Tuesday, April 3, 2018

Why We Do Pre-Orders The Way We Do

The new shiny is even newer and shinier when it's not here yet.  I assure you, I know this anticipation very well.  I cannot think of a product in recent memory that I am as eager to purchase as the forthcoming Ori and the Will of the Wisps for the Xbox One.  My entire family is looking forward to playing.  From nothing but a teaser and our deep enjoyment of the original, Ori and the Blind Forest, we are completely in the tank for this new game and will pay whatever plausible price it may cost, and as soon as we're allowed to do so.

The mechanism for placing mass-media pre-orders like this, especially now in the digital age, is as seamless and frictionless as the deployment channel can make it.  I recently pre-ordered Star Wars: The Last Jedi from the iTunes store, for example.  The movie was nicely locked in for an automatic download at midnight Eastern the day of release, whereupon it magically appeared on my AppleTV and my children watched it.  I was out of town at the time, it was that seamless, we didn't have to do anything, it Just Worked.  Any time I am logged into the iTunes store, I can see my pre-orders on my dashboard, and I can modify or cancel them by pressing buttons.  (I don't typically cancel pre-orders of physical goods on principle, but I'll cancel a digital pre-order if I absolutely don't want the thing anymore, since it's near-zero impact to do so.)  I paid this time with store credit (gift card balance) but if it were a direct purchase they'd just ding my VISA as soon as the title went live.  It's tough to imagine it being any easier.

Here in the world of brick-and-mortar small specialty retail stores, our mechanism isn't quite that polished or quite that frictionless.  But it has come a long, long way since DSG opened in 2012, and an eon further than it was when I had earlier stores in place.

People often ask why I do pre-orders the way I do: why I take payment in full up front or there's no pre-order, why the pre-order opens when it does, why we deliver in the manner we do, and so on.  Fair questions all, since these processes are not common to all stores like mine.  Indeed, a mere five miles north of me is a store that has such a vastly different policy they may as well not be engaging in the same kind of transaction.

This is an instance in which our point-of-sale software, Crystal Commerce, actually shines.  From the customer-facing side, a pre-ordered product is clearly marked as such throughout the ordering process (online or in-store) and they will see the release date we entered for the item.  Once the purchase comes in, it resides in a special Preorders tab where we can reference those invoices at any time.  The day before release, we print up all the invoices in that tab, since they will automatically move to the regular orders ledger on that appropriate day.  The customer arrives, shows ID, signs the invoice, and takes their stuff.  (Their original receipt from when they bought it is their for-keeps receipt.)

That's the mechanical explanation.  Every part of the pre-order process has a policy explanation too.

Due to the rules in place from Square and PayPal, we can't take a credit card payment for an item that's more than 30 days before release.  Sometimes for especially anticipated merch, we'll open pre-orders earlier than that on a cash-or-store-credit-only basis, but usually we don't.  I'm not a fan of telling someone their money's no good here, even if it amounts to parsing payment types.  So for practical purposes we start taking money for high-profile stuff a month before the announced street date.  There are some publishers, Fantasy Flight Games I'm looking at you, who let us get a lot closer to release before finally locking that date in, while their devoted player base is champing at the bit to pre-order right on announcement.  I really don't like making them wait.  But once the floodgates open, those players are happy.

You might ask, but why take payment up front at all?  Isn't "No Money Down" an attractive marketing pitch?  Do you need the money first that badly that you can't buy the product otherwise?

The reality is, we're not yet at scale where it makes sense to take no-money-down pre-orders, even though we're well past the scale where the pre-order is absolutely necessary for us to buy the product.

For a very small store on all but the most obvious of core products, a pre-order might be the only way that a given item even gets ordered at all.  This is more likely to happen on board games or miniatures core games, because a TCG booster box was likely going to get stocked even at the smallest of stores.  If I had a 1200-square-foot microboutique focused on card games and video games, the only way a new release like Pandemic: The Clap gets ordered at all is if I have a pre-order in advance for it.  In practice, at DSG's size and scale, we order basically all TCG releases, most major-publisher board game releases, and most Warhammer model or accessory offerings.  So that stuff was coming in anyway.  Pre-orders only help us decide how much of it to buy.

So why take money at all?  Well, there is still substantial hedging.  If a product gets really hot on hype and we take a pile of "request only" pre-orders that have no payment and are thus not really binding in any way, as soon as the hype cools down, a lot of customers might not ever be back to pick up that pre-order, so we may have gone behind the slingshot for 70, 80, maybe 100 units that now suddenly won't sell.  Or there turns out to be some ridiculous Amazon rebate offer or something and they just buy it that way and forget about the pre-order they "placed" with us.  Given enough scale to where we'd be expecting to sell through that volume anyway, it might not be a problem.  For the time being, the only things we sell through at that scale are Magic releases, and the market expectation on those is pre-paid pre-orders anyway.

A casual pre-order for a copy of a board game that we'd have ordered two or three units anyway, and grows our pre-order to four units?  That would not be a concern for us in terms of taking money up front.  I would not be worried in the slightest about that buyer no-showing and being stuck with a whopping one surplus copy of a $40-$50 retail box on the shelf.  In such a case the main reason we take payment with their pre-order is because we're already using that process for everything else.

How do we price pre-orders?  For white-hot unobtainium, we'll typically be at MSRP when the market price is somewhat higher.  It's not a hard-and-fast rule, but in an expected scarcity situation, we're able to achieve normal margin and make a customer happy that they didn't have to fight all of Craigslist to get theirs at who knows what price.  Typically if we're at a market-based price on a pre-order, the underlying reason is we know in advance that we can only get some tiny number of units from allocation.  From the Vaults sets for Magic were often like this.  The reality is, if we're going to sell out almost instantly, it's irresponsible of us not to build in some sort of premium.  Often we'll come in over MSRP but under market price, so that our local players are better off buying from us than online.  If we stay at MSRP on those types of products, it incentivizes the backpack flippers to stake a bunch of scarecrows to buy us out so they can resell, and then our local players still miss out.

For products that are going to be popular and sold ever after at MSRP, we tend to offer a modest discount purely for the "we appreciate you committing to this purchase with us" factor.  For products we expect to be discounted, it's case-by-case.  Magic's "Masters 25," a product that ended up a little shallower than expected in customer demand, we knew where we wanted to be on everyday price and stock level moving forward, and the pre-order was far enough below that to present an attractive option to local buyers.  We didn't worry about fighting the entire internet to make a nickel over wholesale.  We're better off just missing the sale than trying to line up with the likes of Massdrop.  Those same inventory dollars can be devoted to other things instead.

We sometimes offer pre-orders on eBay.  This usually happens when we want to make some purchasing increment and be sure we're going to get it.  For example, Game X gets $4 cheaper per unit if we order at least 100 count, or we're trying to advance to a higher purchasing tier with distribution (this just happened because the quarter ended on Saturday) so we want to pack an extra couple thousand dollars onto that week's orders.  But mostly I don't like taking pre-orders in general on eBay.  The only operands of competition are price and, to a FAR lesser extent, our high feedback rating making us appear as an attractive low-risk source to buyers.  That's not a lot of basis to compete.

There are also far more cancellations of pre-orders on eBay, which is a huge inconvenience for us and is something we can't stop.  We have not delivered the goods so we must permit the cancel and refund the buyer, and thus we do.  Anyone who cancels an order on eBay gets added to our blocked list.  It's nothing personal, just filtering for the customer tendencies we want to cater to, which is those people who don't, for whatever reason, ever bother to cancel pre-orders.  We are at liberty to do this without missing out on sales volume because eBay is such an enormous overall buyer population, and we prioritize our local clientele first and foremost anyway.  Every time I finish a pre-order fulfillment cycle on eBay, I tell myself I'm not going to bother with the hassle and the fees and so on in the future, but it's such easy money that I can't stop dipping back into that well.

TCGPlayer offers pre-order capability natively in their system, but I cannot take full advantage because it doesn't work the same way for Crystal Commerce "sync" accounts.  If the "sync" system changes in the future or if I end up moving to TCG Pro or another front-end, then I'll probably end up offering pre-orders through that channel, but it's going to end up being 1:1 with the regular price of the item because mechanically it's cumbersome to make it work any other way.  It's probably still worth doing.  If you list your singles early enough, TCG Direct themselves buys them from you in order to fulfill Direct orders.  It's not a high-margin play but the volume is tough to beat.

Well, there it is.  Concepts, mechanics, policies, and connections, all the juicy details on why we do pre-orders the way we do.  I hope this has been informative, and hey, if you're a customer reading this, please feel welcome to pre-order all your Magic the Gathering: Dominaria goodies today, in-store or on our website at www.desertskygames.com!  Have a great week!

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