Tuesday, November 24, 2015

Thoughts, Part 3

The last few weeks got pretty heavy, so this week I'll lighten up with a return to my periodic, anthologic "Thoughts" series of articles.  My first two installments (part 1) (part 2) touched upon a variety of topics based on whatever I observed at the time.  I'm still kind of fixated on solving "the board game problem" at DSG, where I have a passionate customer following and good arrival traffic, but the category underperforms its sales metrics substantially, and the specter of price resistance, mostly not an obstacle in the past, has risen from its grave to rattle its chains.  Accordingly, today's Thoughts will all be about the board game category.

Last week's article ran so long I didn't get around to mentioning one of the little litmus tests or telltale signs, you might say, that the board game market at brick-and-mortar retail may have become compromised, perhaps fatally, by online deep discounting.  Gary Ray calls this "last man standing," and I see it a little more cynically as "having exhausted all other options, we came to you."

Take a hot board game, I'll use examples from the past year that come readily to mind.   Dead of Winter.  Codenames.  Risk Legacy.  In each case, there was brief availability in distribution (or, for Risk Legacy, via WPN Direct), followed by a pronounced outage where no product was available.  In each case, my initial stock of those games was modest, an amount a prudent retailer would order before knowing whether the game would be a hit. At DSG's scale, that meant four Dead of Winter, six Codenames, and four Risk Legacy.

In each case sales were nonexistent at first and the product sat on the shelves.  Then, the game got hot all of a sudden.  Dead of Winter was on Wil Wheaton's Tabletop, the others caught on from whatever social media or advert campaign, et cetera.  But still nothing.  The game was the toast of the town and I still couldn't sell a copy at list price.

Then just as I was ready to pull them from the shelves and take advantage of the eBay closing prices being at a premium due to supply scarcity, and sometimes after I had already done that on a few units, I would start getting the calls, messages, and visitors asking for the game.  They quickly bought what little I had left, and of course then I couldn't restock the title for a long time.

The entire time the title was out of stock and the Amazon and eBay price was out of sight, I was bombarded with regular requests for the title.  For Dead of Winter I even had a waiting list, since I hadn't learned this lesson yet.  My entire staff started learning the script.  "Yes, we do carry it, but it is out of stock in distribution.  We've ordered it and as soon as it's reprinted it will absolutely be here."

Eventually, at long last, I got a restock of each.  And of course since I had placed backorders with multiple distributors, I got quantity from all of them, more or less at the same time.

And then... crickets.

The calls stopped.  The requests stopped.  Nobody ever asked for the game again.  Okay, one or two people.  Out of the eight-deep restock of Dead of Winter, I have five copies left, and that was after buying one for myself.  For a game people tried to buy from me almost every day for most of a year.  I have yet to sell a copy of Codenames or Risk Legacy from the healthy restock I finally got.

What happened?  Where did everybody go?

There are several possibilities, and they are not exhaustive.

1. My in-town competitors are just crushing me, and they got all those sales.  There are two other "alpha board game stores" in town that sell at list, and I don't doubt that they saw somewhat better results than I did just due to their sheer longevity and deep, decades-built clientele.  But they had the same sourcing problems I had.  Even if their initial sell-through happened faster, they still sold out, same as I did.

2. The repeated requests were coming from eBay flippers, garage dealers, flea market dealers, or what have you.  Some of this was certainly happening.  But the sheer volume of it... unless I was hearing from every grind-hard in the American Southwest over and over again, the lion's share of requests had to have come from players who just wanted the game.

3. The game withered on the vine.  Too long out of availability, players gave up and moved on to the next hot title.  I think this is a plausible part of the equation.

4. Some other factor I haven't considered.

But I think we all know the real culprit, the proximate cause in the majority of cases:

5. Most people buy their games regularly at deep discounts online, and only turned to us when that reservoir ran dry.  Once we were refilled, everyone was refilled, including the deep-discount sources those players were accustomed to using, so once again they had no need to turn to brick-and-mortar at list price.

Man, it's a damned good thing Magic, comics, and miniatures are so strong this year, because if I were counting on board games to make nut, I'd be looking for a way out of my lease.  The most frustrating thing is knowing the board game industry is booming, seeing the racks full to the rim at Barnes & Noble and Target, and envisioning the gigantic amount of sales all these other retailers are making on board games, so the market is out there... but we're just making the ancillary sales, if that, and an underwhelming modicum of activity otherwise.

Moving on.  One thing an industry publisher told me last week that rang true was that with most board games, there's no ongoing investment or attachment, resulting in board games being far more vulnerable to commoditization.

With a collectible card game or miniatures game, cultivating a relationship with your local game store is an important part of the equation.  Without an LGS, tracking down the cards or figures you need becomes a tedious and expensive pack-surfing routine or an endless series of PayPal expenditures and waiting for little parcels to arrive, hoping each card really is "near mint" as claimed and dealing with hassles regularly.  As well, having a place to play is pretty crucial to collectible games because the metagame quickly grows well beyond the bounds of a kitchen table playgroup.  It's similar with the comic book hobby, where you're most likely going to subscribe at exactly one store to all the books you want, and that store is going to facilitate things for you.  Yes, there exist online sources for all of this, but it's almost all just small local stores selling online -- the collectibles side of the trade is the part that is toughest to scale up, so the mass market isn't doing that much of it, and it's where local retailers add a lot of value just by having the goods and knowing about them.

But with a board game, even something awesome like Dead of Winter, well, you only really need to buy it once.  And you're only going to play it at home, 99% of the time.  It's tough to make a case that you should pay anything more than commodity pricing for it.  Meanwhile, both the mass market and online discount warehouse stores can scale up simple, box-shaped commodity SKUs very easily.  They've already solved that workflow.  They can already do it better, faster, cheaper, and more profitably than any LGS-scale store.

Your only rationale for not taking the bottom price overall for that board game is going to be some combination of the rest of the brick-and-mortar value proposition: You get it immediately (relevant for Cards Against Humanity when the dinner party is in three hours); you avoid the risk and hassle of a damaged or incorrect shipment; you can use up store credit if you've been saving any; social reasons, and so on.  I'm not sure whether all that put together equals the incremental delta between the online price and MSRP in many cases.

This might be an endemic flaw to the board game category, something where the first publisher to solve this quandary definitively, and to have sufficient control over distribution to prevent a race to the bottom, will taste profound success.

Maybe this is why the comic and hobby game trade stores that focused on "collectibles" outnumber the pure game stores among those that have been around for decades.

Related subtopic and I'll leave it at that for the week: Board games have become increasingly card-based, which is sensible due to production costs being so friendly for playing card media.  Meanwhile, players have become increasingly attuned to how easily cards wear down, mostly due to the pervasive influence of Magic: the Gathering.  The natural result of this is that players tend to want to sleeve their board game cards. I sell far more sleeves for card-based board games than actual card-based board games.  And though I do enjoy the revenue from selling packs of all the oddball board game card sleeve sizes, my life would be an order of magnitude easier if publishers would just use the standard playing card size as much as feasible.

I want to call out the following publishers for making the decision to keep their cards standard-sized and thus easily sleeved with the most sleeve options the market offers: Stone Blade Entertainment (Ascension series); Cryptozoic Entertainment (DC Deckbuilding, Lord of the Rings Deckbuilding); Brotherwise Games (Boss Monster series); Asmodee sometimes (Splendor, Elysium); and Z-Man Games (Shadow Hunters).  I'm sure I've missed some, props to them as well.

Anyway, that's all for this week, if you're in the U.S., I wish you a happy and safe Thanksgiving!

Tuesday, November 17, 2015

How It Is

This article, which I'll warn you in advance is lacking in brevity, is about what happens when philosophy meets the reality of a comic or hobby game store's operational struggles.

It's happening to DSG right now, and we're at a decision point.  If I chart the wrong course, I could severely hurt DSG.  Even if I make the right calls, if I base them on the wrong reasons, the execution will be wrong and I could still fail.  I could sit still and do nothing, which, if wrong, could result in failure.  If I make the right decision, DSG should benefit tremendously.

Oh, and I don't have enough information to make the decision.  But I have to make it anyway.  So I have made it.  In consultation with my business partners, we came to a consensus, and as the administrator, I am pulling the trigger on it.

So.  How did I approach this?  (You lean forward, intrigued...)

I am a student of Objectivism.  (Wait, come back!  We have caaaaake!)

Don't worry, I'm not recruiting.  In fact, Objectivism doesn't work that way; you're supposed to integrate concepts for yourself, firsthand, not be talked into it.  That's part of why I say I'm a "student of Objectivism."  I don't claim to understand it perfectly.

But one thing I do understand about Objectivism is a concept my good friend Chuck Prime summed up in one simple phrase: "Don't lie to yourself."

That reaches far.  You know what it means.  People evade.  They rationalize away bad decisions.  There are the obvious examples, of course, like the alcoholic who swears he can stop any time he wants to and doesn't have a problem.  I eat a cookie even though I know it's bad for me.  I lie to myself that it's not consequential.  But it is, and that's why I am out of shape.  There are differences in degree, obviously.   The gambler who believes if she makes enough bad bets, the next one will finally pay off.  The spouse who manipulates his or her loved one out of a misguided expectation that they can change that person, or that they can prevent that person from changing.

What "Don't lie to yourself" really means, is an advocacy of recognition of reality.  This doesn't mean we can't think big and dream bigger.  What it means is that we can't expect to wish our way to that outcome.  We have to acknowledge what is, and when we have accepted it, we will have the insight to act, to bring about the change we want.

Wishful thinking achieves nothing.  Wishful thinking can be very dangerous as a rationale for business decisions, in place of observed facts and plain logic.  Instead of making a decision based on the best available information, that decision is instead based on fiction, the fantasy of how the person wishes the situation could be, rather than how it is.

If I'm trying not to lie to myself, wishful thinking is about the wrongest thing I can do.

So what does that have to do with the game trade?  Stay with me here.

Often on this blog I've said that customer buying preferences are not inherently right or wrong, but just a pattern of behavior.  It is up to the store owner to adapt to customer behavior, not up to the customer to behave as the store owner wishes they might.

Store owners wish all customers were wealthy multi-genre gamers who spend lavishly on a regular basis.  In reality, very few customers are like this.  An observable majority of customers of the comic and hobby game trade are enthusiastic and passionate about their comic or tabletop interests, but make their purchasing decision based primarily on price, secondarily on availability, and only after that do other factors come into play.

Again, the above is neither right nor wrong.  The information above is how it is.  Certainly it rings true anecdotally as well.  I am a married father of three; my household is on a tight budget, and you had better damned well believe that I shop on price a great deal of the time.

"But you've said yourself, Bahr, here on this business blog, repeatedly, that this trade is based on boutique store business models.  That discounting is bad.  So does price matter or doesn't it?"

Price matters because of how it relates to value.  Many of these same customers spend hundreds, even thousands of dollars, on games.  How price-sensitive could they possibly be if they are doing that?

They assess price, but on a deeper level the customer decides whether the item is worth it.

Value is the backstop to price's promise.  And if value fulfills that promise, price comes out looking like a champion, regardless of what the number actually is.

Value can be objective or subjective, and price elasticity is an expression of the spectrum thereof.  I like to teach the two extremes of price elasticity with the examples of a ten-dollar bill and a human heart.  A tenner is perfectly elastic.  You will sell an infinite number of them at $9.99 and zero of them, ever, at $10.01.  A human heart is as inelastic as a good or service could feasibly be.  A buyer who needs it will buy one, and only one, and it won't much matter how high the price is.

On the purely objective end of the spectrum, goods like water, gold, and steel have chemical and/or biological properties that make them worth a given amount fairly reliably.  Even if someone doesn't want to buy that gold right now, it's not going to be difficult to find a buyer at market value in short order.  That predictability reinforces the value perception of the objective good.

Games are entertainment goods, by definition indulgence purchases.  Their value is much more likely to be on the subjective end of the spectrum, far more elastic.  How much fun does a customer think he or she will have with this item?  And generally due to market iterations, we have seen price strata arise that are tied loosely to the cost of the production of the good but can sway in either direction based on the reputation of the publisher, the characteristics of the product line, expected resale value retention, and so on.  Games Workshop gets to charge more for miniatures and sell them, because the quality is perceived as excellent.  Magic cards hold value because the market for them is so liquid and format staples are perpetually in demand.

A wise company manages their product distribution to maximize its value.  Vertical pricing and distribution agreement structures are legal now, thanks to a 2006 Supreme Court ruling.  That's how Wizards of the Coast was able to get distributors to lock online-only businesses out of access to Magic: the Gathering.  The most obvious examples are outside our industry, of course.  Apple, PING, Subaru, Nintendo.  Each uses a combination of selective access, quantity limitation, quality guarantees, and market positioning to reinforce the value of their wares so that customers are willing to pay full price.  And it works!  It works so well that the resale value of these items remains high, despite that secondary-market transactions take place completely outside any control whatsoever of these manufacturers.

I mentioned Wizards of the Coast.  Other companies in our industry are doing this now as well.  Games Workshop is known to do it; they forbid their direct accounts from selling new product online, they enforce a minimum advertised price (MAP), they require that retailers stock and merchandise their item in a manner that is master-planned to reinforce the value of the product line, and the discount differential versus third-party distribution makes for an extremely effective dangling carrot.

Recently WizKids took a huge step into this fray, limiting initial orders on HeroClix and Dice Masters product to fifty cases per store.  This affected huge online discounters while having close to zero impact on small local game stores.  Why do this?  Because WizKids knows, just as Wizards of the Coast knew in 2006, that if a collectible game isn't being played at the local level, it will eventually sputter out, and small local game store support is the linchpin to that mechanism.  So far it has worked for HeroClix: the first expansion released under the new plan, Superman vs Wonder Woman, held at nearly MSRP for weeks on Amazon before follow-up orders and volume saturated supply, and as of this writing the Amazon low is still less than 20% off MSRP for the critical SKU, the "booster brick."  The HeroClix set before that, Nick Fury, is readily available online at discounts approaching or in excess of 50%.  That's a pronounced increase in value perception.  This week, Dice Masters will get its first controlled release, Amazing Spider-Man.  I am optimistic and excited to see what happens.

Not all publishers in our industry are on board with this plan.  By not supporting the value of their products with vertically integrated resale structure, they allow a landscape in which their products are bought en masse by massive online discounters and countless garage dealers and flea market hucksters and sold in a race to razor-thin profit margins and the bottom dollar.  This percolates through to every major resale channel: Amazon, eBay, Craigslist, et cetera.  And ultimately that makes these products' value, subjective or otherwise, plummet.

So, on products that seem like they should have robust value, because they are good games,  especially when they are good games with large audiences, my customers have the option of paying me list price for the item, or obtaining it for less money, sometimes a lot less money, from another source.

I do offer some things in the value proposition that customers have, at times, found persuasive.  Immediacy.  You get the item now, and time is a scarce resource for many.  Tactile appeal.  You can pick it up and check it out.  Risk.  Ever order something through the mail and had it arrive late, incorrect, or damaged?  Ease of transaction.  This includes things like using store credit, and also (less so nowadays) discomfort about using one's credit cards online, and like such.  Degree of incremental difference.  As in, the local price is higher perhaps, but is it higher enough to bother sourcing the item another way?  Few people care about the price difference on the $14.99 SKU that's $12.68 online.  A lot of people care about the $99.99 SKU that's $57.34 online.  And then there are abstract social factors.  There be dragons, venture not into yon uncharted currents.

Accordingly, I must recognize the impact of price on the value proposition.  If I pretend price doesn't matter because I can tug at a social lever of "supporting one's local game store," I am lying to myself.  I believe a lot of customers do want to support their LGS.  I know many of them personally.  I know their intentions are sincere.  A lot of these customers are extremely supportive of DSG.  I also know they can read the numbers on a price tag perfectly well.  And it's disingenuous of me to expect them to set their own value judgment aside, arbitrarily, and pay full list price for a product every time, if the manufacturer isn't even willing to take steps to make the product's value worth that price.  And it's not fair to expect those customers to subsidize the other players either.

The manufacturer that hits this issue the closest for me, because of the combination of having great products, a huge audience, and significant devaluation of their products because of online discounting, is Fantasy Flight Games (FFG).

Fantasy Flight holds the tabletop license for Star Wars, so as you might imagine, they have many products that would have been market-viable even if they weren't that great.  But as it happens, they're generally excellent.  The X-Wing Miniatures Game is the flagbearer.  There are also the Star Wars Living Card Game; the Imperial Assault Miniatures Game; the Armada Miniatures Game; the three-faceted roleplaying system Edge of the Empire, Age of Rebellion, and Force and Destiny; and more, including a deep-engine tabletop board game called Star Wars: Rebellion due to arrive in early 2016.

Games Workshop also licenses the Warhammer line to FFG for card and board games, which have included 40K Conquest, Fantasy Roleplay, Dark Heresy Roleplay, Forbidden Stars, 40K Relic, and as of next week, the Warhammer Quest cooperative card game.  Other FFG games that are hits include Android Netrunner, a reboot of the WOTC 1996 asymmetrical TCG; A Game of Thrones Living Card Game; Talisman, an evergreen classic now in its fourth edition; XCOM cooperative board game; Civilization; Cosmic Encounter; Battlestar Galactica; Citadels; Descent: Journey in the Dark; BattleLore; Fury of Dracula; it goes on.

These games have a huge audience and their metrics on my sales floor have been underperforming their reach for literally years now.  This has continued despite constant efforts to promote sales, efforts both internal and external to DSG.  In-house, I have given FFG games massive boosts in shelf presence and room positioning, product champions have volunteered to provide extensive organized play and drawn big turnouts, I have spent advertising dollars specifically to draw in and grow the audience for these games.  Externally, the 2014 dockworkers' strike resolved, filling my racks with product, FFG continued to produce organized play premium goods that players wanted, and the tabletop game industry has grown overall.

Despite all that, a majority of my sales of FFG games have been either low price-point SKUs, pre-order bundles offered at a discount, revenue from a special Independence Day sale we ran, or closeout/overstock mark-downs.  Some angel customers have willingly supported the store full-tilt and that's something I will never forget, and I will always look out for those individuals when it comes time for retailer support of various kinds.  Moving out from those angel customers at the core, we have our tournament regulars in the next orbit, who were the next most frequent buyers.  And moving out further, we have tournament attendees who simply bought all their stuff on Amazon, in some cases speaking vocally about it right in the store.  That's as far out as the store goes: there are hundreds of members of some of the FFG regional Facebook groups, and online discount deals are a common topic that propagates.  These guys are buying tons of product and they aren't buying it from me.  I once thought I was just doing a lousy job running the line, but checking against other retailers both local and national confirmed that my situation was more common than the other way around.

More frustratingly, FFG has made things worse at times.  We understand the Target timed exclusive on the X-Wing Force Awakens core set.  Disney made you do it, we get it.  That SKU has been a colossal choke in the game trade because so many of the players got it at Target on Force Friday -- and why shouldn't they have?  It was the only choice they were given!  But just last week during the X-Wing World Championship, FFG's own commentators told viewers and listeners that they could buy their new X-Wing product on Amazon, rather than supporting their LGS.  That was obviously a gaffe, but it shows how firmly rooted the idea is, that FFG's own people think of it off the cuff.  It's cheaper online.  Just buy it there.   Our product isn't worth any more than the cheapest you can find it.  Our product's value is less than the price we suggest for it.  MSRP, after all, stands for "manufacturer's suggested retail price."

After extensive metric review and other research, DSG has decided that maintaining FFG product at list price (MSRP) is no longer viable at this time.  The turn rate doesn't meet the level we hold every product line accountable at in order to justify its space in the store and the cash tied up in its shelf stock.  This is symptomatic of board games overall, because with many publishers it's the same problem.  There are board game publishers devalued further than Fantasy Flight, and unfortunately they are the norm lately rather than the exception, but their audiences aren't as large and their product lines aren't as broad.  I can keep one copy of Upper Deck's Marvel Legendary on the shelf as customer courtesy, even though it's an infrequent sell.  Notable exceptions, board game publishers meeting or exceeding turns at list, include Steve Jackson Games (publisher of Munchkin) and Looney Labs (publisher of Fluxx).

So what do we do about FFG?  If I am correct that the product is good and the problem is that the manufacturer is not upholding its value well, then its price should be extremely elastic.  That is, a reduction in price should cause a greater-than-par increase in sales.  (This means FFG is leaving money on the table by failing to protect the value of their product.)

If I cut a margin in half, I have to sell twice as many units to make up for it.  The overhead math on that can reach a little farther, because of the costs of labor and space and other factors it's more like we'd need to sell to four or five times as much, but let's just suppose we are dealing with spherical sheep in a vacuum here, and call it 1:1.

If I'm wrong, then lowering the price shouldn't make much difference.  Sales won't pick up, and I'll make less revenue than if I had done nothing.  FFG games are inelastic; they're just not as good as I thought, and maybe FFG was right to encourage people to scrap for them at bottom dollar.  Perhaps that is the case.

From the context you may infer that I am going to reduce the price on Fantasy Flight products in my store, and you would be correct.  But there's more.

I won't do this haphazardly, of course, and this is something that has been under development for a while.  I have made some arrangements within our supply line that make a move like this even possible to consider.  That was the first big factor.  But beyond that, I want the product's value to stand for itself.  And at the same time, if there is a benefit to advertising a lower price -- and decades of Wal-Mart adverts establish that pretty well -- then I want that benefit too.

So we're doing this on two fronts.

Effective immediately, and at least through the end of 2015, Desert Sky Games and Comics is price-matching Amazon for Fantasy Flight Games and WizKids products on purchases totaling $35 or more.

There is some fine print, of course.  We're going to use the main Amazon price, not third-party seller offers.  By requiring the $35 ticket, everyone gets Amazon Prime -- we're not going to count Amazon main shipping in the price match, unless the SKU item is not eligible for Prime.  Mixing and matching is fine.  Heck, if you want, you can buy $50 worth of Magic cards and one pack of $5 Fantasy Flight sleeves and by golly we'll Amazon price-match those sleeves because your total ticket is over $35.  Other terms and conditions apply but that's the clutch of it.

Why am I including both FFG, which is not upholding its products' value, and WizKids, which is upholding its products' value?  Because I think the outcome will tell the entire story.  I think the price match will be much less elastic on WizKids items.  I think their new products are going to be worth more.  I think WizKids will become a healthier product line, pound-for-pound.  Not just HeroClix and Dice Masters, but also D&D and Pathfinder miniatures and the rest of what they produce.  And this will make me put more money into their lines and more calendar into their events, hopefully creating a virtuous cycle.

We're also going to count everything.  This will be a study in metrics and an experiment in retail psychology data gathering the likes of which we have never engaged before.  And, honestly, Magic, comics, and miniatures are so strong for us right now that we have the luxury to do this with a line that is flagging.  We're curious to see whether this sort of thing might be workable in the future across the board game category, which has had a lot of devaluation.  I'm not expecting iPhone levels of price resiliency, but I'd be happy not seeing marquee SKUs at fifty cents over wholesale.  There is no excuse on the planet for the 5th Edition Dungeon Master's Guide to be available at 45% off MSRP online, as it is right this moment as I type this.  List price is a complete fiction at that point.

We did a test run on this last weekend when we had several FFG tournaments going.  We announced it to the players and were cheered.  Throughout the day, they hit that X-Wing shelf like the antidote was in there.  About a thousand dollars in FFG product moved in a single afternoon.  The Amazon price match ranged from a worst-case ~40% discount (Force Awakens core sets) to no discount at all (X-Wing Most Wanted).  The discount averaged almost 18%.  The volume moved was... more.

Did we make the correct decision?  I won't know for a while yet.  There is much data to gather, much observation to make.  But I know this.  At no point in this process did I lie to myself.  From beginning to end, we forced ourself to look at the landscape not how we wished it was, but how it is.

Monday, November 9, 2015

Growth Unabated

I am intrigued by how my vested interest affects, or doesn't affect, my assessments of scope.  There is a sea change underway in my industry, and my in-the-moment reaction to it is one thing, but upon a deeper look at the landscape, I arrive at a different understanding. 

OK, I'll get more specific.  As you've seen in recent articles right here on the Backstage Pass, there are 48 comic and hobby game trade store locations operating in the Phoenix metro area alone, not even counting the rest of the state.  Another four or five have joined the fray just now (or are about to, depending how you want to count them), in alphabetical order:

Arkadia Gaming, Goodyear
This appears to be a former garage dealer who is now holding events in hotels and bootstrapping that into a physical location by means of an SBA loan and some crowdfunding.  Focus so far is on TCGs and billiards, of all things.  I'm as much a fan of coin-op as you like but I'm very apprehensive about billiards.  I'd worry about biker bar customer traffic, and while there's probably a niche for that, it's not something that has worked in the past for the hobby game trade.  (Gamers Cardz tried it in 2002.)  Maybe Arkadia will be the store that finds a way to do it well.  Very close to Play or Draw, a juggernaut of a store in Avondale.

Helix Games, Chandler
I was told this was open, but then was unable to locate it.  Chandler's permit process is almost as forbidding as Gilbert's in terms of being stuck in limbo for seemingly arbitrary periods of time, so it's entirely possible that this is their current status.  If and when they do open, it appears likely they may be very close to Desert Sky Games and Comics.  Is this where I'm supposed to say, "Come at me, bro?"

Monster Comic Books, Tempe
Opening Saturday, November 14th, this "comic book warehouse" in north Tempe less than two miles from the site of Tempe Comics (below) and not much further away from several other comic stores is bringing a wholesale motif to the table, offering BCW supplies at a discount.  It appears Monster will not be carrying games.

Snapcasters Gaming and Espresso, Phoenix
Opened last week.  I haven't visited yet but their photos online indicate a purely Magic: the Gathering store.  Supposedly with coffee, which I'm absolutely interested to see their approach with.  The initial inventory appears to be a player's deep collection, which is not uncommon in our industry.  Location is extremely central to the population base.  Very close to Phoenix Gaming Lounge, Samurai Comics Central, Critical Threat Comics, and Tempe Comics (below).

Tempe Comics, Tempe
Due to open shortly, this is the second location of the business that currently operates Mesa Comics, and so is an established entity.  Within five-ish miles of between six and ten other stores, but that depends how you count because it's a diverse mix.  Not all of them overlap product lines among one another, and some of them care about each other but won't be disturbed by Tempe Comics.

I wish I could tell you that this phenomenal explosion of store openings was something novel or regional but it's basically happening all over the country.  I stay in touch with other retailers through them newfangled intertubes and we're constantly astonished at the sheer propagation rate.  

Notice these newcomers appear to have no fear whatsoever of opening on the doorstep of established stores.  That's the part that makes me shake my head.  Your plane just landed, you haven't even gotten to the hotel and put your suitcase down yet, and you're going to pick a fight with the local toughs?  A huge part of my original business plan involved finding a location where there was zero nearby competition and not likely to be any for the foreseeable future.  That planning has paid off decisively. It worked for Play or Draw too: they opened in Avondale where a game store was not, and grew unconstrained into an absolute behemoth.

There's a certain gravity, to borrow a term from Black Diamond Games founder Gary Ray, that an established store has.  The store is already there, and people mostly know about it.  It's very easy for them to get business away from a newcomer just by running efficiently, and it's very difficult for a newcomer to get business away from the incumbent without raucous salesmanship to a degree that stretches to the intrusive.  As Gary puts it, the default outcome is that the newcomer is crushed in the existing store's orbit by its gravitational pull.  Sure, you could end up picking that fight and winning, but why put yourself at that disadvantage when you could just find an emptier stretch of road and win incumbency the moment you open the doors?  Magic: the Gathering is just that hot, I guess, so hopefuls are drawn to the dream so strongly they disregard pitfalls along the route.

That's what exasperates my peer retailers and I more than the abject fecundity of it all: Magic is white-hot, so many of the newcomers are essentially Magic clubhouses.  This is, of course, the normal way of things when a product line is in a sky-high boom cycle: everyone wants a piece.  Such a clubhouse store tends to parasite off the rest of the game trade to a degree, taking what would have been low-hanging fruit away from the diversified stores (who are able to flourish in other categories) until they've poisoned the well a bit, and then either cleaning up their own mess and graduating to become diversified stores (as DSG did) or ultimately petering out when the momentum of the hot product stalls or too many more newcomers jump into the pool and there's just no room for anyone to thrive.

Could such a stall be approaching?  Probably not.  Battle for Zendikar, though a gigantic seller out of the gate, is sputtering, and there's much uncertainty in the air right now.  TCG singles seem ripe for a market correction.  But Magic as an overall game is reliably hot, and Wizards of the Coast has given us all reason to expect the bonanza to continue with the announcement of April's new large expansion Shadows Over Innistrad, returning to the setting of what is perhaps MTG's finest entry.  Even if we take a bit of a breather with a fun, market-soft Commander 2015 set this week, Magic is going to be fine.  The explosion of new stores will continue.  Will it keep up until there's Friday Night Magic every other street corner?  I don't know.  Maybe.

Now is where I take a step back away from my initial reaction and look at things in a colder and more detached manner.  The Phoenix metropolitan area is home to almost five million people, if you count all the way to the exurban edges.  Based on the game and comic store density in other metro areas, which I'm blanking on a source but I recall to be about one store per 40,000 humans, the Phoenix area should be able to support something like 125 stores.  One hundred and twenty-five.  Seventy-seven more stores than there are, more than a doubling of what I've been calling a supersaturated market.

Before I conclude that I have it easy and just don't realize it, though, I can scale that back a bit, realistically, due to the significant exceptions.  The Phoenix population contains large pockets of retirees that, never mind our fondest wishes, are unlikely to engage in our trade as customers.  The brick-and-mortar footprint is naturally suppressed by a gargantuan presence from online discounters in town, including now four Amazon distribution warehouses and one-hour delivery.  Many products can now arrive via Prime faster than a customer could visit a store and purchase them.  The metro is already developed out by big box retailers and club warehouse discount stores, further curtailing boutique retail.  Our malls and heritage districts alike have been retrenching for decades now.

So maybe it's more realistic to say this metro area operates at perhaps half the population efficiency of an average city, so it could more credibly support around 63 stores.  Having 48 then goes beyond the happy middle ground and stretches well into the "saturated" range.  After adding in the newcomers cited above, we're about two or three more stores away from functional supersaturation.  A tremor in the comic or hobby game trade reducing the interested addressable audience could tilt the ratio, pushing us beyond the redline and making us drop our transmission even if the store count stays where it is.

And then there are big variables.  There are large cohorts of primarily non-English speakers, mainly Spanish-speaking, in Arizona and metro Phoenix.  I honestly think it's a gigantic untapped resource for our trade, as many of our products, including Magic: the Gathering and Warhammer, are available in the Spanish language.  However, I don't speak Spanish and I don't (currently) have the resources to enter that market.  I have learned that the Spanish-speaking customer demographic for other types of businesses in this region is stronger than its raw numbers suggest.  There are fortunes being made by offering regular everyday goods and services to these customers in Spanish.  That's the kind of opportunity that respecting someone's language can lead to.

That also means that the effective audience remaining is smaller still.  It may be that 48 stores is already too many for central Arizona.  Fortunately, we have a scathingly impartial arbiter to decide if that's the case.  It's called Capitalism!

Actually, even given all the caveats, I think there's still more room for more stores even in this crowded region because the hobby game trade itself is growing.  Tabletop gameplay is becoming more mainstream.  There are literally a new generation of gamers, gamers begotten of gamers, kids whose parents played tabletop games growing up in the 1980s and early 1990s and are now their offspring and are reaching the age where they can pull up a chair and join in.  They've already long since joined the worlds of comic books and video games, both of which reach deeply into the game trade and mainstream commerce.  And even with massive growth spawned of Essen Spiel and the roaring of the Pacific Tigers, the trade even today has hardly scratched the surface of the potential worldwide market.  Eurazeo buying up Asmodee/Fantasy Flight/Days of Wonder wasn't a lark.  The powers-that-be fully intend to monetize our trade exhaustively.

I think there may be more room for newcomers to enter this market yet.  Everybody into the pool, I suppose.  Oh, and I'm not worried.  I'm already good at this.  DSG has the resiliency of being able to stay in business even if Magic disappeared tomorrow; we have robust communities in TCGs, comics, miniatures, board games, and RPGs; and so much untapped potential ahead for mainstream games, books, toys, a return to console video games, revival of the DSG Vintage Arcade, and then more speculative stuff like pure modeling and I don't even know what all.  Kites?  iPhone repair?  The sky's the limit.  No single-category store would ever be an existential threat, even if they opened with a pile of cash right on my front lawn with the intent to conquer.  It would take a bunch of hyper-focused single-category stores all opening right next to me and then cooperating against me, which in practice would never be feasible, to force me into failure.  It would take, like, seven of them.

Tuesday, November 3, 2015

The Confluence: GTS Come and Play Day 2015

Two weeks ago I attended GTS Distribution's Come and Play Day in Atlanta.  While the title is playful, make no mistake: This was a trade show, and a substantial one.  I learned a lot and made quite a few observations.  If you're interested, read on!

Until October 21, 2015, I had never set foot in the state of Georgia.  The weather was absolutely gorgeous.  The endless rolling hills and pines are a bit disorienting with no mountains to make one's bearing, but we have smartphones now so it's all good.  The main Atlanta metropolitan area is very compact, seemingly the size of Tucson, but that's a relative perception as I am acclimated to the wide-open Phoenix metro; it takes a gargantuan sprawl the likes of Dallas-Ft. Worth or Los Angeles to try my patience.  And as you leave Atlanta it's still civilization in every direction, whereas five feet south of the Bush Highway in southern Chandler is where town ends and desert commences.  Atlanta's Hartsfield-Jackson International Airport is practically a city in itself.  There are Circle-M convenience stores, which are clearly two letters better than my hometown Circle-Ks.  Warehouses exist in the middle of the woods for some reason.  Waffle House is the truth, Coca-Cola was everywhere, grits go well with almost anything, and "southern hospitality" is real.

GTS Distribution is one of my primary vendors, receiving a plurality of my procurement business and topping the ranking list that continues with Alliance, Diamond, Wizards of the Coast, Games Workshop, PepsiCo, USAopoly, Amazon, and several others.  I wrote about GTS back in June after they visited my store, and attending this trade show was another step in developing the business we do with each other.  My success is their success, and they said as much during the presentations.  GTS, the result of the decade-ago merger of Gamus Distribution and Talkin' Sports, has grown to a network of something like a dozen locations from Boston to Hawaii, and with that kind of growth has come the challenge of keeping their physical infrastructure on the cutting edge.  It's a process.  Their massive Atlanta warehouse, nearing completion on a comprehensive bin-system rebuild, is a promising sign of things to come.  My local warehouse in Tempe is pretty far down their priority list for the bin-system refit, but that's understandable knowing that they've completely outgrown it and likely have to move to bigger digs before implementing new tech.  But I'm getting ahead of myself; that was Day Three.

Day One started with happy hour in the late afternoon.  I don't drink much alcohol due to my bariatric surgery, but I got to visit with owners of some of my neighbor stores, Matt Murphy from Shuffle and Cut in SoCal and Jamison Sacks from Common Ground in DFW.  (The names become a whirlwind from then onward so you guys who are also my Facebook friends whom I met are going to have to pardon me for not name-dropping all of you here in this article.  I enjoyed meeting you, I promise.)  After talking shop and baseball scores, we were treated to dinner by Asmodee, and then I played a friendly Splendor match with some other attendees.  At the end of time, I won with nine points on board to my opponents' 7, 4, and 4.  The prizes in warehouse credit for Asmodee products were issued by drawing, and I didn't win any, but I had fun all the same.  As it happened, I already liked Splendor, but had I been new to the game, this would have been an ideal introduction to it.  Filing that away for opportunities later.  Afterward, Matt and Jamison headed to the first demo night in the game room, but I was hitting the wall with fatigue at that point and retired.

Day Two was the meat and potatoes of the convention.  Fantasy Flight treated us to a protein-heavy breakfast that even I could enjoy, and the morning consisted of twenty-minute publisher pitches where we had a chance to look at some upcoming releases and also get insight into the direction each publisher was moving in the months ahead.  For example, Ultra-Pro is making extensive changes to their product line, and they definitely have my attention.  Asmodee is entering the second iteration of their AsmoPlay tournament series.  Fantasy Flight has a substantial rack of new releases in the channel.  A few board game publishers presented, and then I had to step out for a bit to manage a situation that had arisen back home at the store.  (And due to the miracle of modern connectivity, I was able to resolve it all from my hotel room and its free wi-fi.)  I forgot who sponsored lunch and I'm sorry about that, but we got a few informative publisher pitches and then a brief invitation from Travis Severance, GAMA's Retail Division Chair.  I'll be at the GAMA Trade Show in March 2016 in Las Vegas, and I strongly recommend it to any store owner in the comic or hobby game trade who hasn't been there (and every few years even if you have).

The afternoon had the opening of the exhibition halls, which bristled to overflowing with publishers and vendors looking to showcase their goods and get store owners interested, and of course to network with one another.  I saw neat things on display from Atlas Games, BCW, Passport Game Studios, Stone Blade Entertainment, and Max Protection, where I had a nice productive visit with SunMesa's Glenn Godard, whose path mine often meets or crosses.  I skipped meeting with Asmodee again because I intended to visit them later that evening with Matt to learn 7 Wonders Duels.  (Ruby Nikolopoulou graciously taught us the game herself, even though it was pretty deep into the evening by then.)  Wizards of the Coast completely humbled me by actually knowing who I was on sight and thanking me for being a voice of reason in their WPN Retailer outreach channels.  Say what you will about the 900-pound gorilla, WOTC has a knack for hiring extremely personable people who make you feel happy to be a part of their success as much as yours.  They also sponsored the tenderloin dinner, which turned into an extended and delightful pow-wow with store owners from across the Atlantic coast and some note comparison on point-of-sale system migrations.  After a brief autism break, I rejoined Matt and Jamison in the game room.  Jamison and I played some Warhammer Quest with Fantasy Flight, and after some more hanging out with folks in the trade, I called it a night.

Day Three was the GTS warehouse raid/sale.  I kind of wish I had come in a day earlier or something so I could have toured some of the local game stores.  As it was, I only had time to drop in on Titan Comics, and only because it was on my route.  Cool store, friendly staff.  The GTS Atlanta warehouse, grown deep in the jungle primeval, is a mammoth operation, going beyond product movement to include in-house playmat printing and other such offerings to boot.  This is actually the last time it will be open to the public; they closed for inventory the following week, and then activated the bin system and presumably are operating that way now and moving forward.  In the bin system, much like what Amazon does, there is no rhyme or reason to where items are located in the warehouse except where pallets and cartons fit.  Each bin has a bin code location and each item is matched to it in the system.  When orders come in, the computer system does the work of mapping out which bins to pick the products from and in what quantities, and even maps out the route for the pickers so they can work faster and with fewer steps.  (I am not kidding, this is a thing.  Fewer steps.  Time is money.)  A given picker's route may cross over multiple orders and sections.  Ultimately the merchandise is delivered to a packing and processing point, where a human being divides items into each outgoing order, verifies that it matches the invoice, and Tetris-es the goods into cartons and boxes.  They fill with inflate-a-pack, seal, and onto the dock or truck it goes.  The entire system makes even the more ambitious shipping operations at the store level look like crayons and construction paper by comparison.

I bought more than I probably should have, but less than I could have, at the warehouse sale.  There were items I had wanted that GTS Tempe didn't stock, items I had missed on the first go-round and forgotten about, a couple of specs, and quite a few things where the price was just really good.  As I've said, I don't shop exclusively on price.  When I'm at Fleming's or Mastro, I don't ask them to price-match Sizzler or Outback.  But there's nothing wrong with getting in on an available deal.  Visited with my rep for a while and enjoyed the afternoon, and soon enough it was time to roll out!

GTS Come and Play Day was absolutely worth the trip and the time.  It's not even a question.  And I could have done even more with it if I had planned a bit more flexibly, which I'll try to do next time.  There's just so much going on at these shows that you can't do it all, and that's entirely beside any opportunities you might have to tour the locale.  I had wanted to visit Super Games, Giga-Bytes Cafe, and at least one tourist-trappy Civil War memorial of some kind, and didn't have time for any of the three.  GTS tends to rotate their show locations around their various warehouses, so time will tell which city will host the next one I'm available to attend.  And even more so than ever before, I realize how badly I have to go to the Alliance Open House in Fort Wayne, and the Diamond Retailer Summit in Baltimore, both of which usually take place in the late summer.  The business development that takes place is essential, and the personal relationships and social enjoyment are a delight.

Thanks to everyone who was a part of that and I look forward to seeing you again!