Tuesday, April 28, 2015

COGS: The Ratios and The Squeeze

An article has been making the rounds noting that the public believes that businesses clear a 36% profit after taxes, or in other words, net of everything.

That is, of course, an order of magnitude more than businesses actually make.  This comes from people thinking, "Gee, well, I heard they double the price before they put it on the shelf, and I'm sure there's some costs in there so they don't get to pocket the whole 50%, so, I guess... 30%?  Or 40%?  Or..."  And you average out those rectally-sourced guesses and 36% is where you land.

The problem is that "I'm sure there's some costs in there" grossly underestimates the reality.  Back-of-the-napkin math, the real average take-home profit across all of retail is something resembling 5%.  Five percent.  I get a shiny nickel when you buy that dollar can of Coke.  Or, more to the point, I split a nickel with my business partners.  As Zoe Washburne said, "At last we can retire and give up this life of crime."

Different retail scale levels produce that profit differently, however, and are vulnerable to different pressures.  Due to the alignment of ratios, big retail is about equally vulnerable to changes in occupancy costs, labor costs, and the cost of goods sold (COGS).  Small retail is vulnerable to everything, but mostly to COGS, and extremely so.  These days COGS for small retail are increasing at a frightening pace, against an MSRP that's printed right on the product a lot of the time and thus cannot be changed.  Small retailers, especially in our industry, are being squeezed by manufacturers/publishers.  And eventually some of us are going to pop.  (As it happens, Funko POP! products are one of the contributors to this problem.)

Big retail has four primary buckets, each shorthanded to 25% of gross sales but in reality with some variance.  Essentially:

  • 25% of gross sales - Occupancy.  A combination of rent/mortgage, utilities, licensing, maintenance, and so on.
  • 25% of gross sales - Labor.  Total payroll, not counting capital gains for shareholders.
  • 25% of gross sales - Cost of goods sold (COGS).  This means 75% of the price tag is markup at big retail, by the way.
  • 25% of gross sales - "Bottom line."  Includes debt service, capitalization, advertising and branding, litigation, taxes, and somewhere in there, around 3% to 8% final profit.

The 25% is good for visualization but in reality occupancy is slightly less, COGS is usually slightly more, and there exists all manner of room for creative accounting in "bottom line."  Labor tends to land right at 25%, though.  I apologize that I'm not citing a source on this, it's something I've learned so repeatedly and since so long ago I couldn't answer for it, and my Google-fu is failing me on locating a primary source.

The restaurant industry, by the way, is so much simpler:

  • 33% of gross sales - Food.
  • 33% of gross sales - Labor.
  • 33% of gross sales - Everything else.

Right away looking at the big retail cost buckets, you know small retail should be sunk because small retail pays so much more for COGS.  We do make up some ground in the other areas, particularly when we rent downmarket or utilize other non-prime commercial space.  Here is how that stuff breaks out for DSG and stores like it:

  • 15%-17% of gross sales - Occupancy.  Which is why there is no game store at the Scottsdale Quarter.  Breakpoint (mall) rent is 8%, so your middle-of-the-bell-curve game store is probably paying about that, with the rest of occupancy coming from the other line items.  Renting downmarket (a dump, in other words) definitely lowers the pressure, but introduces other problems.
  • 22%-25% of gross sales - Labor.  Try what you want, it's tough to escape this figure without being a one-worker shop.  We sometimes shave a dollar here or there by virtue of attracting people who would rather make $9/hr with us than $10/hr at Wal-Mart.
  • 50% of gross sales - COGS.  More on this in a moment.
  • 8%-13% of gross sales - "Bottom line."  Which is why if you get into any significant debt as a hobby game or comic store, it's tough to see how you're going to make any money until you overcome that burden.  Between cap, advertising and branding, and taxes, and God help you if you have to sue someone or defend a suit... yeah, you maybe put 3%-4% of gross into your pocket.  You typically need a windfall to grow, expand inventory, or survive adverse finances.

So, COGS is the real ballgame, isn't it?  And this is why it's so difficult when a customer expects us to give a big discount -- after all, we bought it for around half the price, right?  What's so bad about ten percent?  Well, that's all our profit and then some.  That's a loss, actually.  Do that enough times and we won't have to worry about discounting anymore, or showing up to open the door.

The above, of course, puts forth an assumption that the retailer is keystoning, or marking up the item to double what they paid.  In an industry like hobby games and comics, where there is often an MSRP printed right on the box or book cover, the store owner cannot always do that.  When prices in distribution go up, all of a sudden profit goes down, because usually the store can't just mark the item up however much is needed.  Your local coffee shop can do this, Jim's Comics can't.

But what about buying Magic cards on the cheap?  Yes, that does happen.  So, let's explore COGS a bit further with that in mind.  With the real COGS having gone up to ~54%-56% for SKU merchandise, the store has to make that up somewhere.  For TCG singles and used comic books, there exists a curve: COGS may be as much as 75%-80% for fast-turn, red-hot Standard staples, as little as under 1% for long-tail slow-turn commons.  The mean is around 44%-46%, offsetting the SKU markup in the aggregate.  In other words, the store only paid $3 for your $10 Commander single because: (a) It will sell slowly; (b) Its value might drop; (c) It offsets higher costs elsewhere; and (d) They probably already had several in stock, so your one card has a lower probability of enabling an otherwise missed sale.

It would take another post entirely to get into the price manipulation in the cesspool that is "MTG Finance," but suffice it to say there is a great deal of abuse going on and it's enough for me to recommend stores that don't have expertise on the payroll stay out of singles entirely for now.

There is a certain equilibrium in these ratios: given a normal healthy velocity of movement of goods, you don't build up too much deadwood, you don't lose too much to the clock or calendar in overhead, and at the end of a $60,000 month, the owner gets to pocket about three grand, give or take.  Probably the owner leaves at least half of that in operating capital and gets an extra thou in savings and/or that year's Christmas fund.  But all it takes is a price hike on a major product line, with no corresponding increase in MSRP, to wipe out those gains.

At the end of 2014, Wizards of the Coast increased the COGS on Magic: the Gathering products by 4%.  (They spun this as a "2% discount reduction.")  This represents significant money for a store.  Even now, with DSG's more and more diversified offerings, Magic is the single largest product and accounts for a plurality of sales, ahead of runners-up Accessories/Supplies (itself a category tied to Magic) and Comics/Toys/Media.  Magic is a mile ahead of board games, healthily ahead of minatures, and RPGs may as well not exist.  The COGS difference cost DSG almost two grand in March 2015.  (From that you may derive some assumptions about our revenue.  Save yourself the time; there was a new release that month so it distorts the totals.)

Cue the GAMA trade show back in March, at which retailers bombarded WOTC with complaints about the price increase, along with reiterating our existing complaints that WOTC does not do enough about the devaluation of their product by online box flippers making only a few dollars per box, or about the Magic "clubhouse" stores, barely more than closets established to get some ascended player wholesale access to discounted product, that are somehow Advanced Plus stores, further undermining the efforts of diversified in-it-for-the-long-haul game and comic stores to remain healthy.  We complained at and after their Premier Presentation, we complained at the WOTC booth on the exhibition hall floor, we utterly let them have it.  If you are going to soak us like this on our COGS, we fumed, couldn't you at least raise the MSRP to $4.99 per pack?

And do you know what WOTC said?  (EDIT: Since there are some Facebook threads going around misrepresenting me on this despite my clear caveats in the previous text here, I want to be exceedingly clear that I am recounting from memory and that this is most assuredly not WOTC's phrasing, but is mine, and should be taken with a certain degree of editorial intent.)   WOTC said that they do care a lot about the devaluation of their product, both real and perceived.  They do care about the health of the industry at the front-line retail level, and they do have concerns about the clubhouse stores having a parasitic effect and the online box-flippers training the customer base to buy in volume at bottom price online rather than buying where they play.  The wholesale price increase, coupled with no change in MSRP, is expected to make it more difficult for the online box-flippers to sustain their practices, while not having as pronounced an impact on established, diversified stores.

Reading between the lines, especially if you are up to speed on the context within the industry, it is not hard to infer the full message, though now we're back to my editorial and not WOTC's explicit statements.  The powers-that-be do not believe that the clubhouses/FNM closets/corner Magic stores are a sustainable business model or healthy for the industry as a whole.  They would rather see full-spectrum game and comic stores prevailing, because in the long run that grows their business profitably and sustainably.  WOTC intends to be Apple, not Android, focusing on strong branding, product quality, and profit, not on pure market reach in a race to the bottom.  I acknowledge the legitimacy of this objective and I think it will work.  But it still takes money out of my pocket and the mouths of my children right now, so I'm grousing about it despite the fact that I support the underlying plan.

For all that, the price increase only meant WOTC's COGS went from 50% to 52% direct and only slightly more in distribution.  Look at this murderer's row of high COGS against MSRP:

  • 55% - Cryptozoic Entertainment.
  • 55% - Fantasy Flight Games.
  • 56% - IELLO.
  • 56% - Mayfair Games.
  • 57% - Funko Direct.
  • 58% - Games Workshop Direct.
  • 60% - most toy and statue manufacturers via Diamond.
  • 62% - Pokemon USA.
  • 65% - BattleFoam Direct.
  • 65% - Dark Horse Comics.
  • 65% - The Upper Deck Company.

Anyone curious to know why I don't have a deep catalog of the last ten years of Star Wars trade paperbacks, or why I order light on Firefly/Serenity books despite them being proven sellers?  Anyone curious to know why I don't mind running lean on the Legendary deckbuilding game?  Now you know.  Literally not worth carrying except as customer care/courtesy.

Importantly, a few short years ago virtually all of these were at 50% COGS or much closer to it.  This is the Squeeze.  This is where small hobby game and comic stores have been bled, despite booming volume and increasing grosses.  This is where danger, present and future, lurks, and if my company should ever go belly-up and close its doors, it will be because of COGS more than any other thing.

I should caveat all these numbers by saying that distributors tend to have pricing tiers that can affect your percentages one way or another on certain product lines; on others, there is a discount cap and no amount of volume makes things any better for a store.  Also, I may have overlooked somebody in each case, and any errors are mine.

So, who are the COGS all-stars in our industry?

  • 52% - Asmodee.
  • 52% - WizKids.
  • 52% - Wizards of the Coast Direct (Magic).
  • 50% - Wizards of the Coast Direct (non-Magic).
  • 50% - Marvel Comics.
  • 50% - Paizo.
  • 49% - Chessex.
  • 45% - DC Comics.  Sometimes better with incentive offerings.
  • 42% - Image Comics.  Sometimes much better with incentive offerings.
  • 35% - Game Salute.  Wow.  If only their games were better sellers.

Some companies are net priced, which means there isn't an MSRP and we can just keystone it regardless of what our cost is.  As long as the manufacturer itself isn't selling the item on Amazon for a miniscule markup, that works great for us, it lets us adjust to costs and have the math work out.

Net-priced heavyweights:

  • Ultra-Pro.  Oh man, Ultra-Pro.  It's probably the best thing about them.
  • EnterPlay.
  • KMC Card Barrier.
  • Rio Grande Games, kinda.  Their games ship NPI on the invoice but each has a "price."
  • USAopoly.
  • Worldwise Imports.
  • BCW Supplies.
  • Pretty much all food and drinks.

You can see all of that is in the storage, accessories, or board game categories, pretty much.  That is where we are free to adjust pricing to reflect the reality of COGS and still make payroll week in and week out.

There is one final category, of course: Not Available Through Distribution, or effectively so due to exclusives beyond merely being only Diamond/Alliance or some other channel that your typical U.S.-based game or comic store can at least readily utilize.

  • Cards Against Humanity.  Amazon and Direct only.
  • Geek Out.  Amazon and ACD only.
  • Ultimate Guard Deck Protection.  Lion Rampant Imports (Canada) exclusive.
  • LEGO.  The worst, since it's direct-only for any kind of sustainable discount, and InterLEGO is not accepting new direct accounts at this time.

As much as I can see the profit in those lines, and the turn rate especially for stuff like Cards Against Humanity, I won't ever sink too much capital into them because of how cumbersome it is to procure the goods.

Thirty-six percent.  Human beings walking around on this earth, and voting no less, think businesses pack in profit on the level of 36% take-home.  It's such ignorance I am amazed they can successfully put on their pants every morning, and yet here we are.  And that is why the jackwagon playing X-Wing keeps telling people they can get the StarViper on Amazon for six bucks less if they want to.

Tuesday, April 21, 2015

International Tabletop Day 2015 Post-Mortem Review

It seems like I'm doing a lot of post-mortems these days, despite not being in the funerary industry.  Nonetheless, I've had feedback that these are helpful articles and less uninteresting than my usual fare, so here we go!

Tabletop is a web video series hosted by Wil Wheaton and Felicia Day and published by Geek & Sundry (G&S).  The hosts join guest stars every few weeks or so and play through a board game or miniatures game on camera, using fun graphics to teach viewers how the game works.

The Tabletop episodes, then, are essentially the best demos the games can ever have, short of being taught in person, so as soon as a game has appeared on Tabletop, it usually flies off the shelves and runs to immediate backorder with distributors.  While this state of affairs is no doubt a positive one for publishers, it creates difficulty for store owners, who are left with empty shelves and a customer public that is disappointed and figures if they're going to have to wait, might as well just buy the thing on Amazon.

Tabletop has kindly released their game roster ahead of time for the past two seasons, giving retailers ample warning to stock up on those titles.  For the current third season, this has worked well for me.  I have been able to move excellent quantities of Tokaido, Love Letter, Forbidden Desert, Sheriff of Nottingham, Dead of Winter, and Catan Junior.  I continue to see great velocity from titles featured in seasons 1 and 2 of Tabletop, among them Carcassonne, X-Wing, Once Upon a Time, King of Tokyo, The Resistance, Fluxx, Pandemic, and so on.  Among all those titles, the hardest to keep stocked recently has been Dead of Winter, with Plaid Hat Games's fulfillment through PSI being abysmal.  It's a hot game, released in late 2014, and most gamers don't have it already, meaning quite a few of them want it.  Yeah, Catan and Small World and Ticket to Ride always sell, but most gamers already own those, so demand is a more steady drip.

So, imagine my happiness when I learned that a special edition of Dead of Winter was included with the ITD 2015 exclusive promo box!  G&S offered a promo kit and a promo box, the latter of which, as it turns out, included the kit.  I bought four of each, two each from my primary distributor GTS and my secondary distributor Alliance.  Had I known then what I know now, I might simply have bought the boxes, perhaps three boxes per distributor and no kits.  The main value was in that Dead of Winter game.

There has been great disagreement on the various Facebook game and comic retailer private groups over whether or not the ITD promos should be sold.  These are items stores had to buy; they were not given to us for promotion.  Stores like DSG readily give out promos that we are furnished at no cost.  The archetypical example of this is Wizards of the Coast's Friday Night Magic program, which has set a very high standard for efficient and effective promo trading card disbursement.  For ITD, store offerings ran the gamut.  Some stores held raffles, scavenger hunts, tournaments, and such, where participation earned a customer some promo or another from the ITD kit/box.  Some sold all the promos online.

However, I took a different approach.  Since earlier in the week, we had been getting calls from people who wanted to know if they could just buy the promos and be done with it.  They didn't want to jump through hoops, they just wanted to get the promo, go home, and play.  Since a lot of DSG's demographic is made up of families and working adults, where time is as much a resource as money, I opted to cater to this demand.  Some of the promos were free, virtually all of them were free-with-purchase (such as getting the Wil/Felicia Fluxx pack free with the purchase of any edition of Fluxx), and those where I still had enough remaining to sell, I sold at nominal prices well below the going eBay rates.

Customer traffic on ITD was less than I expected, but more than nothing.  I think a fair number of people stayed home and watched the YouTube live stream from Wil and Felicia, rather than playing games at their Friendly Local Game Store.  Our events all fired, but not by a wide margin.  About halfway through the day I saw that we had some solid sales of the promo materials, but we were not on pace to run out of them, so I yanked a bunch of them off the sales floor and quickposted them on eBay.  We sold several hundred items from Saturday through Tuesday.  When the early posts had promo items like the Fluxx packs and Dixit cards at ten bucks or so, I came in at $4.99 and cleaned up.  By the time my supplies ran low, everyone else had saturated the resale market and they were all competing for the scraps.  The Felicia Day Dead of Winter promos sold for an average of $45.00 each.  Wow.  I had a few customers turn their noses up at the bare promo for $29.99 in-store.  We quickly sold three of our four ITD Editions of Dead of Winter in-store with the promo included for $100.  The fourth went for $150 on eBay.

So, was International Tabletop Day 2015 a success?  I would have to call it a push.  I think a beautiful spring Saturday when we might have seen depressed traffic and sales anyway was lifted up into an average, perhaps slightly-better-than-average day.  I think the kits and boxes were far overpriced for what we got, and I will be much more skeptical about buying heavily into them in 2016 if they are offered.  However, on some level and to some degree of involvement, I think DSG will participate again in the future.

Tuesday, April 14, 2015

MTG Dragons of Tarkir Release Post-Mortem

I wrote an article like this after Fate Reforged was released in January, and received quite a bit of feedback that readers found it useful.  Accordingly, here is a post-mortem analysis of DSGCW's experience with the release of the latest Magic: the Gathering expansion: Dragons of Tarkir!

First of all, a quick bulleted list of what Dragons of Tarkir gave us:
  • Dragons!  Unlike previous expansions purported to be centered on dragons, this expansion delivered dragons in every color (and none at all) and at every rarity.  There can be no question even in the slightest that, just as Avacyn Restored delivered angels, Dragons of Tarkir delivered dragons;
  • In the thematic realm, an alternate-present-timeline story that I know many players agree was delightful;
  • A cycle of Elder Dragonlords, some of which will be Commander favorites in perpetuity;
  • More clear Standard "push" mythics, in particular Deathmist Raptor, Shorecrasher Elemental, and Dragon Whisperer;
  • Two splashy planeswalkers, one in a color combination (red-green-blue "Temur") that had not yet hosted a planeswalker;
  • More special alternate-art promo cards from the Dragonfury dice game, which ultimately won't move the needle compared to the Ugin promo card from the last set;
  • "Money" uncommons in Roast, Draconic Roar, and others; and
  • One of the most satisfying draft formats in years.
Not a bad resume, right there.  Plenty of MTG sets have delivered less.

It's not all good, of course.  Here is what Dragons of Tarkir did not offer:

  • A set of rare dual lands, whether the enemy-colored fetchlands that were expected, allied- or enemy-colored "fast lands" a la Scars of Mirrodin, allied- or enemy-colored "filter lands" a la Shadowmoor/Eventide, or what have you;
  • Sufficient critical mass of Standard-impacting cards from the get-go to prompt competitive players to pre-order boxes en masse; and
  • Cards with significant implications in eternal formats.

We can live with two of these things based on the greater context.  Khans of Tarkir was such a blowout success in part because of the reprints of the Onslaught allied fetchlands, and let's be fair: WOTC bought themselves a honeymoon period with that.  Fate Reforged kept the party going with additional fetch access in the land slots in boosters.  Magic Origins in the summer can have just about any land mix and be acceptable, because Battle for Zendikar in the fall is fully expected to complete the fetchland reprint cycle.  (And if it doesn't, look out below.)  Cards for eternal formats mostly drive sales when they are for Commander, which at least is seeing some impact from the set; Legacy and Modern are seeing virtually nothing, but those aren't players who spend money on sealed MTG anyway.  Your typical legacy veteran's main purchase pattern at the FLGS level consists heavily of premium sleeves such as KMC Card Barriers or Dragon Shields, occasional slow-turn high-glitter cards like ABUR dual lands and foreign, original, or foil eternal staples, and concessions.

The third factor is a greater concern.  Because the Standard implications of the set were so opaque in the promotional period, pre-orders for boxes came in extremely shallow for us, a result we saw reflected to varying degrees with other store owners that communicate regularly with me.  We know now that there is plenty for Standard in the set, not the least of which are Dromoka's Command, Dragon Whisperer, and Roast, perpetual outage singles.  And we could have surmised that no set being released is going to allow Standard players to sit out.  I stood confident of that.  But the fact remains: Interest from competitive players started low.  Now, because of it being a Dragons set, it has been a beautiful slow burn of sales to casual players since release, much like Avacyn Restored was.  I still go through almost a case a day, give or take, and have gradually whittled my opening supply down to only a few dozen boxes.  I have still never restocked Fate Reforged, but I restock Dragons of Tarkir every week.  But this marks two sets in a row where the initial "burst" of sales failed to cover the cost of the initial allocation.  I've been bending down my pre-order numbers to account for this; just watch as Origins or BFZ are completely bananas and I wind up with stock outages.  I am hoping part of WOTC's new Standard rotation plan is that it allows them more consistent fulfillment, which thus far does appear to be the case.

The prerelease for Dragons of Tarkir broke all records for us, besting our previous best of 268 for Fate Reforged by bringing in a whopping 352 players on a 360-player allocation!  And the remaining eight were mostly defective player packs we needed to replace -- several Kolaghan packs contained no seeded pack or two seeded packs, and then we needed to open a couple of Ojutai leftovers to get prize packs for the main events.  The event was effectively a sellout.

We reduced the price of the prerelease to $24.99 plus tax, whether paid in money or store credit.  We reduced the prizing to only the two boosters provided by Wizards of the Coast.  This allowed us to push hard with our online web pre-registration, coupled with in-store pre-registration.  I discussed this in an article here a few months back when we did it for our Fantasy Flight Store Championships.  This time we had a pre-registration SKU for each event start time, and it fed through to our web store.  Players could register in-store or online and their order of entry was preserved by Light Speed Retail so that we could print out a report the morning of the event and have players pick their clan/dragonlord packs in the order they registered!  It was everything we ever wanted it to be and more.  I cannot stress enough what a difference the pre-registration system made.  It helped again to a lesser extent for our much smaller TCGPlayer Modern State Championship tournament last weekend, but the big breakthrough was using it for hundreds of prerelease participants.  No more long lines at the crack of dawn.  No more players having to wait to enter events.  No more delayed event starts.  It was glorious.  And players have sent their message as clearly as you like: We want a low admission price more than we want prize augmentation, the end.

In fact, the only negative I have to report about the prerelease was that the Tarkir Dragonfury dice "bowling" game created some negatives when we quickly ran out of the best promo cards to skilled players in the early events.  Wizards of the Coast really needs to make sure the premium giveaway stuff allows stores to provide every player with the same gift item.  The Ugin's Fate boosters from Fate Reforged were a runaway success in this respect, and I told them so at the GAMA Trade Show in March this year.  Even though not every player opened a promo Ugin, every player felt like they had a fair chance to do so.  The Dragonfury game also ate up a lot of labor attention.  Without that on the agenda, with the pre-registration removing virtually all of the crunch from sign-ups, and given great judge volunteers, I could have run the entire weekend with a single staff member on duty.  (I wouldn't have, of course, because of the overall level of business during a prerelease weekend justifies additional coverage anyway.  But still.)

One side note is that this is the first Magic: the Gathering expansion that WOTC has ever released in the month of March, to my understanding.  This made our March from one of the worst retail months of the year (often the worst) into our best month since the release of Khans, easily.  It appears stores are now going to get a major MTG release every two months, though a couple of those might not be booster releases, and a MTG release of some kind in almost every calendar month:

  • January - Fate Reforged
  • February - Duel Decks: Elspeth vs Kiora
  • March - Dragons of Tarkir
  • April - (nothing this time in paper but Tempest Remastered in MTGO)
  • May - Modern Masters 2015 Edition
  • June - Duels of the Planeswalkers 2016
  • July - Magic Origins
  • August - From the Vault: Angels
  • September - Duel Decks: Thing vs Thing
  • October - Battle for Zendikar (this might be late September but whatever)
  • November - Commander 2015 Edition
  • December - (Duel Decks Anthology gift box analogue)

Honestly, for as long as Magic remains red hot, I see no problem with this.  It does create an awkward prerelease schedule of January, March, July, and September.  Nobody seemed ready for a March prerelease (though it didn't seem to dampen attendance any) and by the time we get to July everyone should be so overamped for it I'll barely be able to calm them down.  Which I guess would also be fine.  In fact, forget I said anything, it's all good.  (Whistles and walks away...)

We opened only four cases and change for singles.  With such low competitive player interest, and competitive players comprising the primary audience for singles, I wasn't about to be caught with piles upon piles of unsold paper slabs in the event of a mass casual clamor for foil-sealed merchandise modules, which in fact is what arose.  We did open consecutive cases to even out our yield, and the worst swings from early on did correct themselves by the end, with a staggering zero Narsets out of the first two cases eventually pulling within the bell curve with the rest of the mythics with a three-pull case and a four-pull case following after.

When it was all said and done, we weren't heavy on anything and we weren't light on anything.  My only case break disappointment was limited to my personal interests: four of our five mythic foils we opened were Standard-relevant only -- Deathmist Raptor, Shorecrasher Elemental, Dragon Whisperer, and Shaman of Forgotten Ways -- and we got only one Commander foil, and a questionable one at that, Dragonlord Kolaghan.  This was good in that we were able to sell those foils quickly, but I had really hoped to break open foils of Dragonlords Ojutai and Dromoka for Commander and of course the planeswalkers for overall top value.  Not a problem; those foils came to me in sell-backs eventually, just as all cards do.

We sell boosters at MSRP and boxes at 20% off MSRP, making off-the-shelf booster box sales about $114.88, or ~$123.90 after tax.  At this point, both boxes and packs are moving with excellent velocity and I am disinclined to tinker with those numbers in any way.

In ancillary products, the fat packs for Dragons of Tarkir have sold strongly.  I expected this because of the natural affinity of casual players for fat packs, as casual players tend to find booster boxes a bit too expensive for frequent purchase.  It may appear they aren't moving because I have a lot in stock, but in fact it's the other way around: they are moving very well and I am restocking them aggressively and frequently to keep the party going.  Also, what's this we have here?  An excellent Event Deck with good singles in it?  Yes, actually!  From Thunderbreak Regent and a pair of Roasts on down to a Savage Knuckleblade and some solid block stock, the Event Deck is not only good value even for a competitive player but also plays extremely well as built.  I'm not going to be restocking it in consequential numbers, but I'm happy that I am on track to sell through it.  Finally, Intro Decks.  This is perhaps all the indication you need that Dragons of Tarkir is a good set for casuals and people getting into or returning to the game.  I actually almost ran out of intro decks after the initial release, and had to restock them.  Yes, I had to contact my distributor and actually purchase a display of intro decks.  It felt so awkward, like something you're always told you can do but nobody actually does.  Like fair-catching a punt before halftime in order to have a free kick for a field goal.

A final note is that the selection of Ojutai's Command as the buy-a-box promo was great.  The card hasn't been a tournament staple thus far, but it seemed like it might be while the set was still in its promotional period, and that's what counts.  It made people want to, well, buy a box.  I would have to characterize that as a completely successful "promotion," which is what a "promo" card is all about.

So that's it!  I am happy with Dragons of Tarkir generally, despite the Zendikar fetchlands not being included in it.  Overall I don't think I need to make structural changes to our business workflows for Magic Origins.  We will make an adjustment for the prerelease by actually using the sixth start time WOTC allows us to schedule, now that it's clear we're likely to run full for the event with an entire weekend of mostly happy players amped up to pay us a return visit.  I am also going to bend down my preorder numbers yet again.  I think WOTC's fulfillment has improved to the point where I am willing to stress-test them a bit by stocking to demand plus a week or so, rather than demand plus two or three weeks in anticipation of having to wait for a second wave like we used to have to do.  That hasn't been the case lately, so I need to avoid tying up cash flow in cellulose as though it was still happening.

I have a bunch of ideas I am tossing around for next week's Backstage Pass article, so for the first time in a while, I'm just going to leave things open-ended.  See you then!

Tuesday, April 7, 2015

Tales of My First Game Store, Conclusion

Wizard's Tower Gaming Center in Mesa, Arizona opened in August 1998 and closed in December of that same year.  That was my first ever experience in owning a business with an open-daily public facing and facility.  I learned a great deal, though a significant share of what I learned did not sink in until years later on reflection.  These past few weeks, I have regaled you all with war stories of the Tower's brief tenure, and here I draw all those things to a close.

December 1st, 1998.  Wizards of the Coast banned the key components of the Tolarian Academy deck, crushing my nascent career as a Magic: the Gathering grinder.  More immediately of concern, rent was due and I did not have the money.  I trudged upstairs to my landlord, hat in hand, and asked for mercy.

Paradise Palms Plaza granted mercy.  One week.  I had a week to round up the necessary funds, cashier's check.

Okay, so in the meanwhile, I got into some other trouble.  My own fault.  It's not related to the biz, so I won't get into it, but that occupied me for a couple of days and my ex-wife managed to open the doors and scratch together a few dollars from whichever visitors I got.  I emerged from this difficulty with two years of probation, subsequently completed without incident.  I spent a day at the store re-orienting and figuring out the next step.  We had orders placed and we were probably 75% of the way to that rent payment.  I had one more day to make good.

The next morning, I showed up to find a padlock on the door and an envelope taped to the glass in which the landlord described, for anyone who cared to open it and pry, that we were being closed down for non-payment of rent.

I can't even really complain because it's not like I had paid on time.  I thought I had another day, turns out by his reckoning I didn't.  I went to talk to the man, and he was unmoved.  I borrowed money from, who else, my parents, and got the store open again.  However, I did not intend to finish out the month.  At this point it was a question of asset reclamation.  I was determined to put the screws to that guy.  How dare he accommodate me so graciously and then impose consequences when I failed to deliver?  I would paint his wagon, yes sir!

As it turns out, the early December swoon that plagues me even now in this industry was a thing back then as well.  Sales were abysmal, though I had given no public indication that I intended to close the Tower.  I promoted up one final weekend of tournaments, following which on Saturday night I would auction off all my remaining inventory to the highest bidder.  Anything that did not sell would be returned to Zocchi for credit against the few thousand we somehow managed to owe them, and remaining Magic singles would stay with me as my personal collection.

We went out with a flourish.  Saturday in mid-December came the auction, and the scene was utter mayhem, with yours truly parsing binders rare by rare, taking bids, going going gone, taking cash, and moving along.  Once some of the players were out of money, they turned to playing my consoles (which were all free that night due to lack of inclination for me to monitor them) or just lounging about.  When I had finally gotten through a pass of the goods, I decided that was enough, and I kicked everyone out.  On Sunday, I backed a moving truck up to the suite and emptied it, except of trash and debris.  I did not depart in a considerate manner.

Right then, my condo lease in east Mesa also ended mid-month.  I was able to move into my parents' garage, part of which had been fashioned into some modicum of bedroom, along with my ex-wife.  My parents were on the verge of retirement, though, so I knew this was a temporary stop-over.  All of the material from the store went right to there, and I spent cold nights burning with anger over my failure.

I received a certified letter from Paradise Palms Plaza, berating me for closing down and leaving the suite a mess, and reminding me that rent was due on the first and would remain due for another thirteen months.  Such a short lease!  And yet it seemed so far out of reach to my limited perspective at the time.  Ending in January 2000?  Two thousand?  We would be Eloi and Morlocks by then!

I added up all my assets and debts and chose to file for Chapter 7 bankruptcy, a full flush.  The total discharge was only about $35,000.  This decision was terrible, by the way.  There was no way on the planet that I benefited from taking a seven-year Mark of Cain on my credit and a launch toward ruin over a matter of thirty-five grand.  I owe ten times that amount now in various debts, between my student loans, mortgage, and revolving credit, and I'm not worried in the slightest about my ability to repay.  Okay, maybe in the slightest.  But no more than that.  I wouldn't begin to consider bankruptcy today even if misfortune strikes, so for me to have done it then over such a small figure... it has me shaking my head.  Part of why I went to law school years later was that I didn't like the fact that nobody I knew was conversant about this stuff, and I couldn't afford a real attorney, so in the absence of good advice I failed to salvage the situation.  I didn't know at the time that I was "independent" for the purpose of student aid, so I could finally have afforded to finish college (which I did a few years later) and then surely secured a quality job and repaid it all.  Late is better than never, I'm sure my creditors would have agreed.

My creditors, anyway: Once we had filed, that was the end of contact from Paradise Palms Plaza and our various note holders.  The law doesn't allow them to continue collection efforts, including mere contact.  Seems like that kind of screws over creditors, but the truth is that the cost of an occasional bankrupt debtor is baked into the price of all borrowing.  So I've been paying for mine and many other individuals' bankruptcies and write-offs all along, and will continue to do so.  And so will you.

The process of bankruptcy was less painful than expected.  There was a hearing, at which a kindly judge asked me to swear that I had returned to creditors all the merchandise and supplies indicated on the filing ledgers.  The court assigned a trustee to monitor our finances, all our accounts were frozen, we lived on cash hand-to-mouth for a while, but aside from that we went about our days.  My ex continued to work for Southern Directory.  I got a temporary job at Office Depot helping rescue people from their computer ineptitude.  The trustee never visited us, never inspected anything, and I couldn't tell you what all the trustee ever did for the most part, but whatever he did, the court was obviously satisfied with it, because it granted us a final discharge in April 1999.  By the time our tax refund showed up, the trustee even released it to us.

Our store bank accounts remained closed forever, of course, along with our credit cards and our joint personal accounts as well, so my ex opened herself a new separate account and I went back to using my personal checking from Bank of America that has been open since 1989.  Which, by the way, helped a lot in recovering my credit.  Tenure, length of accounts, is part of the scoring formula.  That account is now 26 years old, still active, and it's practically a Konami code for the Fair Isaac algorithm.  Anyhow, whatever else I might say about my ex, I can tell you that our money arguments basically ended once we had separate accounts.  That's one of the rare false-positive indicators that a marriage is maybe not destined to last: seeing conditions improve as separation begins.  We divorced in early 2001.

I lasted three or four weeks at Office Depot.  I don't recall much about it.  I showed up every day, wore my name tag, tried to explain to people why their RAM didn't have a virus, you get the picture.  One day I got through a tough customer interaction where they had me digging around the racks and shelves for compatible parts for most of an hour.  I leaned back for a breather, knowing the store was quiet at that moment, but the next fetch quest could be mere minutes away.  A shift manager chucked a dirty rag into my chest and admonished me, "If there's time to lean, there's time to clean!"  I don't know if she maybe wasn't used to working with the tech support guys; we were never asked to clean the store.  Our job was to sell computer parts.  But somehow that was the spark that ignited months worth of anger and frustration in me.  I swallowed the rage -- I wasn't a moron, after all, and I was on probation -- I forced myself into a smile, and replied, "Well, there's always time to quit!"  I hurled that rag across the store like Joe Montana to Jerry Rice, ripped my name tag right off my shirt, and stormed out to my car.  The car that I didn't have.  And I walked the mile and a half to my parents' house, fuming the entire way.

And that is why I never use the phrase "if there's time to lean, there's time to clean," even when I've got a quiet store and I fully expect my staff to get on with the cleaning.  I find that I prefer treating them like adults and simply instructing them on what needs attention, in those instances where they don't just take the initiative to do it themselves.  Which, usually, they do.  I absolutely hate that phrase, and any other euphemistic "Let's make drudgery fun!" folderol.  I don't need my staff to be delighted to mop the floor or scour the toilet.  I'm sure it's not especially fun, that's why I furnish them with dollars of money in exchange for doing it.  To their immense credit, they don't complain.

Of course, quitting a job is a lot like wetting your pants.  At first, there's just warmth and release, but then cold, uncomfortable reality sets in.  I was living hand-to-mouth and had just cut off half my incoming cash supply.  I had to scramble up a job somewhere and quick.  The ex had a dependable paycheck, but it wasn't enough.  I went to sign up at the Adecco temp agency in Tempe, and after finishing the paperwork, I remembered that I was standing in the same plaza as that game store Jason Barnes had opened, the Arizona Gamer.  In fact, there it was, three doors down!  I paid a visit, and just like that, my fortunes changed....

Whew!  That's it!  That is the story of Wizard's Tower Gaming Center... pretty much in full!

I feel like I gave somewhat short shrift to some of the excellent people that populated the Tower, hidebound as my articles were to the progression of events.  I don't mean to overlook my bros (nor the ladies).  Some of the Tower denizens have become longtime friends of mine, and I am in touch with many of them even today.  Virtually all of them followed me to Arizona Gamer, so their stories and my story continued together a while longer.  I'm also apprehensive about giving shout-outs because I know I'm going to forget people.  But at the very minimum, and setting aside game-hobby folks who were there at the time but whom I already knew, such as Matt Stenger, Ray Powers, Jeff van der Zweep, Ray Ybarra, and Dan Gray, I would like to give Wizard's Tower Props to: John Lind, Jay Webb, Steve Ward, Dan Voigt, Brock Burr, Jon Rapisarda, Drew Durbin, Steve Rice, Ed Kenney, Wayne Paden, Robin Reid, Brandon Helding, Jason "Silky Smooth" Ludwig, Ryan Chapman, Chris Shaner, Mike Girard, Brian Garrison, Jared Arthur, Matt Mortensen, the late Scott Dove, Matt Cass, Chris Sadler, Mike Clement, David Ray, Mitch Ledford, Greg Smith, and damn it all, I know I'm going to remember more but right now that's it.

Join me here on the Backstage Pass next week for a post-mortem of DSG's experience with Magic: the Gathering - Dragons of Tarkir!