Tuesday, July 7, 2015

Thoughts, Part 2

As with my previous article by this title, this is not a multi-part essay but instead a collection of my recent observations and happenings at the DSGCW.

June 2015 was, overall, our best month in the store's history.  This is despite a couple of so-so weeks toward the middle and end of the month.  We didn't hit our very highest gross, or our very highest net, or our very lowest expenses; in fact, overhead went up since May, mostly due to scale.  What we did see what the strongest combined finish so far.  Most of our high-gross months have been Magic release months, meaning our net was constrained by so much booster box pre-order discounting. Most of our high-net months (as a percentage) have been otherwise slow months in which we bought a windfall collection and quick-flipped it.  This time, we had a top-5 gross coupled to a top-5 net month.  Much of the net was inventory growth and not cash profit, but this tells us that our workflows are sound.

Year 2015 Quarter 2 was the best quarter in the store's history without qualification -- highest gross, highest net, lowest overhead as a percentage of gross (though higher in absolute dollars than in the early days, of course).  This despite April posting artificially bad COGS, because the sales of Dragons of Tarkir came in March, but the net terms came due in April.  In terms of business organization, Patrick and I are starting to flex our muscles in our better allocated roles.  He manages the staff and does a significant amount of hand-selling and public interaction.  I manage the business operations and for the time being also serve as our online fulfillment specialist.  As our various tasks become more systematic, we're able to do more, faster, and with less waste.  And the potential is still vastly untapped; we both have miles of ceiling room for improvement.

The Independence Day weekend behaved almost precisely as Patrick and I predicted: Everyone left town by Saturday, so we needed to move in hard with promotions starting on Wednesday the 1st.  Overall it worked: we had three monster days in a row, followed by a very, very slow Saturday and a middling Sunday.  The week's goals got there, where our sales would most assuredly have missed their targets if we had not had our foot on the gas mid-week.  Holidays are tricky things for stores in our industry.  The best holidays are simple days off from work or school that don't come coupled to ideal vacation scenarios.  On those days, we see a lot of shopper arrivals.  Columbus Day is a perfect example.  Nobody is going to travel in early October to do anything.  But if you don't have something specific lined up and a plan in place for Memorial Day weekend, you might as well stay home and grill hot dogs because you sure aren't going to have a busy sales day at the shop.

Games Workshop pulled a semi-reboot of Warhammer Fantasy, with new rules just released called the Age of Sigmar and a new starter box set due out next week.  On the whole, the content stands up. The new rules are free (they're downloads from the mothership or you can get them in White Dwarf magazine this week, along with an exclusive figure, if your store still has any left) and they scale from one model up to however large your armies happen to be.  There is ample opportunity for new players to jump on, while preserving a chance for the hardcore to engage in epic confrontations.  In fact, if Games Workshop could be persuaded to give retailers more than five hours' notice about new releases, by golly, they just might turn around and see some sustained resurgence.

The gross manipulation happening right now in the Magic singles market is beyond even levels I expected to see.  Every week, a new Modern card or cards are being bought out from the online aggregators, eBay, and Amazon, spiking the card's value and setting off a chain reaction of mostly pro players selling into the spike and live-from-deck-to-deck hopefuls stuck buying at the new higher prices.  I keep telling the hopefuls to stop pawning their cards over and over and just keep them, and they'll find it much easier to build the Deck of the Week if they plan to be competitive.  But they're not interested.  And as a result, the pros and speculators are making a killing.

The Magic Origins prerelease is next week, and the release is the week after that.  So far we have the lowest pre-order totals for both that we've had since the store opened, despite there being no price increases or anything like that.  I don't fully buy into the notion that Magic is in a bubble, because it's so hot these days overall that even a sharp downturn will take years to prove out.  Origins appears fairly decent, more promising than Dragons of Tarkir did, so Standard (and even Modern) players won't be able to sit out.  And this fall we're going to see bananas business from Battle for Zendikar in all likelihood.  But even still -- if sales come in shallow for Origins generally, that anguished gasp you're going to hear will be the sound of hundreds of Magic dens/clubhouses finding their cash flow pinched off like someone stepped on the garden hose.  They already had to dump the gift of Modern Masters 2015 at less than retail to make their bills a month ago.  I have no cause to panic -- through diversifying our product lines and audience, we weaned off the store's addiction to Magic FutureBucks over the course of the year so far -- but I'll be quite disappointed if Magic Origins ends up being a woofer.  I was hoping we could use surplus Origins revenue to springboard into our migration from Light Speed Retail to ComicSuite RMS.

I've been watching a lot of Pawn Stars lately, now that it's on Netflix Instant.  I know the bread-and-butter day-to-day "boring" transactions don't make the show itinerary, and I know the interactions they do show are "managed" -- the quasi-scripted norm for "reality TV" in which the participants aren't necessarily reading lines but are absolutely staging the scene -- but I am constantly impressed by the Harrisons' approach to the actual verbal bargaining.  There are good parallels to what we do at DSG when making collection buys.  Your typical Magic grinder who wants to buylist a couple of fetchlands doesn't really need much staff interaction to transact business, but it's a different story when a more substantial collection of anything walks in the door -- Magic, comics, Pokemon, whatever.  And it will be more so again when we go back to dealing in video games.  There's a qualification stage that an untrained buyer skips, and in doing so, the buyer loses an opportunity to lay the groundwork for a good outcome.  Notice I said "outcome," not necessarily "transaction."  In many cases there isn't going to be a sale, because either the merchandise is just in too poor condition or the seller has an unrealistic expectation of its resale value.  But with good qualification, establishing that rapport and leaning on some key phrasing, a buyer can be absolutely honest and transparent about what the store is willing to do and why, and put the seller into a comfortable place to take a realistic offer and feel good about doing it.  And if it's one of those times when there's no sale to be had, you can send the visitor away not feeling like they were shamed or belittled, possibly generating a more beneficial future arrival either from that individual or by word-of-mouth.

Well!  That's about all I have for today.  Two weeks from now I'll write a post-mortem for Magic Origins, so next week is another wild card.  I'm sure something will come up that lends to analysis.  Hope you're having a great summer.

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