopping short of foretelling suffering to come or any such thing; I just wonder if we are seeing a significant piece of the consolidation trail played out quietly before us, in realtime.

I'm stuck on a metrics pinion right now.  A fair number of board games and miniatures failed to meet turns for Q1.  In terms of cash flow management, the correct move is to clearance them with a sale of some kind.  But with DSG Next so close upon us, I'm going to want a lot of product to fill up all that footage.  What do you do when you don't really want to clear the deadwood because you know bonfire season is approaching?  In the end I think I'll cash out some chips with a sale, but it will be small and understated compared to my usual strike first strike hard no mercy sir closeouts.

Online traffic continues to pick up.  TCGPlayer is adding Final Fantasy and Destiny to its offerings, which suits me just fine to be perfectly truthful, as I am already dealing in both.  It's irksome seeing a 90%/10% split of online/in-store singles sales, when the transactional cost is so much better in-store and these buyers are passing up a lower price card-by-card to buy through TCGPlayer.  (I use a multiplier to defray fees with a 20% price bump; all DSG website and in-store singles sales pay 20% less.)  But volume, man, volume.  With mastered subprocesses there's an opportunity there.  I have some great folks in the high-end dealer community to thank for teaching me how that works.

Square doesn't offer the best rates for credit card interchange, and they don't offer the fastest payment (though you can insta-withdraw for a small surcharge).  But their system really is easy and faults are rare.  I finally ran into one this week where the chip dipper kept disconnecting for some reason.  In the end deleting the Square app from that iPad and redownloading it fixed the problem.  Have you tried turning it off and on again?  With their use of device codes so I don't have to give all and sundry my Square login credentials, I think they've got a winning system.  PayPal Here is close but I still run into technical problems more often than anyone should.  Saving money on the interchange rate is extremely important but how much money do you lose when there's an interruption in your ability to take payments?

We ran a table at Zapcon 5 last weekend, an arcade game and pinball convention that wasn't really tailored toward shopping, but where I wanted to get some more exposure now that video games are becoming prominent for us.  It was cool to see the guys from The Gaming Zone, Starfighters Arcade, and Game Over again, and we appreciate Wes and the Zapcon organization inviting us.  We sold out of everything Rick & Morty, sold most of the Nintendo marketing trinkets I brought (there is more), and sold a respectable amount of Magic and Pokemon cards.  I think if we're invited back I'm going to find some way to feature console free play or testing at our booth, since we had electricity at no extra charge.  I took a few jaunts into the game room and most of what I wanted to play had a line waiting, but that's OK in my world -- it means people are enjoying something I am passionate about.

Speaking of which, I got myself an X-Bone for my birthday, without much of a clear direction for what games I wanted to play on it, figuring to use Plex and the media center functions.  I had already played a bit of Destiny and Forza Horizon, as well as brief durdling on Dark Souls III and Deus Ex Mankind Divided.  That last one, by the way, has some solid worldbuilding in it.  I love me a good twenty-minutes-into-the-future storyline, and Mankind Divided executes that splendidly.  Forza delivers as promised in the racing department, which I occasionally decide to obsess over.  But the revelation on the Xbox One thus far has been Moon Studios' masterpiece Ori and the Blind Forest.  I was given the recommendation by people I trust, and wow, I was not ready for the impact of this game.
Most of what I might tell you about Ori has already been said.  It's beautiful, both visually and musically -- perhaps the best ever.  It's a mechanical delight, the pinnacle of both the Metroidvania mechanic specifically and 2D platforming generally.  And the story is Pixar quality, including the requisite "all those feels."  I would not have regretted buying the system solely to play this game.

I do have some other games -- about a third of my DLC from the Xbox 360 ported over, and most of our disc titles are apparently on the backward-compatible list.  I picked up Mighty No. 9 at the right price and I'm ready for a letdown but hoping for the best.  I'm told that Life is Strange, Rise of the Tomb Raider, Axiom Verge, and Batman Arkham Knight are also worth a look.  There seems to be an abundance of high-production-value first-person-shooters and sports games on the platform, but I can't do much with those these days.  I just don't have the patience for them, and even as I was able to appreciate the tactile polish of Destiny, I could not summon up the urge to play more.  I didn't even redeem my code for Madden 17 that came with the console.

Once the store has enough systems in stock, I'll procure a Playstation 4 so I can try that silly VR thing, and play titles like Journey and The Last of Us that I've had strongly recommended to me.  The kids have their Wii U to play the LEGO games on... and Minecraft.

Hope everyone's May is off to a great start.  Enjoy the onset of summer!

Monday, April 24, 2017

All Shall Perish Like the Morning Mist

This is not a discussion of pricing, though I will reference pricing for specific offerings as a way of anchoring the concepts involved.  As always, individual businesses must set prices according to their own criteria.

I'm going to hit this topic quickly because it has been a busy weekend and I have even busier weeks ahead.  This is the kind of topic where other retailers reading should do follow-up research on their own and really integrate these concepts.

Some goods are there for a while and then become worthless.  Traditionally these were called "evanescent" goods, because the definition of "evanescence" is a property of existing for a short time and then disappearing.  In recent decades the term "evanescent" goods has largely persisted only in law and academia, where the adjective also describes e.g. evidence: traces of alcohol in a suspect's bloodstream, for example.

The term now in commerce is perishable inventory.  Just like food that literally spoils if unsold for long enough, there exist goods and services that become worthless if unsold during a given interval.  A seat on a plane flight or a bus trip.  A night's accommodation in a hotel room.  An evening's occupancy of a seat at a concert hall.  That ticket to see Evanescence perform at the Dodge Theatre becomes worthless after the show, so the promoter really, really wants to see every ticket sold.
There is bean counting that achieves the goal of selling an optimal number of perishable goods and services.  Paradoxically, that number is usually not expressed in terms of a 100% sellout.  If a concert sells out, the promoter doesn't know how many more tickets they could have sold if they had staged the event at a larger venue.  If an airplane flight sells out, you end up having to beat up passengers.  If a hotel sells out, anyone who paid less than anyone else to stay there represents money lost.  And therein lies the rub.

It's impossible to tell the future, comma, lottery tickets yippee.  Though the actuaries who count the assorted airline, concert, and hotel beans tend to count very well, they will have an error rate even when performing at their best.  The business then has to decide how to mitigate those risks.  An airline might oversell and offer vouchers to get people to bail from a flight.  A hotel worried about being too empty might offer deep discount room rates far in advance or on mid-week days, and then raise the price right up until the week or days prior.  Then, the very night of, the hotel rates might plummet as unsold rooms stand on the verge of earning nothing.  It's not spherical sheep in a vacuum because it costs labor to have the service staff restore a used room, but bistro math says the hotel hopes to be close to full at a fairly high average room rate.  Close to full.  That's efficient.

By now you can certainly imagine some of the financial and promotional gymnastics that go into the perishable inventory mechanism.  If you want to live on the bleeding edge and experience this in excruciating fidelity, be a ticket scalper.  Your stock value will fluctuate wildly and you'll have to do all your research in advance and operate live without a net, and your hope is to clear a night's profit for yourself before your remaining stock of tickets turns to metaphorical dust.

So why am I talking about all this?

Tabletop game pre-release events are perishable inventory.

In most cases pre-releases are publisher-driven and stores are given a limited allocation of "player packs" or prize modules or whatever creates finiteness in the offering.  And in most cases stores can only run the event on a given calendar day.  So the store wants to sell out that event, to within one player kit.

Invariably, as occurred after last weekend's wonderful Magic: the Gathering "Amonkhet" pre-release, the retailer realms on social media were inundated by stores complaining that they had been allocated too few kits and had sold out the event too quickly and had to cancel remaining start times.  And while there were plenty of instances where this happened despite good practices, fairly often I see stores causing their own problem when it comes to perishable inventory by underpricing it.

The MSRP of a Magic pre-release is $25.99.  Disregarding for the sake of clarity the fact that each new release may vary in quality from the last, a store that sold out its previous pre-release or came close, should likely change very little.  DSG used to sell out or come within small unit counts of doing so routinely, as you can read right here on this blog.  Ever since another store dropped in three miles away, some amount of our local audience is saturated out, and we now post sell-through figures in the eighties of percents, offering the event at MSRP.  This would be unacceptable if we were not simply able to recoup much of that value selling the event kits a week later as regular product.  But we do get to do that, so ~85% of capacity is fine.  Meanwhile DSG Tempe runs over 100% capacity and gets additional kits from DSG Gilbert's excess.  So that's outstanding.

If we routinely ran very shallow on sell-through, that would be a sign that our price was too high.  Once upon a time I ran the event at ~$30 with higher prizing.  I think that's actually a more realistic price level for a Magic pre-release, and I am not the first to say so.  But as crowded as my market is, I didn't see that same traction for sets that had soft underbellies, such as Fate Reforged, despite heavy prize support.  We took a complete bath on Journey into Nyx at thirty bills.

If I found the sellouts coming very easily and Sunday afternoon events cancelled on the regular, that would be a telltale sign that I was too low on admission price.  I think I could run $20 events tax-in and sell out extremely easily, but the net on that is abysmal compared to far smaller events at MSRP or above.  It doesn't make a lot of sense when I can come close to selling out at MSRP, and in all likelihood the main thing preventing a full sellout these days is that I don't have the physical space to seat more players at prime start times such as the midnight kickoff.  (That raises a fun question of whether varying pricing by start time might be a viable option.)  Back when Dragons of Tarkir came through and sold out, my allocation was smaller, and my floor had less product on it.  Great for pre-release capacity, bad for sales the other 357 days every year.  Much as I'd love to have huge, luxurious seating for throngs of players, and we'll see what DSG Next has in store, for now we just don't have it, and product must have adequate space on the floor for visitors to shop it.  DSG Tempe is bigger than DSG Gilbert physically and still fills up on event days.

So if you're one of those stores that gets a 90-pack allocation or 120 or 180 or whatever and you sell out too quickly at $25 tax-in?  Maybe you need to be charging $27.  Maybe $29.  Egads, maybe $32, though I think that might be a little more than most markets will bear unless your store is a luxurious event center like The Wandering Dragon or Mox Boarding House.  And I have no idea what they charge, for all I know they're at MSRP anyway.

You can't really reduce prizing if you're giving out the two packs per player that Wizards requires.  You can adjust round counts, prize dispersal, and various other semi-meaningful criteria, but the big one is price and will always be price.  And if you're wrong?  You still get easy sales of the pre-release kits on release weekend.  Maybe you charge one price for advance registration and more at the door on the day of the event, though I urge caution there, that might dissuade players who feel like they missed out on a better deal and won't come play on a quick decision.

The next level of analysis is to recognize that filling capacity is a great rule of thumb, but overall net income is the real goal, and depending on price elasticity in your market, costs of operating, and like such, it might actually net you more to fill 70% of player slots at a given price point than going down $2 per player to fill them all.  I'm keeping that out of the scope of this article because I don't think a lot of hobby game stores are there yet.  They're so terrified of failing to make rent that they'll crank the price down as low as necessary to ensure a sellout, and all the while that gross revenue doesn't punch anywhere near its weight.

Do your research, learn and understand how perishable inventory works, and crib from the vast history of companies who have tried every process under the sun to optimize their results.  But don't give away nickel beer and then complain that you ran out.  Your problem isn't the brewery failing to send you enough beer.  It was you charging only a nickel for the beer they did send you.

Monday, April 17, 2017

Bunch of Savages in This Town

Sometime in the early morning hours of Easter Sunday, this happened at my Tempe location:
I won't recount the details of the burglary, as those are in the hands of the police and insurance company and that information is of little value to anyone not involved.  What prompted me to write this article was the pervasive jadedness I found in my reaction.

Not right away, of course.  First I shook my fist and cursed the sky.  But after burning off my initial reaction, I went into administration mode, and mentally planned my due diligence.  Examine the scene for myself.  Secure the police report.  Contact our attorney.  Contact the insurance agent.  Send out word to the community.  Secure the premises.

I realized at some point during this process that the entire thing had become, to use a word that isn't precisely right, routine.  Break-ins happen to retail stores.  They just do.  Statistically speaking, it's kind of unusual that it took until five years in for one of my locations to get hit.  And this is just what happens these days.  As the officer on the scene observed, one day it's our store, the next day it's the one across the plaza.  So we go through the motions and check all the boxes and file the insurance claim and hope we don't end up losing too much money, labor, and time, by the end of it all.  And there's just nothing anyone can do about it.

I am told that Griffin had even more adrenaline spikes and dumps than I did throughout the day, and understandably so as a burglary is an invasive, violative discovery and he didn't already endure this in 2000, 2001, 2005, and 2009 like I did.  I burned the fuse all the same.  By late afternoon I sat at my workstation in Gilbert, making the necessary calls and emails, and found I could barely keep from nodding.  Deep exhaustion set in.  Fight-or-flight dissipated.  A wave of indifference washed over, or perhaps it was futility, or even chagrin.  More accurately?  Disenchantment.

Why bother, after all.  It's just going to get you a brick through your window.  Why build a business when I can have the ease of an assured paycheck working for the man?  How many times am I going to miss my children hunting for Easter eggs, or opening birthday presents, or trick-or-treating, because some damned thing went wrong at work and I have to head in unscheduled?  And for that effort I get to have some try-hard tell me the best stuff on the shelf has "no value" and would I "do" 70% of market on some Legacy staple that's never going to drop in price for as long as TCGs exist?  Or field a damage swap from some eBay buyer whose kid stepped on the jewel case of his Magical Fantasy Adventure CIB, my eBay metrics now hostage to his apparently sacrosanct desire for a free replacement at my expense?

This is all in the moment, however, and some other thing will happen that will make the notion pass.  I actually had a monstrous weekend of TCGPlayer sales; until Sunday morning I was flying high, mentally banking that extra revenue already toward our upcoming move.  I have friends in town for some special Warhammer events.  We've got a vendor table in two weeks at Zapcon, the arcade convention where I've wanted to exhibit since it began in 2013.  The Magic Amonkhet prerelease is coming up this weekend, and that's always a get-healthy store event, and one the players love every time.  That will be followed by a full release for Amonkhet, a full release for the new Star Wars Destiny set, a reprint of the first and most demanded Final Fantasy booster set, and then apparently a new edition of Warhammer 40k.  One top title after another, and plenty of chances for nourishment.

Decisions made in heightened moments of distress rarely stand up to scrutiny later.  It's critical to allow time for assessment and to let events play out a little further.  In essence, no matter what the disaster at hand, it's best to keep an even keel.  It's best to think of it as... routine.

Monday, April 10, 2017

Time Bombs

One of the strengths of small business is that you can pivot.  With the reach and extent of the enterprise often within a single building, or two and a half buildings in our case if you count Isla Sorna, an owner can quickly implement a policy change, a price or marketing special, or even rebuild a merchandise fixture on the fly.

Unfortunately, not all decisions have consequences so quickly absorbed, analyzed, and responded to.  Some decisions, if early enough and important enough, are time bombs, small mistakes in the early going that ultimately metastasize into big core problems costing thousands of dollars or more to rectify.  When they can even be quantified.  And when they can even be rectified.

The biggest time bomb of all is, of course, going into business with a business partner who doesn't work out.  It is difficult to generalize about this so I won't reach too deeply into this example, but the main points of contention usually end up being unmet expectations (reasonable or unreasonable) for the allocation of resources, control, and work contribution.  I don't have a perfect system for addressing these, but our LLC Operating Agreement has done some heavy lifting over the years.  It is perhaps the opposite of a time bomb.  We have addressed much of the rest in policy.  Accordingly, DSG has survived expensive partner departures that might have destroyed a normal store.  From the eleven original LLC members, the only ones remaining are my wife Stephanie and myself.  [EDIT: To address the wiseasses out there, most of the departed partners did so happily, profit in pocket, to move on to other ventures.]  Two other members have since joined.  It took all the partners' capital to get things rolling, but with the expense of separating the partners who left on less optimal terms, we lost enough ground that I suspect I would have been better off starting much smaller with a tighter ownership group that held a more unified vision.

Here is a time bomb that explodes continuously for me and that I've been cleaning up for almost five years now.  Our logo is wrong.  When initially designed, the "Desert" was in sand and the "Sky" was in sky blue, with "Games" in brick.  It worked nicely and was easy to read.  However when monochromed, the logo instead reads "Desertsky" (think "deh-ZERT-skee" like some sort of Russian soft drink).  It is basically unusable for us but we've been stuck with it for years now.  That small design oversight turned into a $7,000 marquee sign that reads like the Leningrad Circus instead of instilling the sense of wonder I originally intended.  Or people see it at the briefest glance and think it says "Dentistry."  Even less useful for me; dentists are feared and dreaded.
Now a new logo is badly needed for multiple reasons: Uniforming across two stores, window vinyl revamping, a new marquee sign for Tempe, the marquee for DSG New later this fall, the mall sign for DSG Superstition Springs after that, social media flyers and promotions, in-store signage for both stores, it goes on and on.  I had a "square" revision made and rendered, which you see in use today on Facebook and on the store's website, but it's not working out.  To make matters worse, I never did get vector assets for it, and the branding of "and Comics" has never quite resonated whether we've featured comics or not.  The original logo also had a tagline I loved, "New Worlds Await," which we simply have not used.  We played with a new tagline of "The Next Level," which is nice and video-game-compatible, but also haven't done much with that.

Ultimately I think I trust our original idea of how our logo should look overall, but need it executed properly.  [EDIT: Since this article went live... had some assistance come our way from a friend of a friend, and we're quite happy with the logo fix.  Stay tuned to see it in action real soon!]

Here are three of my other DSG time bombs from 2012 through 2014.  If this doesn't scare potential store owners into second-guessing every tiny choice before them, I haven't done my job here today.

The biggest time bomb, of course, was our lease.  At the time it didn't seem that bad.  People heckled us relentlessly for opening a store almost twice as big as any existing store in town, at 2400 square feet.  Yeah, nice joke, huh?  Now DSG Gilbert is among the smallest stores in town, and is easily the smallest proportionate to the amount of revenue it drives through those doors.  We've had to climb right up the walls with sky-high fixtures and crowded conditions just to be able to operate our volume of business in this constrained space.  And for that privilege, we get to pay more per square foot than about 80% of the other stores in town.  (Though that's now, at the tail end of the lease, when the ramp is at its worst.  The five-year average rent rate was competitive.)  DSG Tempe's lease is much better, but that location suffers geographically and has inadequate parking.

I contend that Desert Sky Games is a well-imagined brand, specific enough to have local flavor while flexible enough to be regional, easy to remember, lends well to a color scheme that isn't the same red and black as half the hobby trade uses, and is very clear as a branding for game products whether tabletop or electronic.  Where we ran off course was adding in "and Comics" in 2013.  While accurate, it just doesn't work.  It's too long and cumbersome, it required a logo change that still didn't fix the Russian soda pop problem, and it proved unnecessary in the end, as many prominent stores like Millennium Games and The Nerd Store carry comics just fine without the word "comics" being in the title.  Moreover, I have a ton of marketing history with the full cumbersome name, and the current uniforms feature it.  It's the worst of all worlds.  I can't fix that logo soon enough, and doing so also fixes the branding.  It's just going to be Desert Sky Games from now on.  I then gain some flexibility to use Desert Sky Comics as a sub-brand (and I own and have secured all the IP for that as well).

I set up a time bomb of missed revenue opportunity in 2014 that I regret to this day.  DSG carried video games since the beginning.  Early on, we didn't do much in the category.  It was healthy on low volume.  Former partner and original manager Mike Girard simply wasn't deeply interested in the category, so we didn't really put a lot of focus on it, but it never lost money.  In summer 2014, Girard and DSG parted ways, and when I took over main operations, I hurried to narrow the category spread in an effort to conserve resources and overcome a moribund June.  I moved away from vintage toys, non-sport trading cards, and the vintage arcade, none of which were substantial in the revenue mix at the time.  But I also made a big mistake, which was to drop video games and sell our inventory for a pittance to the good guys at Tempe's The Gaming Zone.  TGZ is a quality outfit and I've said so before in this space.  Video games as a category were a very healthy thing and not something I ought to have dropped, never mind that I was worried about saving the rest.  Video games returned in early 2016 and as of last month have climbed back into the top 5 categories for gross and are the #1 category pound-for-pound.  Had I stuck with video games and dropped board games and comics instead, focusing only on core competencies, I could have bought back into board games and comics later with ease off a far larger bankroll.  Video games aren't right for every store, but they may be a good option to consider for many stores, and they especially are worth keeping around if your store already carries them!

There were other small time bombs over the years caused by yours truly.  Tournament calendaring is a big one because the power of an event calendar is when it rarely ever changes.  You want to catch those people who are back in town to see their families for a few days and remembered that you have Thursday night MTG Standard or Saturday night 40K.  Over time it builds up in aggregate, and that's part of how stores that are open for a while build their incumbent advantage and outperform loud and charismatic newcomers.  Thus even if you have a "bad" event on the calendar, it usually stays there a long time before you make a move.  Staffing has led to some time bombs.  Out of HR consideration I won't name names, but there are employees I held onto well past their expiration date.  That has not been nearly as much of a problem for the Gilbert crew since last summer.  One could argue that being stuck in troubled categories and having deadwood stock amounts to a time bomb, but I see that more as the usual ebb and flow of inventory and part of the educated guessing game that goes into ordinary procurement.

It is difficult to avoid setting time bombs of your own in business, but I wish you the best of luck in containing the damage when the explosion finally hits!  Thanks for joining me once again and have a prosperous week.