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Tuesday, January 16, 2018

Close But No Cigar

In today's cybertronically connected omnidata existence, we have access to most of the knowledge of humanity's history alongside our funny cat videos.  Big business has leveraged this power to offer service/intrude ever deeper into our individual lives, and effectively so.

The positive side of this infotech Renaissance is something resembling my electric car navigating around a blocked section of freeway for me, while I conduct a voice conversation hands-free over bluetooth with a distributor two time zones away, and then I arrive at Panera to pick up the lunch they already have waiting for me, and pay with a smartphone "bump" and fingerprint unlock.  It's tantalizingly close to living in the world of Star Trek.

The negative side of this social connectivity overload is something best described by telling you to binge-watch Black Mirror on Netflix.  A suggestion that is nice and meta.  There are only 19 episodes and practically all of them are outstanding.  Don't start at the beginning.  Start with "Nosedive" and continue into "The Entire History of You" or "Be Right Back."  It's an anthology show (episodes and characters all stand alone) so you can watch in any order.  "White Bear" is the best one but it has a markedly different tone from the rest of the series so don't start with it.

In a far more mundane sense, the instant access to any index, catalog, or calendar has everyday implications here at your Friendly Local Game Store.  It enables a degree of just-in-time logistics that was impossible as recently as a decade ago, and makes our store a living, breathing organ of the Digital Now the way no tree-corpse emporium rightly should be.  But then there are the times when we can't seem to find the strike zone, and miss opportunities left and right.  It's maddening.

The most obvious is product availability, of course.  We're expected to have the new hotness on release day.  It's a pretty fundamental piece of our job.  And most of the time we get it done.  But a streak of rotten luck with pre-orders, shipping dates, and logistics had DSG missing some crucial board game titles over the holidays: Azul, Kingdomino, and Sagrada, all monster hits, were no-shows for us.  I had pre-orders in on all three.  For various reasons I missed each one.  It was maddening.  Now I'm scrambling for the reprint waves, which always sell far worse than the initial shipments.  Meanwhile we had far too many copies of Clank in Space and Game of Thrones Catan.

It's astounding that in a world where over three thousand new board games are released every year, the market expectation is for us to have all the most relevant ones in stock on time every time, and thanks to our ubiquitous and versatile connectivity, we mostly get there!  But when we whiff, it just makes us look that much more incompetent.

In areas other than product sourcing, this comes up often as well.  When close a comic subscription box due to the buyer failing to pick up after repeated notices, we look back and think how obvious it was on first glance that the guy was a deadbeat.  Like, how could we not know?  Hindsight is 20-20 and this is clear confirmation bias, but it seems like we're wrong practically every time.

Or, egads, employees who have ended up being terminated.  Not every involuntarily-separated staffer has gone on to be "unfriended" by the store -- some are still on good terms and one even got brought back.  But there are a few I've had to cut loose where I looked at it after the fact and can't imagine how I didn't see the problems coming all the way back at the interview stage.

The tiny things.  Having every retro controller in stock except the one the customer needs.  Having six versions of that card in stock but the player wants the seventh or eighth version only.  Having three people call and ask if we have a Standard event on the three days each week when we don't have Standard.  Getting calls one after the other for Legos, used DVD movies, and model rockets, none of which we carry, though all are things I could envision bringing in!  I'll be shaking my head putting down the phone and wondering how I managed to miss carrying everything that anyone wants.  Isn't my job connecting people with things they want?

We're not alone, fortunately.  We aren't the only ones who miss seemingly obvious layups.  Wizards of the Coast released the Grand Prix playmat images for the first quarter of 2018.  They obviously used the Rekindling Phoenix art for Grand Prix Phoenix in March, right?
Miscues like this can happen because ultimately even the most powerful and flexible technology gets its effectiveness from the human beings operating it.  It's true at the big corporate level and it's true at the local small specialty store level.  Every working human is multiplied many times over in capability by good tech or software, and conversely no tech or software solution is as dependably effective as the one that includes among its process elements, that of human judgment.

And where there is human judgment, there is always some amount of error.  And that error is what jumps off the page and sears itself into the forefront of the obsessive mind.

It's just very easy to forget the first part, where the technology makes that judgment more effective and the judgment makes the technology more effective in turn.  The benefit is still there.  Only it's cold comfort when we see the frowny face from the customer who had a very simple need that we could not meet.  However diligent we might have been, all that customer knows is that we dropped the ball somehow.  They don't know, can't know, and shouldn't care that we only drop the ball one time in a thousand.  They were the one.  As far as they can tell, we're 100% useless.

So how do we deal with this interminable parade of Scott Norwood field goals?  Aside from ongoing training and education to sharpen the active judgment of our crew at every opportunity, we build in safety in the system.  Good restocking logistics are crucial, and are something I really need to make a software change to get back.  Stocking deep is nice if you have the luxury; most stores use Open to Buy and cannot simply aggregate forever (and there are serious tax implications that discourage doing so anyway).  Focusing or narrowing categories, the opposite of diversification, can certainly help, but of course that leaves the business at the mercy of its main revenue lines underperforming from time to time.  Mostly process mastery and built-in redundancy serve as a substantial backstops against performance failures.

We've operated with only the most perfunctory of safety nets since the move, with so much of my attention in 2017 directed at things other than main store operations.  I'm enjoying gaining back so much of that lost ground every day completing unfinished deliverables, and I think we'll start to see our batting average improve as I am able to give the staff a more functional infrastructure to work in. Until then, we'll just have to keep winging it as best we may.

Tuesday, January 9, 2018

Hobby Comic and Game Store Closures, Second Half of 2017

It's a bloodbath out there.  And for sure, I have been through the closure of my businesses before and it's not something I would wish on others.

Here are the stores that hung it up between July 1, 2017 and December 31, 2017, that I know about.  My information sources are imperfect but I am confident that this list does not fundamentally mischaracterize the situation.  I required a firsthand-source announcement or the discovery of the store closed in order to add it to the list.


  1. 2 Drop Game Shop (Fort Myers, FL) 
  2. 8-Bit Legends (Clermont, FL) 
  3. A Kid At Heart Games (Round Rock, TX)
  4. Arcana Hobbies and Games (CT)
  5. Area 52 Comics (Gainesville, GA) 
  6. Arkadia Gaming (Phoenix/Ahwatukee, AZ) 
  7. Battle & Brew (Atlanta, GA) 
  8. Board Game Island (Galveston, TX) 
  9. Cerebro Gaming (Lake Charles, LA) 
  10. The Comic Book Collector (London, Ontario, Canada) 
  11. Comic Cafe (Hammond, LA) 
  12. Comic Outlaws (Phoenix, AZ) 
  13. Cosmic Comics (Bellingham, WA) - reported may still be open
  14. Desert Sky Games and Comics (Tempe, AZ) (other location remains open) 
  15. The Dice & Dagger (Mandeville, LA) 
  16. Excelsior Games and Comics (Greenville, MI) 
  17. Fongo Bongo Games (Salt Lake City metro) 
  18. Full Spectrum Wargames (DFW metro) 
  19. The Game Academy (Tampa, FL) 
  20. Game Haven (Norwalk, CT) 
  21. Gamers Guild (Florida) (may have been sold to new ownership)
  22. Gamers Hall (Jackson, TN) 
  23. Games & Gizmos (Redmond, WA) 
  24. Game X Change (Clearwater, FL) 
  25. The Gaming Goat (Las Vegas area, 2 of 2 stores; Chicago area, 2 of many stores) 
  26. Gizmo's Games (central California, 2 stores) 
  27. Heroes Landing (Clearmont, FL) 
  28. Hero's Corner Comics (New Orleans) 
  29. Hobby Land (Montana) 
  30. Karliquin's Game Knight (Boulder, CO) 
  31. Legends Tournament Center (Bedford, TX) 
  32. Light Speed Hobbies (Portage, IN) 
  33. Lost Harbor Games (Westfield, MA) 
  34. Microplay (Reading, PA) 
  35. Oak Cliff Games (DFW metro) 
  36. Quantum Leap Games & Hobbies (Killeen, TX) (sold to new ownership and expected to reopen)
  37. Retro Reboot (Pineville, NC) 
  38. Retro Station (Woodbury, NJ) 
  39. Scarecrow's Games (Millsboro, DE) 
  40. Shep's Games (Aurora, CO) 
  41. Silver Star Comics (Tempe, AZ) 
  42. The Score (Murfreesboro, TN) 
  43. Tables Board Game Spot (Las Vegas metro) 
  44. TD4W Games (Delaware) (may have reopened)
  45. Toyriffic (Maplewood, MN) 
  46. Untamed Worlds (Lynchburg, VA) 
  47. Valhalla Games and Comics (Plano, TX) 
  48. We Got Game (Mankato, MN) 
  49. Wildpig Comics (Kenilworth, NJ) 
  50. Zanadu Comics (Seattle metro)


And no, I'm not being cheeky counting my own Tempe store on that list.  I had two stores, I now have one.  Never mind that the one is bigger than the previous two combined.  I moved locations, but I also closed a comic and game store, and therefore that counts as one down.

So, what do we make of all this?

Both of the stores closest to my new Chandler location closed within 90 days of my arrival.  Arkadia Gaming and Silver Star Comics were their names.  I did not target them in any way, I did not make efforts to poach their customer base.  I do not expect to get any significant migration in the near term from their clientele.  There is a myth that a new store can open and steal all the customers from an existing store, or something like that.  While some audiences are migratory to a fault (X-Wing players, I'm looking at you) the reality is that most are not, and will focus at one store while occasionally-to-infrequently visiting others.  When a player's Friendly Local Game Store closes, a substantial percentage of its customer base simply quits the hobby.

I think an important lesson to take away from DSG's experience with Arkadia and Silver Star is to remind ourselves as business owners that a store that closes is not necessarily bad, nor did it necessarily operate poorly.  It is possible for a store to operate well and still come up short.  Granted, failure to survive is usually indicative of at least some missteps, but nobody is batting a thousand out there.  Retail is in a state of upheaval, just as social media and technology are, and those of us piloting these barges are steering against choppy waves and just doing our best to steer prudently enough to stay off the rocks.

As Captain Picard famously said, "It is possible to commit no mistakes and still lose.  That is not a weakness.  That is life."  A quick look around the list provides plenty of evidence of that.  Hobby Land in Montana closed due to owner retirement; customers from the area speak of it with reverence. It would be a miscue to suggest that they "failed."  Gizmo's Games was a planned closure, with owner Lloyd Loomis deciding he needed a break and taking advantage of both his locations being eligible for ending-of-lease.  Zanadu Comics was an era-defining store in one of the toughest markets in the country for small business, and is as much a victim of the artisanal comic magazine problem as anything else, rather than some speculative lack of execution.

It's true that some of the stores on that list probably did fail, as such.  When a clubhouse store has holes in its floor and has aimed so low in its local market that its players are indifferent to that?  Probably no longer really on the yardstick by which we assess a peer.  It's just a thing, something that exists, something that irritates competitors in the area, but has long since been doomed, and it is only a matter of time before entropy catches up.

There are not a lot of guarantees in business, aside from ever-increasing costs.  My own situation, while favorable in the long term, is still stabilizing in the wake of an expensive, cumbersome, and disruptive move.  When another store transitions into history, every survivor learns something, even if that something is marginal or another data point on the list of known causes-and-effects.  If we're lucky and we keep this barge afloat, we can learn enough to know where the next rocks are going to be.  Staying alive is the only sure way to maximize the range of positive outcomes.

Tuesday, January 2, 2018

Regrowth

So the holidays did us no favors, and the week afterward was suitably lucrative at the expense of a lot of discount dumping.  I didn't enjoy doing that because it was tremendously inefficient.  You've already seen that discounts beyond 10% are basically straight-up loss, so you can imagine what a 40% to 90% clearance does to the asset ledger.  At least it worked as intended.

What, then, for 2018?

The year 2017 was the most difficult in my professional career, and that's a career that has thus far included such non-running-my-own-business events as finishing law school, passing the bar exam, and working for over seven years as a senior rules analyst for the Arizona Department of Health Services.  That job had me presenting legal analyses of the Arizona Administrative Code in front of the Governor's Regulatory Review Council on an ongoing basis.  Meanwhile, I also worked on the team in the Office of Administrative Rules and Counsel that developed and revised code chapters to adapt to ever-changing statutory requirements and political prerogatives.  This ranged from untangling the hellish skein of the 2003 version of 9 A.A.C. 21 -- a rulemaking so exacting that it wasn't finished until two years after I left the Department -- to writing the Medical Marijuana regulations in 9 A.A.C. 17 from the ground up, meaning our office began with a blank screen and a blinking cursor.  We had a mandate from a 2010 voter initiative that a registration system for patients and a certification system for dispensaries each had to exist on the double, where neither existed before, and it was upon us to manifest them.  And I'm saying 2017 at DSG was more difficult, at least for me specifically.

Imagine you have a business model that is functional, but depends on a certain amount of owner expertise.  For whatever reason, it has not scaled up to the point where process mastery takes over, and there are managers and crew who are purely on payroll and are capable of operating the business in its entirety with no other oversight.  Instead, the managers and crew are able to perform all the day-to-day internal work, but an owner is needed for infrastructure, banking, payroll, HR, and so forth.  That's DSG, obviously, as it operates even today.  Now imagine that owner is unavailable for half the year.  And that was 2017.  I was effectively out-of-office for huge swaths of time, working on the move, often physically on site operating construction equipment.  I had to do it.  Nobody else was available, aside from some spot assistance I got from some people who may not realize just how badly I needed it and how grateful I am.  But in any case I could not readily deploy the employed staff to do this work, as most of it involved move-specific deliverables that will not recur.

"Wait a minute, not recur?" you may ask.  "What about when this lease ends?"

Yeah, about that.  If there's one lesson the year 2017 hammered completely into my skull, with blood and bone fragments scattering everywhere as it pounded mercilessly, again and again, it was this: A store needs a staggering cash reserve to move, and if that cash reserve is unavailable, borrowing to make up the remainder is not a viable play.  The viable courses of action are: (1) Stay; (2) Move to a smaller or cheaper location where the cash reserve needed is lower enough that available funds are sufficient; or (3) Wind up operations and shut the business down.  As it happened, we did have some money available.  Operations provided some, our moving sale back in June provided a lot, and we let a few categories lie fallow to free up additional dollars.  But costs quickly spiraled out of control and we had to borrow the rest.  The result is the situation we have today, where the store has awesome long-term advantages but we're stuck tightening our belts as we enter the new year.

One of those three courses of action will occur in September 2022, when our lease ends.  We will either renew in place, we will move to a location we can easily afford, or we will close.  I have a health condition that gives me only about a 50/50 chance of being alive by then, so this might be someone else's problem when the time comes.  But assuming I am involved, by far the preferable scenario is going to be staying open in place.

And that means our way forward is clear.

No more worrying about how I'm going to leverage into the next thing.  No more, at least for now, dithering on whether it's time to put in a coffee bar -- that will be a question for years later, depending how fast our bankroll refills.  I'm not even going to put any attention into reopening branch locations until we've paid for the opening of the main location, which with any luck won't take long.

The order of the day is not expansion, it is regrowth.  The year 2018 will be the one where we take what we've learned, how we discovered to do it optimally and efficiently, and then apply that knowledge to the business we had to take apart last year, and build it better than it was before.  We have the materials.  We have the location.  We have most of our existing customer base, and every day we meet new faces.  We'll skip past all the steps that didn't work since 2012 and build the same amount of muscle mass in half the time or less.
The Magic card "Regrowth" translates into German and Italian as "New Life."  Standing here at the beginning of this vast undertaking, it does sort of feel like that.  New life, with a newer and greater adventure.  Come join us if you like.

Tuesday, December 26, 2017

That Tax Basis Ain't Gonna Lower Itself

In small specialty retail, we want to have as much inventory as possible right up until the days before Christmas, and then we want as much of it gone as we can manage, before the last day of the year.  This is because we want the most possible holiday sales, and then we want to avoid being stuck with a bunch of extra inventory because growth on that ledger counts as income at tax time.  I could avoid this pinch if I simply reset my fiscal year to begin and end on some other date, but we're not nearly at the kind of scale where such a logistical upheaval pays off.

In practice, what this requires is good forecasting.  Based on the sales numbers of past Decembers, we're able to project sales for this December, and starting in late November we tailor our ordering so that the inventory asset ledger tapers off right on time and then we can do some modest after-Christmas year-end sales event and shed down to the number we want.

It's rare to hit the mark perfectly or even within a few percent.  If I'm wildly off on the low side, my shelves are barren and I've got that nice low tax basis, but we probably missed a lot of potential sales.  If I'm wildly off on the high side, I've got overloaded shelves that I'm about to have to pay for twice, as it were.  The latter is the situation in 2017, since holiday sales came in well short of projections, even after hedging from spotty results last year.  In fact, if you took DSG's numbers from last week and erased the dates and mixed them up with a bunch of other weeks of the year, I'd have a hard time telling them apart from an average week in April or June.  It was disappointing, likely an ongoing effect from our move, coupled with the fact that holiday shopping is far more volatile against online and big box volume than our day-to-day bread-and-butter business is.

This meant our end-of-year sale for 2017 had to be a little more aggressive than I might prefer, while still protecting products I know I can't restock reliably in the first quarter of 2018 because half the factories on the planet shut down for Chinese New Year.

So I figured this blog post might be a good time to look at the when, how, and why of sales.  It's a topic I've covered before, but always good for a refresher.

WHEN: 
The best answer is "almost never."  Sales in small specialty retail should be rare, limited in scope, and unpredictable.  If the public knows what's going to go on sale and when, they'll respond to that incentive by never buying those items any other time.  Black Friday and end-of-year are the biggest danger spots here.  A good way to mitigate this problem is to avoid storewide "everything" sales and be more focused, and that's in the "how."  But in terms of "when," only the mass market with its vast economies of scale and automation is able to benefit from keeping rolling sales underway seemingly every week.  Small specialty is always safe to hit the major sales periods, and shouldn't hold big prominent sales otherwise unless there's a tie-in event like a grand opening, store move, expansion, or what have you.

HOW:
The best answer is "purposefully."  Either attach a simple rule to an entire product line or category (such as Buy Two, Get One Free), or attach a simple sale scheme to select items.  Those are the two winning plays really.  Blanket percentages off are logistically easy but also tend to result in narrowing the dynamic range of your stock -- don't do that to categories that have big jackpot items or super-rare stuff in them, or that's all that will get bought and you'll lose the most money possible.  I like to take the clearance rack that already exists and get really aggressive there as a sale promotion, because it's stuff we already wanted gone.  Importantly, you have to set up the terms of a sale and set up boundaries so the promotion is contained.  If you don't, you have the same problem as with frequency.  People will start to speculate that you'll go blanket-dump on board games or singles or what have you, and they will stop buying and wait you out.  Conversely, players will happily buy WarDoggies models the week before Thanksgiving if they have no specific reason to believe you're going to knock the floor out from under WarDoggies prices on Black Friday.

WHY:
The sale should never be just to bring people to the store.  Small specialty retail can't use sales that way; once again, you lack the economies of scale and automation that the mass market uses to do that, and moreover, you don't want to curate a customer base of the most price-sensitive customers you can find, because they won't be back during ordinary time.  Sales need to have purposes that, once achieved, allow the store an unambiguous benefit and a chance to return quietly to normal operation.  My end-of-year sale is driven by tax policy and is among the more obvious "good reasons" to "devalue" my own goods.  Clearance/closeout are probably the most common purpose and as long as you're not expecting to continue turns on that stock, it's pure cash recouped when you sell it, even if it comes with the regret that the BattleDucks Core Set never caught on and did not become evergreen as you had hoped.  Overstock sell-downs are a store correcting partial mistakes; we don't enjoy having to have such sales, but a bad overbuy can put a store in real danger if it ties up enough cash flow, even though you plan to keep the game itself around after that.  There are other niche reasons to put a product on sale, such as ding-and-dent or a new edition announcement, and anything you do in those scenarios is probably safe.

Anyway, if you're an industry peer, I'm sure you're nodding along and I hope your end-of-year reduction sale, if any, is successful.  If you're a customer reading this, allow me to quote from the late Peter Steele: "Please buy our products."

That about puts the wraps on 2017 here at DSG and the Backstage Pass!  May all of us have a better 2018 than the last twelve Godforsaken months have been!  Cheers!

Tuesday, December 19, 2017

The Excluded and the Excluders

I thought we were seeing the start of the holiday shopping ramp-up over the past couple of weeks.  Nope!  Still idling along at basically average numbers.  Which are good if I've got average invoices to pay, and less good if I have much larger holiday inventory invoices to pay.  Take a guess.

On further sifting of the numbers, the slow build we were seeing after the start-of-month dip was just general transactions, primarily in categories we already dominate and are hobby-based and not mainstream.  Magic cards, Pokemon cards, video games, the middle range of board games.  Not Warhammer.  More on that in a moment; that issue became the second half of this post.

But in terms of the mainstream merch we carry: Comics, POPs and action figures, mainstream-buzzing board games, apparel, and so on?  Black Friday weekend was great for these, and they have been utterly asleep since then.  Like, really asleep.

What we're seeing is this.  People just shop on Amazon now for the holidays.  Gifts, etc.  It's over.  That's just how it works now.  Nothing can be as easy as tapping your phone and the thing appears on your doorstep magically a short time later.  But once it's too late to be sure you'll have shipping in time to give that present, then that's when people will shop local.  Not until then.  I could be proven wrong later this week, I'm sure, but I bet I won't be.  I saw this last year but chalked the malaise up to Trump-based anxiety and depression.  Business as usual until the last minute, then BLAM some huge days and then the calendar gut-punched us with a Saturday Christmas Eve and the entire season amounted to a disappointment.  I saw it to some extent in 2015 but it was less of a dip from the usual pattern of sales because, probably, our usual wasn't as good then as it is now.  Now I realize it wasn't Trump, and it wasn't whatever else.  It was that small business are no longer part of the holiday picture.  The rest of the year we can make hay and our sun shines.  But right now we are, as Neal Morse put it, on the outside looking in.


There will eventually be an inversion due to this where small local businesses will have better pricing on this sort of merch, because Amazon will have something like 70%-80% market reach in entertainment goods, and will be at liberty to price up.  Everyone associates Amazon with low prices so it will take time before that price memory becomes replaced by the discovery that it's not always the best deal.

Even now, Amazon is already awful if you want a game that's sold out in distribution but stores still have.  As of this writing, board games like Fallout, Game of Thrones Catan, Ex Libris, and Photosynthesis are way above MSRP and/or are back-ordered on Amazon, but they are on many store shelves (like ours) at MSRP today, a comparative bargain.  Since much of Amazon fulfillment is done by affiliate retailers, their well will run dry first, and stores like mine will be the ones that Have The Goods (still the gold standard) deeper into the season.  But like I said, it will take a while before people really notice this, and before it pervades across all games.  Right now instead of shopping their FLGS, an awful lot of people are shopping via iDevice while waiting for a bus.  They never come in so they never realize we actually have what they want and at a competitive price.  We're left to preach to the already-converted.  Paradoxically, the procrastinators who are almost the last ones to visit will be rewarded because the hotness will be in stock for them.  Only the latest of the Eleventh Hour Crew will see us truly sold out.

So, Warhammer.  Warhammer is doing so poorly for us since the move that I may have no choice but to discontinue it outright.  We ended our standing discount on Warhammer when we moved, on the rationale that the discount was unsustainable in the first place and we only offered it to make up for the Gilbert facility being so small and cramped for minis gameplay.  With the gigantic, palatial game room we have now, there are no more apologies.  Top stores in town already collect MSRP on Warhammer with smaller spaces.  Knowing we'd see some drop in sales from ending the discount, we ripped the band-aid and were prepared for some impact, and figured we'd grow from there.

Unfortunately that's not what happened.  Instead of being painful but bearable, the reduction in Warhammer sales was ridiculous.  Warhammer had consistently been our 2nd through 4th place category all year long at DSG Gilbert.  Some combination of Magic categories always led, and once or twice a big month for some other category poked into the top tier.  But month in and month out, Warhammer got the job done.  We moved on September 29th.  In October, Warhammer was in 11th place for sales.  In November, Warhammer was in 10th place, but if you back out the sales from our Black Friday deep liquidation of Age of Sigmar, it was in 15th place, barely outpacing apparel and the Dragon Ball Super TCG.  So far in December, Warhammer is out of the top 15 and in an area where the data can be too grainy to draw reasonable conclusions.  That, my friends, is what you call sales falling off a cliff.

We did not think our Warhammer player base was that price-sensitive.  I'm still not positive it is.  A lot of the guys who hang around and use the game room and haven't been spending, have armies that do not yet have 8th edition new releases.  Some others are enjoying our game room but buying from other sources, either online discounters like Frontline or whichever other store(s) in town still discount their minis, which I'm not going to waste time investigating because it doesn't actually matter which one(s) it is.

"So nurp nurp put the discount back!", some may retort.  No.  At less than full margin, which is a short margin already because Games Workshop does not grant us keystone, Warhammer is not worth carrying.  I've had years to suss this out, it's pretty conclusory at this point.  Warhammer takes up an inordinate amount of space and labor in logistics and support, relative to the revenue it generates.  We are better off putting those resources into something else.  Compared to TCGs it's an absolute joke, I can seat 8 to 12 players in the space that one Warhammer table takes up, and I can fit cards worth the value of our entire Warhammer aisle into a single white cardboard storage bin and have room left over.  And that's not even counting that a card player doesn't splay their duffels and totes across a bunch of nearby regular tables or the aisle floor while they play.

And again, it's possible we're just seeing a sales gap from only a few armies getting meaningful product releases during the last three months.  Warhammer holds value well, and the miniatures hobby is a healthy pursuit, and Games Workshop is mostly great at supporting its retail partners, and these things help the balance so that if we're at MSRP, Warhammer is fairly safe to carry.  At the very least, the risk becomes negligible on a basic-stock-plus-special-orders basis, and bringing in the new releases on an open-to-buy budget basis can be maintained indefinitely.  We have sought to do better: to carry the line in depth and provide luxurious amenities.

I'm not fully decided on what to do about this.  Blowing it all up and starting over, including disallowing Warhammer play in the game room until that happens, seems like overkill.  But shedding the line down to minimum has to happen.  Right now Warhammer isn't pulling its weight.  For whatever combination of reasons.  And it needs to get fixed.  The economics of Warhammer are different enough from TCGs and video games that a one-size-fits-all venue monetization model isn't quite feasible for us yet, so the pay-to-play game space is also not yet a starter.  We'll see what happens.

I don't want to have my last article before Christmas be nothing but a bunch of Debbie Downer content, so I'll say this: Our crew is running strong, our video game category continues to improve by leaps and bounds, we're in a gigantically favorable tax position going into the end of the year,  and event attendance is through the roof.  I don't know whether every store in earshot is also seeing high player counts or whether it's just us.  But I'll take it.  Butts in seats does not equal net revenue, but stores like ours that can offer the goods players want and develop that community are seeing the right metrics follow.  That's up to us, to welcome those arrivals and find them a reason to become part of our player community.  The doors are open.

Tuesday, December 12, 2017

Glasses By Any Other Name

It's that time of year again when I look back and absorb it all.

Long ago he set the ship aright
Then he sailed away into the night
And I don't believe I wear rose-colored glasses
But I believe we have the greatest hope
And I know that we are more than dust and ashes
And one day we will know what we have known.

- Transatlantic, "The Whirlwind VI: Rose-Colored Glasses" (main) (alternate)


Looking back across posts from this weblog these past few years, it's easy for me to tell whether business was great or lacking at the time I wrote each article, whether my personal outlook on the business was positive or pessimistic.  Even in the best times there were setbacks, just as even in the most difficult times (some of which accompanied our move this summer) there were home runs.  More than that, I carried my business worries home, and that's something I would dearly like to learn one day how not to do.

I'm sure some of that confidence or worry, that excitement or disappointment, or perhaps all of it, bled through clear as day to the reader's side.  I am autistic so I can't really tell.  I find it close to impossible to discern what someone else is thinking or feeling, unless they give off the most obvious cues, and not always even then.  This deficiency can be something of an advantage on the logistical side, where I can examine hard numbers without being swayed by personality effects or emotion.

In any event, here is the answer key to 2017.  Here is what really happened.  You may have intuited much of it already, but now the signals should match the inputs for you.

January - The big news of the early year for DSG, of course, was the merger and acquisition of Tempe Comics and the organization gaining Michael Griffin and his crew.  We would end up closing that location at the end of October, but it served as a failsafe in case we couldn't find an acceptable lease.  We could have continued as a merged store there, though that would have meant a substantial business adjustment as the Apache Blvd location was truly awful and had bad parking, bad freeway access, and minimal shopping footfall.  The strengths of the physical plant were a dirt-cheap lease and a decent amount of space.  It could be a lot worse.

February - By this time we got to the end of our possibilities to stay at the Gilbert location, and had to start scouting out in earnest.  I was deliberately obscure about specific times and dates in certain blog articles so as not to tip off the competition to where we were looking, but once we had our spot, I had no qualms about making it public and only had to wait until the landlord gave the all-clear that no other tenants would be impacted by our announcement.  In Magic, Aether Revolt disappointed somewhat; it would take until much later in the year for players to want cards other than Fatal Push. Now the set is a trendy spec pick.

March - I had a splendid time at the GAMA Trade Show in Las Vegas, and I look forward to attending in 2018 in Reno.  In Magic, Modern Masters 2017 underperformed out of the gate thanks to the player base assuming it would have no value because Rudy and the other unregulated "investors" told them to be bearish on it.  After Iconic Masters landed in November with its second-tier roster, all of a sudden everyone loved Modern Masters and it was the best.  Yeah, I said it was the best when it was first spoiled and it had so many great cards in it.  Maybe try thinking for yourselves and not taking buying advice uncritically from YouTube personalities?  Back to that in a moment.

April - Our Tempe location was burglarized, and even though we got an insurance reimbursement, it was still an expensive and harmful event that netted us significant losses.  This event served as essentially our final determinant that the only way Tempe was staying open was if we could not find an acceptable lease elsewhere.  In Magic, Amonkhet landed and the player base mostly didn't like it.  The overload of product had begun and Magic product performance in its totality became worse from here on out.  Without singles, we'd have been in a really clenchy position.

May - We landed our Chandler location, though it would take weeks to finalize the lease and far too many months of construction before we could move in.

June - Lots of waiting.  Small optimizations.  Knowing the storm was imminent, I took the family to Disneyland.

July-August - My memory of this time period is mostly dark and angry.  And hot.  Dealing both with construction in Chandler and normal store operations back in Gilbert had me at the limits of exhaustion and frustration.  In Magic, Hour of Devastation flopped.  The warning alarms were blaring.  I was standing on the brake pedal, reducing my orders, but I didn't do so fast enough, and I felt the pinch.  The set was good, but wallet fatigue was metastasizing into authentic player disengagement.  I used the blog as a welcome diversion by starting the Arizona Gamer Story.  It has plenty of installments still to go.

September-October - We exulted in opening our new location, but it was still half-finished and we had none of the advantages of size or comfort, and all the disadvantages of a store move and the attendant loss of business.  And half of everything was put away or inaccessible or some damn crap reason we couldn't do it right.  (We're down to 25% of everything being screwed up, as of this writing.  Maybe 20%.)  The impact of the move was less than I projected; many of our customers followed us to Chandler.  But October was the worst month of sales all year and it wasn't close, and that's counting Tempe still being open.  Griffin and I were stretched to our limits, doing far too much in far too little time.  We won't think back on these months with fondness.  But we got through and made it to the promised land.

November - I haven't closed the books yet for the month but it looks like it might have been the best performance of the year, even up against ten previous months with two open locations.  The November swoon was real, but at the end of October we got the rest of the main room open and as a result, event attendance exploded and drove revenue.  Every single Friday and Saturday in November was better than every single day in October except for Friday October 6th, which had the combination of Ixalan still being new, Commander 2017 being back in stock, our PPTQ registration opening, and the Legend of the Five Rings LCG releasing.  We did still have some dud days in November, especially mid-month, and too many new releases.  But Black Friday was great, it set a new record, and the ensuing week has been decent and has let us make up some ground.  The crew is finally unified in one place with one goal, one mission, one flash of light, one vision.

December - Around the community, there is unrest and uncertainty.  Remember those YouTube personalities?  Yeah.  Back on the homefront, expenses are still staggering -- we'll be paying for construction until the end of 2018 or even later.  We are fortunate to have so many understanding creditors.  But the holiday sales tornado has already been kicking up some swirling winds.  The mainstream customer visits have been an utter delight to witness, especially with us having a chance to start all over and erase mistakes from our original Gilbert opening.  I have literally years of work ahead to make DSG's Chandler hub the store it ought to be.  But for at least this glorious winter into spring, that's our entire focus.  Be awesome.  Here.  Doing this.  And the people will arrive.  And DSG will reach back out into other locations in due time.

I may be too busy to keep the blogging schedule for the rest of the month.  At least, I certainly hope I am.  If I don't return in time, stay safe out there, and I'll see you again in 2018!

Tuesday, December 5, 2017

Once You Pop, That's Great!

The pace of new releases right now across tabletop categories is such an overloaded blast that it can only be properly depicted by the Whaaargarbl Sprinkler Dog:
We can't keep up with this.  There are not enough gamer dollars out there to ingest all this content.  There is so much that the top gamers in my player community, the guys who jump onto each new game system with top enthusiasm, are tapping out and abandoning ongoing games, and largely shrugging at new ones.  The top fervor I get for new titles on the rack is when the reseller scrappers show up because that title has already sold out online and they know they can flip it at a profit.

I talked about this a few months ago and concluded that despite the content quality being very high right now, we were headed for an analogue of the 1983 video game industry crash.  This bubble was bound to pop.  Well, it's happening.  Maybe people should heed my warnings instead of brushing them off.

The mass market, which pushed so hard to bring about this torrid pace of releases, is learning something the game trade knew all along: by mass market standards, these things don't turn worth a damn.  They're fine for small specialty retail, which can survive and even thrive on a turn figure between 3.2 and 3.8 per annum.  But mass sets a base standard of 12.  If it doesn't turn over monthly, clear the rack.  And the bloodbath has ensued.  Among others:

Barnes and Noble is tapping out.

Gamestop is tapping out.  Maybe.

Walgreens is tapping out.

Target kind of tapped out after their "all these exclusives" plan last year, with Oregon Trail and Dirty Codenames and Machi Koro Nights and so on.  They'll retain Cards Against Humanity (or Prongles or whatever it is now, see also title of this article) and Hasbro mainstream stuff, and a few sacrificial lambs to be able to say they have hobby games.  But they won't really.

Pardon the use of Reddit for links on those; much of the circulating news about those clearances was via social media that is not readily linkable.

The DSG plan to ride all this out?  Lean on our pawnshop business, of course.  Ain't no such thing as a new release when all the merch is used.

I wonder what will happen once the bubble has popped and things contract back to reality.  Will some of these amazing games finally have room to breathe?  Will I get to enjoy like three years of data packs from Android: Netrunner?  Will HeroClix v2.0 with its streamlined rule set finally start gathering momentum again?  And wow, what about Magic: the Gathering, which has had enough content to hold player interest for ten years released in roughly the space of two years?

You know what?  It's going to be miserable and lose a lot of people money, but maybe this is for the best.  Content is eternal and good content will still be around for us to partake of it later.  The mass market is Leviathan, and perhaps that tortuous serpent will finally starve out and seek waters better suited to its gluttony.