One of the most important things in business is to avoid spending resources that will not provide a return on that investment. To avoid that spending, you have to be able to say "no." And if anything, I haven't said "no" enough.
Desert Sky Games benefits from being full-spectrum, but is also spread thin from being full-spectrum. As the Chandler location's construction costs taxed our budget for the past year and counting, and as we saw a drop in customer traffic upon the initial move that we then had to recover and rebuild, we put resources into the merchandise that was paying off the most dependably: Magic, video games, Dungeons & Dragons, and board games. It was simple retail Darwinism and coffee was for closers. Those four pillars are the foundation of our revenue right now.
Accordingly, we have categories that have sunk beneath the "commitment quotient," or "CQ." That's a term I just invented out of thin air to describe the level and mix of stock and the amount of fixturization/merchandising and product knowledge and promotion that is sufficient for a store to carry so that an average customer with a greater-than-trivial interest in that category will take you seriously as a retailer of that product category. The CQ boils down to a money amount a store needs to spend, but because that expenditure is made up of interlocking pieces that a store may, in some respects, already have deployed, it's not quite as simple as quoting one number. It really is a resource and expertise collection, that is only consequentially expressible as a monetary cost.
To meet a category's CQ, it is not necessary to have a stock level to shock-and-awe the most hardcore of devotees, though that surely meets the CQ if you can. If you can't meet the CQ in a category, you're going to lose some sales and some money. It becomes a question of degree, and depending on the particular economics of any given category, such a failure can be anywhere from relatively painless to horribly expensive. You're not a "real" seller of Thing X. People will immediately realize that Other Store Y in town is better for them, if Y has even a modicum better spread of Thing X, even if, objectively speaking, Y's offering is not that great. Other Stores have gotten away with this grass-is-greener the-devil-I-know effect for some time, especially when incumbent. I've been the Other Store in some instances.
To give an example, the commitment quotient for Dungeons & Dragons would set you back around six or seven grand at wholesale. Sourcebooks, accessories, dice, dice accessories, miniatures, paints, rack and fixture that presents it professionally, and finally some furniture to facilitate gameplay.
We're talking about shelf levels of half a dozen starter sets and Players Handbooks, half that in Monster Manuals and Dungeon Master's Guides, one of each of every other sourcebook, and however many screens and spell cards you can get because Gale Force Nine appears incapable of printing them with regularity. I use old newsstand racks for this so I can face everything out, but IKEA Expedit/Kallax are also an acceptable solution if you're OK with spine-out display.
We're talking a couple hundred different colors and finishes of plastic dice and a handful of premium options, plus dice accessories like bags, dice towers, and so on, as well as marker-friendly grid table mats. It's almost impossible to stock too many dice. Just when I think I've surely ordered more dice than we can sell through, they're gone.
We're talking WizKids's pre-primed, unpainted, officially licensed "Nolzur's" D&D miniatures line, a case pack of half a dozen of as many of them your distributor can get you. (The difference between GF9's perpetual outages and WizKids's perpetual outages? Each time WizKids finally restocks us, they really restock us.) If you're lucky enough to strike paydirt on those, it's very easy to have over 100 different figure packs on your racks, including their Deep Cuts and Wardlings branded figures, both of which are perfectly good for D&D.
And you'll need a line of paint and tools for people to use to customize their figures, and for dungeon masters (DMs) to customize NPCs, monsters, enemies, objects, and terrain. Army Painter provides a full line with commercial rack, and a bunch of distributors have it. WizKids also produces pre-painted miniatures in blind boosters that you'll want on the shelves to the tune of a booster case plus the case incentive premium model.
Then you'll want to have some tables that aren't taken up 24/7 by TCG players, so that adventurers can play in your store! It helps a great deal if at least one store owner or employee understands how Adventure League works and can coordinate with DMs for a monetized high-quality organized play offering.
To be really healthy with D&D, you'll want double or more of that sourcebook count, a seriously huge inventory of dice, somewhat more of the other stuff, and more organized play. But if a D&D player walks into your store and sees the stock I describe above, they know you're for real. Your risk of losing money because of an insufficient entry into the category is in the very low percentages. You absolutely will attract D&D players to your store to buy from you. You met the CQ.
So, what happens when our coverage of a product category doesn't hit the CQ? We have a few that are failing to do so now, and a few that I'm concerned are headed that way. And there are products I want to get into right away but where I know we won't be able to hit the CQ yet, so I am holding off.
Apparel and collectible toys have fallen beneath the CQ for us to be considered a serious player in those categories by anyone who walks in. Fortunately, those two categories don't punish dabblers much. We can have just one rack of shirts and one rack of POPs, as we currently do, and the penalty is that we don't sell many shirts or POPs... which was already the case. Otherwise I wouldn't have let them attrit down to that level.
You may recall shortly after the store move that I stood on the verge of eliminating miniature wargames. That danger has largely passed at this point, but only because we placed the category into something of a "maintenance mode" that amounts to just enough coverage that our devoted regulars can get the models and supplies they need. I'm still not convinced that going huge on Warhammer or miniatures generally is still a thing that it makes sense to do. I'm convinced that if we can keep the toxic side of the community away and encourage them to play at other stores, the player roster that remains will be good people.
So should I keep wargames now that I already have them? The CQ for this category is a bit abnormal in that you can ignore most product lines as long as you carry Warhammer and the Citadel paint and tool assortment. Games Workshop has polished this to a shine over the course of decades, and now provides (with pricing incentives) multiple buy-in levels complete with branded rack and fixture that constitute essentially ideal CQ for a store entering the category. Over time, a store that sees success with Warhammer will start to learn which other SKUs are essential despite not being in the pre-set stock groupings. But in terms of starting up, it's a solved equation. And, crucially, in re-starting up it's a solved equation, which means that stores can drop and rebuild if they have to. I don't think I am going to do that, but it's reassuring to know that I can without screwing up minis.
Comics continue to underperform. Not long ago they spent some time in cash-flow-negative territory, which is just utterly unacceptable. With the move and the combination of stores, we knew we'd lose some boxholder traffic. But we couldn't just start shorting orders because we couldn't know which boxholders would go deadbeat on us. We had two things happen that have brought us back out of the red in the category, though it isn't fully healthy yet. First, the mini-golf place moved in next door and has brought in an increase in casual visitors, which has in turn grown comic sales, especially of all-ages books. And second, there was an orderly transition from my previous comic manager, who relocated for his other employment, to my new comic manager, formerly a store assistant manager. They have been keeping orders lock-tight. I don't see a lot of waste. In four months with no back-issue library to speak of, we've managed not yet to overrun the new-and-recent racks. It's impressive.
So should I keep comics now that I already have them? The CQ for the comics category is enormous. I often tell people to be ready to spend five figures and change over the course of the first few months to get established. If you can't spread a fairly comprehensive array of new releases each and every week, nobody will subscribe a box with you and casual visitors won't take you seriously in the slightest. However, you won't have sales yet so you'll waste a lot of wood in the early going. I almost think the CQ is even bigger than that, though. I look at the most successful comic businesses today and I notice one common element: They're not just comics-first, they're practically comics-only. To wit, many of them pay only passing attention to the "games" side of the industry. And they might be right to operate that way. (This is part of why I'm not concerned about GameStop's entry into the comics category.) This leaves me in something of a conundrum. Having comics be an appendage at the games-focused DSG is probably inefficient unless they somehow grow all the way back to scale organically. It probably makes more sense for me to split off Desert Sky Comics as its own thing, though I'd rather not spare the personnel expertise and my focus right now is on the hub store. I guess the outcome for now is that pulling the plug entirely on comics is still on the table, and that might even be the correct decision, but man, it seems like a punt when I've already hit the CQ.
We have a few small game systems with low CQs and they're sticking around because we can be real players on those product lines without risking too much illiquidity. In each case we're already players in their overarching category, so a component CQ for adding a game can be cheap, and that's likely why game stores tend to expand within what they already do, more often than adding new things entirely.
Star Wars Destiny can be carried "for reals" for less than a grand sunk, and the same fixtures you use for any TCG, and the same organized play labor you already use for Magic. Singles are optional; we've been waiting to get ours back in action for when Crystal Commerce and TCGPlayer integrate the category. So we'll be supporting Destiny until it's well and truly dying, which doesn't seem likely any time soon. Its CQ is minuscule.
Guild Ball is a micro wargame that's basically death soccer with tremendous British "flavour." If you're already carrying enough minis to have a paint and tool line in place, the CQ for Guild Ball is about the same as for Destiny, less than $1k. I wouldn't pick it up as your first and only miniatures line (unless perhaps it's your first wargame and you're already carrying Wizkids Nolzur's, Wardlings, and Deep Cuts for all your D&D players) but if you're in minis at all, it's safe for now.
Dragon Ball Super is a hot TCG that's been getting hotter. Distribution is pretty narrow, with GTS getting the lion's share of product, but it's obtainable. The CQ for DBS is also in that sub-$1k range as long as you're not going to do singles, and we're waiting on integration for the same reason as with Destiny. The booster packs and boxes are known form factors. There are only three main sets so far and a handful of ancillary packs. Most stores already have card tables and an event schedule. Giddy-up.
Finally, Lightseekers is a new property, a TCG that's blended to a smartphone game. It has some marketing push behind it from I know not where, and the hook is that it's an easy play and quite a bit of fun. It's tough for any new TCG to get traction, but Lightseekers seems on the verge of doing it. And the CQ is made easier by a publisher-direct starter option that I won't detail too closely here because I understand they're making some adjustments to it.
The CQ for the Pokemon TCG, if you're going to carry singles, is pretty high. Realistically you need to dump five grand or more to start, to be doing it right. And then you have to spend every day to buy walk-in collections, and 90% of them will be worthless 1999-2001 cards in awful condition. Moreover, the current market for Pokemon singles has been worsening, as I mentioned recently. Nothing is worth anything the day after tomorrow, the crucial cards needed for high-level tournament play (such that it exists for Pokemon) become spike expensive overnight, nobody trades them in, and they become chaff like everything else once the metagame shifts. Kids who don't know much about the game or don't play competitively just want EX and GX cards, and there's no good EV to open them from packs and no good ratio to buy them that gets many takers. In 2018 I've seen better Pokemon singles sales from our sticker vending machine, and they don't even know what card they're going to get! And unlike Magic players, the Pokemon players don't want to use the electronic kiosk system. They want all the benefits of it, such as instant knowledge of stock of any given card, but they want to pick through bins and search through binders physically, and neither of those things work well if you're cataloguing the cards.
So, despite the fact that I've long since paid the CQ for Pokemon singles, with an inventory years in the making, I may drop them. Sales are down, chaff trades are overwhelming to the point where we just stopped buying, and moving away from them could free up resources to do something better. I'm going to try a few things that might get output back to where it needs to be. If it all comes to nothing, I'll likely sell the singles inventory to another retailer and not worry about it, or convert it to pick bins and have the shiny kid bait in a glass showcase, offering visual you-see-it-we-have-it shopping like we were a bunch of barbarians or something.
That old article I linked at the start? It's easy to see why we have or haven't moved on some of those product categories it mentioned. Look here:
Sports cards? Prohibitively high CQ for now, only overlap is card supplies.
Disc golf? CQ isn't awful but it overlaps with nothing so we'd incur the full weight of it.
Vintage toys? High CQ, though it's not all money; a big need here is space to store and triage acquisitions. We do have the space, we're willing to leverage it, and therefore we might move this way before too much longer.
Classic games? Moderate CQ and we've already started moving in.
Coffee and/or food service? Sky-high CQ. In fact, entire-business-level CQ.
LEGO? Moderate CQ, and process mastery is the main obstacle here. I have about 25% of the seed inventory already, in storage.
Vintage arcade? We're doing it, full blast.
Electronics? Moderate CQ and it's a direction I've been looking to go.
Lord willing and the creek don't rise, I expect to use the months and years ahead to iterate the store's merch portfolio to reach an equilibrium point where I'm not outgrowing our space again, and instead pushing for efficiency and depth, and therefore sustainable net. New additions will enter when I am sure I can meet or exceed that category's commitment quotient. This will serve as a natural gate to expansion components, and I accept that categories with smaller CQs will seem artificially better prospects to get added sooner.
You know what had a bargain-basement CQ, especially in proportion to the sales we saw for them? Fidget spinners. That's why in short order you started seeing them everywhere. A low CQ for us sometimes means a low CQ for any business. I'll still take it.
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