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Monday, November 9, 2015

Growth Unabated

I am intrigued by how my vested interest affects, or doesn't affect, my assessments of scope.  There is a sea change underway in my industry, and my in-the-moment reaction to it is one thing, but upon a deeper look at the landscape, I arrive at a different understanding. 

OK, I'll get more specific.  As you've seen in recent articles right here on the Backstage Pass, there are 48 comic and hobby game trade store locations operating in the Phoenix metro area alone, not even counting the rest of the state.  Another four or five have joined the fray just now (or are about to, depending how you want to count them), in alphabetical order:

Arkadia Gaming, Goodyear
This appears to be a former garage dealer who is now holding events in hotels and bootstrapping that into a physical location by means of an SBA loan and some crowdfunding.  Focus so far is on TCGs and billiards, of all things.  I'm as much a fan of coin-op as you like but I'm very apprehensive about billiards.  I'd worry about biker bar customer traffic, and while there's probably a niche for that, it's not something that has worked in the past for the hobby game trade.  (Gamers Cardz tried it in 2002.)  Maybe Arkadia will be the store that finds a way to do it well.  Very close to Play or Draw, a juggernaut of a store in Avondale.

Helix Games, Chandler
I was told this was open, but then was unable to locate it.  Chandler's permit process is almost as forbidding as Gilbert's in terms of being stuck in limbo for seemingly arbitrary periods of time, so it's entirely possible that this is their current status.  If and when they do open, it appears likely they may be very close to Desert Sky Games and Comics.  Is this where I'm supposed to say, "Come at me, bro?"

Monster Comic Books, Tempe
Opening Saturday, November 14th, this "comic book warehouse" in north Tempe less than two miles from the site of Tempe Comics (below) and not much further away from several other comic stores is bringing a wholesale motif to the table, offering BCW supplies at a discount.  It appears Monster will not be carrying games.

Snapcasters Gaming and Espresso, Phoenix
Opened last week.  I haven't visited yet but their photos online indicate a purely Magic: the Gathering store.  Supposedly with coffee, which I'm absolutely interested to see their approach with.  The initial inventory appears to be a player's deep collection, which is not uncommon in our industry.  Location is extremely central to the population base.  Very close to Phoenix Gaming Lounge, Samurai Comics Central, Critical Threat Comics, and Tempe Comics (below).

Tempe Comics, Tempe
Due to open shortly, this is the second location of the business that currently operates Mesa Comics, and so is an established entity.  Within five-ish miles of between six and ten other stores, but that depends how you count because it's a diverse mix.  Not all of them overlap product lines among one another, and some of them care about each other but won't be disturbed by Tempe Comics.

I wish I could tell you that this phenomenal explosion of store openings was something novel or regional but it's basically happening all over the country.  I stay in touch with other retailers through them newfangled intertubes and we're constantly astonished at the sheer propagation rate.  

Notice these newcomers appear to have no fear whatsoever of opening on the doorstep of established stores.  That's the part that makes me shake my head.  Your plane just landed, you haven't even gotten to the hotel and put your suitcase down yet, and you're going to pick a fight with the local toughs?  A huge part of my original business plan involved finding a location where there was zero nearby competition and not likely to be any for the foreseeable future.  That planning has paid off decisively. It worked for Play or Draw too: they opened in Avondale where a game store was not, and grew unconstrained into an absolute behemoth.

There's a certain gravity, to borrow a term from Black Diamond Games founder Gary Ray, that an established store has.  The store is already there, and people mostly know about it.  It's very easy for them to get business away from a newcomer just by running efficiently, and it's very difficult for a newcomer to get business away from the incumbent without raucous salesmanship to a degree that stretches to the intrusive.  As Gary puts it, the default outcome is that the newcomer is crushed in the existing store's orbit by its gravitational pull.  Sure, you could end up picking that fight and winning, but why put yourself at that disadvantage when you could just find an emptier stretch of road and win incumbency the moment you open the doors?  Magic: the Gathering is just that hot, I guess, so hopefuls are drawn to the dream so strongly they disregard pitfalls along the route.

That's what exasperates my peer retailers and I more than the abject fecundity of it all: Magic is white-hot, so many of the newcomers are essentially Magic clubhouses.  This is, of course, the normal way of things when a product line is in a sky-high boom cycle: everyone wants a piece.  Such a clubhouse store tends to parasite off the rest of the game trade to a degree, taking what would have been low-hanging fruit away from the diversified stores (who are able to flourish in other categories) until they've poisoned the well a bit, and then either cleaning up their own mess and graduating to become diversified stores (as DSG did) or ultimately petering out when the momentum of the hot product stalls or too many more newcomers jump into the pool and there's just no room for anyone to thrive.

Could such a stall be approaching?  Probably not.  Battle for Zendikar, though a gigantic seller out of the gate, is sputtering, and there's much uncertainty in the air right now.  TCG singles seem ripe for a market correction.  But Magic as an overall game is reliably hot, and Wizards of the Coast has given us all reason to expect the bonanza to continue with the announcement of April's new large expansion Shadows Over Innistrad, returning to the setting of what is perhaps MTG's finest entry.  Even if we take a bit of a breather with a fun, market-soft Commander 2015 set this week, Magic is going to be fine.  The explosion of new stores will continue.  Will it keep up until there's Friday Night Magic every other street corner?  I don't know.  Maybe.

Now is where I take a step back away from my initial reaction and look at things in a colder and more detached manner.  The Phoenix metropolitan area is home to almost five million people, if you count all the way to the exurban edges.  Based on the game and comic store density in other metro areas, which I'm blanking on a source but I recall to be about one store per 40,000 humans, the Phoenix area should be able to support something like 125 stores.  One hundred and twenty-five.  Seventy-seven more stores than there are, more than a doubling of what I've been calling a supersaturated market.

Before I conclude that I have it easy and just don't realize it, though, I can scale that back a bit, realistically, due to the significant exceptions.  The Phoenix population contains large pockets of retirees that, never mind our fondest wishes, are unlikely to engage in our trade as customers.  The brick-and-mortar footprint is naturally suppressed by a gargantuan presence from online discounters in town, including now four Amazon distribution warehouses and one-hour delivery.  Many products can now arrive via Prime faster than a customer could visit a store and purchase them.  The metro is already developed out by big box retailers and club warehouse discount stores, further curtailing boutique retail.  Our malls and heritage districts alike have been retrenching for decades now.

So maybe it's more realistic to say this metro area operates at perhaps half the population efficiency of an average city, so it could more credibly support around 63 stores.  Having 48 then goes beyond the happy middle ground and stretches well into the "saturated" range.  After adding in the newcomers cited above, we're about two or three more stores away from functional supersaturation.  A tremor in the comic or hobby game trade reducing the interested addressable audience could tilt the ratio, pushing us beyond the redline and making us drop our transmission even if the store count stays where it is.

And then there are big variables.  There are large cohorts of primarily non-English speakers, mainly Spanish-speaking, in Arizona and metro Phoenix.  I honestly think it's a gigantic untapped resource for our trade, as many of our products, including Magic: the Gathering and Warhammer, are available in the Spanish language.  However, I don't speak Spanish and I don't (currently) have the resources to enter that market.  I have learned that the Spanish-speaking customer demographic for other types of businesses in this region is stronger than its raw numbers suggest.  There are fortunes being made by offering regular everyday goods and services to these customers in Spanish.  That's the kind of opportunity that respecting someone's language can lead to.

That also means that the effective audience remaining is smaller still.  It may be that 48 stores is already too many for central Arizona.  Fortunately, we have a scathingly impartial arbiter to decide if that's the case.  It's called Capitalism!

Actually, even given all the caveats, I think there's still more room for more stores even in this crowded region because the hobby game trade itself is growing.  Tabletop gameplay is becoming more mainstream.  There are literally a new generation of gamers, gamers begotten of gamers, kids whose parents played tabletop games growing up in the 1980s and early 1990s and are now their offspring and are reaching the age where they can pull up a chair and join in.  They've already long since joined the worlds of comic books and video games, both of which reach deeply into the game trade and mainstream commerce.  And even with massive growth spawned of Essen Spiel and the roaring of the Pacific Tigers, the trade even today has hardly scratched the surface of the potential worldwide market.  Eurazeo buying up Asmodee/Fantasy Flight/Days of Wonder wasn't a lark.  The powers-that-be fully intend to monetize our trade exhaustively.

I think there may be more room for newcomers to enter this market yet.  Everybody into the pool, I suppose.  Oh, and I'm not worried.  I'm already good at this.  DSG has the resiliency of being able to stay in business even if Magic disappeared tomorrow; we have robust communities in TCGs, comics, miniatures, board games, and RPGs; and so much untapped potential ahead for mainstream games, books, toys, a return to console video games, revival of the DSG Vintage Arcade, and then more speculative stuff like pure modeling and I don't even know what all.  Kites?  iPhone repair?  The sky's the limit.  No single-category store would ever be an existential threat, even if they opened with a pile of cash right on my front lawn with the intent to conquer.  It would take a bunch of hyper-focused single-category stores all opening right next to me and then cooperating against me, which in practice would never be feasible, to force me into failure.  It would take, like, seven of them.


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