Tuesday, June 12, 2018

The Game Stops Here

In the tabletop retailer Facebook groups, there is extensive discussion of mass market outlets like Amazon and Target, but owing perhaps to the lack of a prominent category-killer chain, that's about as far as the discussion goes.  Toys R Us is dead now, or dying, or whatever.  Barnes & Noble whipsaws between going deep and blowout clearance; it seems obvious they're on the brink.  When Hastings was still in business, it wasn't a big topic of discussion despite the close product mix and the company having among its owners the publisher WizKids, once known for HeroClix and now known for D&D miniatures so white-hot popular that supply doesn't begin to meet demand.

In fact, the only small-store tabletop chain stores that ever get brought up are the Games Workshop company stores, the newer of which are simply branded as Warhammer stores.  Often a tabletop retailer will be concerned if a GW store arrives in their orbit, expecting their Warhammer sales to tank.  In reality, I'm deeply hoping they drop a store right there two miles off my starboard stern at the Chandler Fashion Mall.  GW stores are great for independents.  They sell the product in a superbly merchandised scheme, they sell it at MSRP, and they actively demo the game.  I couldn't ask for more from a publisher-owned outlet with products I carry.  I hear a lot about how the GW stores get the "cream" of customer spending, the initial burst of interest and money, and pass off those customers for "maintenance" to independents when the low-hanging fruit spending is over.  I think that's a short-sighted perspective.  A person who truly engages in the Warhammer hobby won't stop at 2000 points worth of Space Marines.  And what do you care how much money the other store makes.  You worry about how much money your store makes.

Having said all that, take the worst tabletop retailer discussion of the GW stores or whatever mass market outlet you like, and it's a candle before the raging bonfire of the video game retailer Facebook groups and how they discuss GameStop.  It's an absolute obsession.  Some of the video game business owners seem like they spend as much time worrying about what GameStop is doing as they do on their own stores.
Desert Sky Games is across the street from a GameStop and two miles away from another GameStop in the aforementioned Chandler Fashion Mall.  And yet, astonishingly, we are still capable of making money in the video game business, and we do it without paying all that much attention to what GameStop is doing on any given day.  How can this be?

I won't straw-man this, so I should give airtime to the legitimate worries of independent video game stores where GameStop is concerned.  Look here.

}- GameStop is so well known they get a high volume of buys from the public, especially of the newest and hottest titles and gear, despite the fact that virtually any independent store will pay more for those games and systems.  A lot of independents get the "leftovers" that the local GameStop wouldn't buy.  And a lot of it is crap.  People post memes about how their entire video game collection is only worth $7.50 when they trade it in to GameStop... and then they do it anyway, instead of selling it to us!

}- GameStop is able to deal in new video game systems and games due to their massive scale, where most independent stores pass on that because of ultra-tight margins, worse than anything in tabletop, and the high speed at which prices plummet when a new title's shine wears off, often making the store lose money outright if they can't shift that stuff within 30 days of release.  That means a lot of calls and walk-ins where people ask for that day's hot new games, and the independent store generally has to apologize and say no, to which the customer replies, "Oh.  I'll just get it at GameStop."

}- Due to their working capital and merchandising systematization, GameStop can drop a store just about anywhere they think they ought to, and have it look pretty decent, in a way that independents cannot really match, pound for pound.  And they have a prepared lease that gives them the plaza or mall exclusive on much of what they sell.

}- Publishers provide GameStop exclusive products.  Independents get those same goods later on the backswing for resale used, obviously, but that's later and the money is missed now.

}- GameStop's software integration and deployment allows them to have a relatively powerful rewards offering, seamlessly functional between their in-store and online sales, and everything else that comes with a huge data infrastructure, such as return-abuse flagging, data mining, load balancing, preemptive price movement, and so on.

}- Oh, and GameStop has been pushing their way into the tabletop and collectibles markets, and now apparently comic books, because they can.

There are surely more factors, but let's go with those.

And here is why they don't crush us.

{- Regardless of what buys we do and don't get on any given day, the longer an independent store stays established, the more people gradually learn that they are better off selling to us.  Our trade prices are regularly higher and our cash offers are virtually always higher.  GameStop overpays on a few things from time to time due to some nuance of their data analytics.  For example, they overpay on aging sports titles, until a threshold passes and then they won't even take them.  The same goes for MMO games like Destiny that are hot tickets one day, and the next day have a trade value of zero at the 'Stop.  Our practice has been to utilize our own buying policies and not worry that much about why GameStop changes an offer price.  For most titles we're going to be offering at least as much or more; for titles we really want, we make a point of being extra generous.

{- Because GameStop focuses so hard on new frontlist and practically disregards retro, there is a symbiotic relationship where we provide customer service by recommending GameStop when someone wants, say, a brand-new Nintendo Switch, and the GameStop gets us back by sending people across the street to our store when they have a pile of cartridges or are looking for titles for previous-generation systems.  And their staff proved friendly and accommodating when we approached them in the same fashion.

{- The GameStop floor plan calls for microboutiques with a Pareto-portioned merchandise mix.  They can never go as deep as we can overall.  Even on newer systems where they make their hay, you'll mainly see the AAA titles, though thanks to scale their online store can go further.  But GameStop's online store is no different to us functionally than any other online competitor, whether Amazon, Cool Stuff, Star City, and so on.  Once you're talking about someone mail-ordering, even when it's as easy as phone taps, you've already changed the venue away from a local store.  So in terms of GameStop's ability to place their cookie-cutter deployment wherever they want, yes, they can do that.  It's a step up from a flea-market stall, but it is of the same species, an ever-migrating shop counter, and a functional one at that.  Your typical independent wants to cultivate a following by picking a location very carefully and staying there for the length of the owner's career, and that difference in objective changes the entire decision tree and makes the comparison apples and oranges.

{- Touching on the previous two points, with our own Elite Pro GameStop membership, we can take advantage of their periodic Buy-2-Get-1 offers on retro titles or accessories, bringing in tough gets like Link to the Past or Smash Bros or PS4 controllers at a margin that's acceptable given the extremely high turn rate.  We can just pay for it and it's worth it, or if we have the time to spare, we can root out overstock we have that they are overpaying on that hasn't gone to zero yet, like Madden [This Year minus 1], and get their store credit bonus to add to our bankroll for their next B2G1 sale.  And they don't care; their approach to this is systemic and disregards outliers like us cherry-picking stock we want against the high volume of inventory they have coming in every day.  I stress that stores like ours don't want to spend a lot of time dickering around with this, since we're better off just focusing on the customer(s) right in front of us.  But the tool is in the workshop for the odd times we might decide to apply it.

{- Any mass-market approach with master-planned processes is going to struggle to hit efficiencies with product lines that are especially fiddly.  That's why they don't ever offer card singles, and that's what makes their push into comics look like two sunset industries leaning on each other and taking a gamble.  While I think they've surely got a return-merch deal in place with Diamond and the publishers that hedges most of the risk, I don't expect them to lose money on the comics thing.  At the same time, they are not going to become a Friendly Local Comic Store.  They simply can't do it.  Not with their physical footprint and not with their process structure.

{- It's easy to forget while our gaze caresses the bumps and folds of our own navels that GameStop has other competitors: the rest of the mass market!  And that makes the exclusives something of a double-edged sword.  What makes someone buy God of War at GameStop when they can get it for the same price or less from Target?  Sometimes those two stores are in the same plaza!  Mass-market outlets use exclusives as lures to get people to come in, almost all of them do it, and what do you know, we do it too with store-exclusive comic covers, WPN-exclusive Magic products, organized play promos from Fantasy Flight and WizKids, and so on.  So while the strike time of a hot GameStop exclusive like the Secret of Mana remaster creates some feelbads for independents, the reality is it's nothing but the status quo, and it washes out in the larger numbers.

{- Finally, yes, GameStop has a software infrastructure advantage that independents can't match.  Independents also don't have to match it, because independents aren't operating a continent worth of stores.  Yes, it would be great for our more humble point-of-sale packages to provide the kind of robust analytics and functionality that GameStop's does.  And you know what?  We almost can.  Megapackages like Magento are within reach of larger independents.  Microsoft RMH, if they can ever fully migrate the world off RMS, is a powerful tool.  And in the world of small-shop cloud-based solutions, we have some narrowly tailored stuff that puts us in the ballpark and for which local expertise simply has to bridge the gap.

At the end of the day, it comes back to fundamentals.  Focus on one's own business.  Refine and iterate.  Find ways to delight customers.  Exhibit integrity.  Master processes.  Build up your employees.  Take care of business and you'll be fine.  Coveting thy neighbour's ox and ass is about as useful as spending your days reading Game Informer.

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