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Monday, October 31, 2016

Who Turned Out the Lights?

Can this election just be over?  There is always a pronounced negative effect on retail sales during the U.S. Presidential election years, because consumers value certainty.  There will be a boost in sales no matter who wins.  (Hillary Clinton is going to win.)  In 2012, Desert Sky Games was still newly opened and did not expect much in the way of sales.  In the four years since, we developed a very accurate idea of what we expected.  And a curve ball showed up anyway and shot my careful planning straight to hell.
Every November, the comic and hobby game trade slumps.  The first half of the month is just dismal, with sales figures that make late February look bountiful by comparison.  The lights go back on somewhat going into Thanksgiving week, then Black Friday and Small Business Saturday, only for sales to quiet down again until mid-December, at which point it's like a firehose of money spraying our faces until a week into January.

Why does this slump occur?  There are several contributing factors:

  • Consumers save up for holiday shopping.  Obvious enough.
  • Public employment finishes much of its work for the year, because so many government workers take a lot of vacation/leave time in December.  This means people are nose-to-the-grind right now, and not out shopping and recreating.
  • Colleges are in go-time, with fall-semester finals on the horizon.  Not the best sales stimulant if you sell a product that appeals to college students.  You know, like strategy tabletop games.
  • High schools are in go-time, with second-quarter finals on the horizon.  It seems like most districts have normalized this now; when I was in high school, finals were after Christmas break and that made for quite the welcome-back.
  • Specific to our industry, the biggest release of the year, the Magic: the Gathering autumn expansion, lands right at the beginning of October, and now all the credit cards are coming due, forcing belt-tightening.


By the end of October 2015, Patrick and I were battening down the hatches for the dry spell we knew was ahead.  We reduced our Magic buy ratios, we decreased the restock volume for most product lines, we dropped the payroll budget by an increment, and we loaded up eBay full of fresh merch to clear.  And despite all that we were still sweating the bills by Thanksgiving week.  We were still missing out on some good opportunities due to having to dip into our war chest of buying funds just to cover operating expenses.

This year was going to be much the same, but then the plunge occurred almost three weeks early.  A curveball I truly had not anticipated.  In-store sales dropped off sharply enough that I wondered if a competitor had gotten in a shot on us.  No, it looked like Magic sales were still substantial, if a bit lower than last year's pace, and there isn't any other competition nearby impacting anything else.  The missing revenue would have come from board games, miniatures, and comics, none of which performed.  The ensuing week was a bloodbath that saw me dip into reserve fuel to an uncomfortable degree.  The weekend was back to average, so I figured that was just a blip.  I set up to accelerate some of our overstock, closeout, and ding-dent sales and specials to cover the shortfall.

The following week came in a bit below average.  Not enough to get us healthy but enough that I could still pay all the bills.  I did our finances and figured that as long as we weren't much worse the following week, we could lean on our weekends and buoy that safely into the November slump.  All would proceed as expected.  I ordered very light from distribution knowing the terms would be due for those orders the same week rent came due.  I amped up eBay a bit and even solicited out some Pokemon overstock to fellow retailers. In theory every hatch was sufficiently battened.

And then we lost a weekend.

It was uncanny.  The weekend of October 22nd-23rd turned in numbers like average weekdays did in September.  It left the store around $6,000 short of projected revenue.  The scramble was on.  I know a few things about moving money around and we got through the week, but oh man, I was sweating it.  Terms that week were from orders placed before the early slump of the week previous.  So they were still hefty.  I had two large cash buys come in the door that I was not going to pass up, even though that meant expending precious reserve fuel at a time I was burning it for heat and light.  This was the correct call, as the buys were Standard relevance and hot video games and both sold through quickly.

There's a mentality in business that if you can just get the doors open another day, you can get healthy again.  It is truly difficult to knock a store down hard enough that it can't get back up.  It happens, especially if a Taxmageddon scenario ensues, or some insurance or crime disaster like the Atomic Comics flood that vastly exceeded their insurance, but usually a closure is not because of those things.  Usually a small retail closure is the result of prolonged decay.  When a wave of shocks like our second half of October hits, even a modest store has a resource base to draw from.  First cash, then credit, then inventory, and finally equipment.  If it came to it and I needed half a grand in thirty minutes and the cash register was empty, I could rip one of the computers out of the till fixture, peripherals and all, and take it to a pawnshop up the street.  That's a horrible, value-eviscerating way to survive, but it is survival.  And then you can open the doors another day.  After a store has spent a year or two withering, its resource base has rotted from the core.  The first shockwave puts the store onto the metaphorical defibrillator, as there is nothing to reach for to withstand it.  If a second shockwave hits, it results in constables posting legal notices on the front door and padlocking it shut.

Last week commenced, and by Wednesday's close it was pacing to be the store's worst week of 2016.  It closed as, in fact, the worst week since at least mid-June when we switched to our current POS, before which comparisons are not precisely apples-to-apples.

Sigh.

One thing I learned in my previous times in business was that if you have to take a serious step to ensure you have stopped the bleeding, take that step right away and get the recovery started as soon as possible.  Thursday I went ahead and engaged in a Reduction In Force (RIF), laying off three part-time employees.  I did not want to lose them and I made it clear to them I hoped to recall them at the earliest possibility.  But with special sale promotions already happening and categorical moves addressing our structural inefficiencies, payroll was the next expense available to cut.  I hated to do it, but I went ahead with it.  I suspended my own pay as well; in essence, I am always my own first layoff.  I am the owner; I will know when the coast is clear again for me to take a disbursement.

Things followed the RIF about as I had hoped.  By the end of that same day we had turned in a much better sales figure.  Friday was within reach of normal.  Halloween ComicFest was kind of a dud, but we rustled up almost enough Saturday sales to close the gap.  Sunday was an expected throwaway due to its positioning between the two holidays of Halloween (Observed) and Halloween (Traditional).  Gradually, excruciatingly, we clawed our way forward.  The sales trough is far from recovered, but by Monday we knew that rent and payroll and bills were safe and dealt with.  I don't know how soon my three lost soldiers will get their evac copter sent out, but now at least I know I will be sending one.  The reduced staff level won't become the New Normal, which would have been an outcome I did not want.  Instead, the lean staffing will end just before the seasonal slowdown does, giving me time to ramp into the insanity of holiday shopping.

My next two months of work are basically set at this point.  I've finished optimizing the primary retail area, which I'll have some photos for the blog at some point I hope, perhaps when there is some sweet signage in place.  I'm about to construct a new tertiary retail area for higher-value video games and for our unified buy counter.  That will be effectively the final bitter end of work I will do on the present Gilbert facility unless and until I get a lease renewal or extension.  Then it's just sales, sales, sales.  Which will be a nice change of pace from an entire year of almost constant upheaval.

I am one of the lucky ones.  So many stores announced closures in the past two weeks.  Huge, titanic businesses announced they were shuttering or selling out.  Everyone from The Happy Viking to Game Universe to Your Mom's Basement to West Texas Cards & Games, and the bloodletting appears far from over.  System outages for our point-of-sale, Crystal Commerce, cost us thousands of dollars in revenue, and for many stores that was the straw that broke the camel's back.  In a market rife with dreamers willing to burn capital right in their faces to poach market share, they looked at their stock, looked at their lease, and decided the money ended up better if they yielded the floor.

One postscript I want to leave you with today.  There is a book called A Civil Action by Jonathan Harr.  It is a documentary-style novelization of the events of the case Anne Andersen et al. v. W.R. Grace et al., the vast toxic waste leukemia litigation of the late 1980s from eastern Massachusetts.  It was eventually made into a decent movie starring Robert Duvall and John Travolta, but only the book is relevant to my point here.  In the book, the law firm's financial manager James Gordon has to find ways to pay vastly escalating bills and expenses while the flow of cash into the business slows down, sputters, and finally stops outright.  Gordon becomes a veritable maestro of acquiring and leveraging credit, from the straightforward to the seemingly foolhardy.  But he had to find solutions so the case could go on, and when it finally settled, he paid back the creditors and his "wobbling pyramid of debt service" was redeemed.  Even though their situation was to an extreme that virtually no small business will ever reach, it is an educational clinic on handling the dirtiest part of the financial minutiae in stretching every last dollar and avoiding the financial breakdown of a business.

One of Gordon's lessons that left the deepest impression on me was, paraphrasing, "Don't lie to your creditors, ever.  Don't mislead, don't omit information, don't avoid them, don't color it up."  Tell them exactly what is going on and what you will try to do, and come as close to meeting that commitment as you can, and then continue to try.  This is crucial because once you mislead a creditor in any way, they can no longer help you.  They cannot extend, they cannot make allowances, because you broke their ability to trust you.  When I am in a tight spot financially, long before the point of default, I communicate with the creditor and tell them what is going on.  Not making excuses, but reporting the situation accurately and reaffirming that your intention is to pay them in full.  You would be surprised at the amount of grace that buys me.  And when I get that done, now they know I am good for it in the future.  You want to know how to build a business that can make big financial moves and weather a storm if one moves in?  That is how.

On that note, I'll go back to slinging what merch I can in the dark until the retail lights turn back on.  Anyone want some sweet board games, nicely discounted?

Monday, October 24, 2016

Isla Sorna

Owning a comic and hobby game store means being in the entertainment business first and foremost. And as anyone who has worked in entertainment can tell you, what appears on stage is only a small portion of the resources being utilized to stage the show.  Backstage and on the studio backlot, the real work of building the business is done.

To explain the reference, Isla Sorna was the fictional island on Jurassic Park II: The Lost World where InGen set up its actual breeding laboratories and test ecosystem.  The main theme park that was located on fictional Isla Nublar, as seen in the first book and film, was the finished, polished product, intended to be staged for the visitors.  Its egg hatchery was largely ornamental, with the public blissfully skipping from cute-little-hatching-raptor to Quiet-they're-approaching-the-Tyrannosaur-paddock.  The park featured curated exhibits, a staged tour, multimedia, park amenities, and of course the gift shop.  Those little reptiles did all their growing up, fighting, and a significant amount of dying, in the visitor-free labs and fields of InGen's backstage area, its backlot.  Without that woodshed, that workbench, there was just no feasible way to set up the presentation of the finished product.

So it is for Desert Sky Games and Comics.  In addition to our primary store facility at 2531 South Gilbert Road and the pitifully small storage office in its back corner, we have other places we use for work and storage, and they have grown full and busy right along with the shop itself.

I type these blog articles from the seat where DSG began, my computer desk in my den at home.  I live in Chandler about six miles southwest of the store.  It would have been easier to locate the store closer to my home, but the objective in opening where we did was to give it the best location possible for customer reach, not the location most suited to our own personal convenience.   I do a considerable amount of work from my desk, moving my workspace at will between the iMac here and the iMac at the shop using the Back to My Mac utility.

Nearby is my garage, designed to house vehicles, but housing no vehicles.  No, it is stuffed almost to capacity with store equipment and merchandise:

This causes some amount of discomfort in the summer.  And in the winter.  And every day, because we have to plug the Leaf in to charge it and we have to padlock the charger so some dirtbag won't run off with it from our driveway.  (Those things are expensive!)

You can see Pokemon product center stage, my Donkey Kong arcade game on the far right (with my Street Fighter Alpha 2 peeking out from behind it), a glass showcase, some slatwall standees, outdated or wrong-versioned Games Workshop racks, tubs full of binders, you name it.  There are tools, containers, vending equipment, bookshelves, and sooooo much gridwall rack.  There is racking pretty much in every part of the garage that isn't in-frame in that photo.  Why did I buy so much?  I did and I didn't.  I acquired a lot from closing stores and other reclamation deals.  I had some when I took things over.  I replaced some that broke over time, though this is rare.  DSG has only so much floor, and I need to use only the rack and fixture I have that is closest to optimal for whatever it is I am deploying.

Elsewhere in my home are even more arcade games that I would prefer to be operating on location, my console collection full of things I'd love to show off in the store if I had room, and... surprisingly little else.  No Magic cards.  My one Commander deck is in the safe at the store.

Other partners in the business are no exception to this rule.  One has a fleet of pinball machines and video games stored in his home, as well as our overflow stockpile of sodas and energy drinks.  He is our scout who finds great pricing in bulk deals and coupon deals on drinks, and then buys in deep so that we're able to improve a little on what is actually a fairly bad margin on refreshments.  The store doesn't have room for all the overflow so he keeps it at his place.  His home also serves as the arcade and pinball workshop, where equipment is taken literally from salvage purchases and reconditioned to be floor-ready and operational.  In order to get some economy of scale out of that, you end up purchasing a lot of parts "on good opportunity" even if you don't have a repair open that needs a part of that type.  That's for general parts.  For machine-specific stuff, we tend to order replacement or reproduction parts within delivery time of needing them.

I have no doubt that I could be featured on "a very special episode of Hoarders" and I'd have to talk real fast and kick the dirt a bit in order to avoid having some smiling fellows and a port-a-Dumpster appear at my residence the following morning.  But the truth is, storage lockers cost a lot, so much that the math suggests you are better off never renting one, and just discarding dead excess and re-buying when you have a new need for it.  Space in our homes is space we're already paying for, though, and while there may be a discomfort factor, it is generally worth the hassle for that degree of savings -- especially when the goods are very clearly still usable.

Various publishers in the game industry have rules about delivering only to actual commercial storefronts used for the primary business, which unfortunately impedes something that is common in the comic side of the industry: the consolidation warehouse.  Atomic Comics used to have everything shipped to a central warehouse, not open to the public, where staff had far more cheap footage in which to triage, sort, allocate, and dispatch merchandise to Atomic's four retail stores, where virtually no footage was wasted storing things.  Large operations like Graham Cracker Comics and Mile High Comics do similarly.  Even if I can never do this for a lot of game product, if at some point down the line I have multiple stores and they're still doing comics for some reason, I believe the central warehouse plan might make sense.  If I can become prominent enough that game publishers will stipulate to it, I might be able to get everything shipped there after all.  Store buys would also be transported for central triage, and that opens up an entire new world of value salvage through reconditioning, combining good parts from multiple incomplete units of a thing, and so on.

That's a quick peek even further behind the scenes than usual, apropos for a blog called The Backstage Pass, I think.  I'm a little surprised I didn't think about our own little analogues of Isla Sorna for an article long ago.  So much of what is going on with the shop now is business-as-usual that I am going to look for topics I brushed aside before and see if I can riff on them now.  If you have any questions or suggestions, by all means send them in.

Tuesday, October 18, 2016

How My Secret Weapon Works

I have a friend.  Ever the humble person, he didn't want the spotlight from this article, so rather than just anonymizing as I originally did, I'm identifying him only as Friend.  He is a fellow retailer and a tremendously successful one, whom I have known since we grew up together.

The reason I refer to Friend as my secret weapon is that he is the kind of friend we all need, and have so few of: a friend that has that insight, shares it with us, and asks us the tough questions.  He tells me how it is, without sugar-coating anything, and makes sure I know good and true when I have made a wrong decision and what impact it is having.  And he dispenses with the bullsh*t and seemingly easily sees right to the heart of any problem.  He does this with unwavering integrity, so it is easy for me to trust his judgment.

During the earliest time of the store, when my business partners and I were much more at odds (and there were many more of them), Friend was in my corner showing me the open shots and teaching me how to hit those openings like a professional.  I owe him big time.

Here is an amalgamation of my most recent conversations with Friend.  Fictitious, not drawn from any specific discussion but a representation of how they go:

F: So how was your last month?

M: Profitable, yours?

F: Pretty good, could have been better, you know how it is.  I saw your Facebook video for that board game sale, you getting some good traffic off that?

M: Yeah, it seems like it doesn't clear nearly fast enough for my liking, but I have to remember just how much of that stuff I had when I started the end-of-summer sale.

F: End of summer!  It's late October!

M: Yeah if I had realized, I would have put more stuff on sale sooner.  It's taking forever.  A lot of it is moving but yeah.

F: So why don't you just run it all out?

M: Lack of space, lack of time, same old problems.

F: How can you not have space, where were the games before?

M: Well I do use that space, I separate out the yellow tag stuff, if you don't do that you create shopping confusion.  But even as I do this, more stuff keeps coming in.

F: What?  Why are you ordering more??  Aren't you clearing the category?

M: Most of it, yeah.  But pre-orders have such a long lead time, I'm still receiving stuff I put in numbers for back in March.

F: What about just blowing it out on eBay?

M: I do a lot of that.  Some stuff is too heavy to make any money by the time you ship it.  Some stuff I'm not allowed to sell online.

F: What, that's crazy, what stuff can't you sell online?

M: Anything Warhammer, anything from the Asmodee group of companies, they're basically like a European version of Hasbro.

F: But you're clearing it, what do you care if you break their rules?

M: They still make stuff I can sell.  Asmodee controls the Star Wars license, so that includes X-Wing, and they make the most popular brand of card sleeves.  Warhammer I still plan to carry, just not fifty grand worth of it on the shelves.  So I can't really burn those bridges.

F: Sounds like you're in a spot.  Stuff that doesn't sell is weighing you down and you can't just blow it out or you'll lose access to stuff that does sell.

M: Exactly.  I can clear some at conventions but we're done with those until next year.  And that leaves the clearance rack.  I get decent traffic off those ads but it's still slow going to get through the volume of it all.  And I have a metric ton of organized play cards and figures and stuff that has market value but I'm not allowed to sell at all.  Can't run enough events to give it away fast enough.

F: You can't just have a friend sell that stuff?

M: It's possible.  The publishers do police it and it's not something I'm eager to test.  I kind of rely on keeping trust, I'm in a small industry and people all get to know one another.

F: Well if they enforce it then yeah you can't be doing that.  Look, what are the stakes here.  If it all disappeared tomorrow and you got wholesale back for it, not a dime more, how much money would that be?

M: Back pocket math... maybe forty grand?  Maybe thirty, I've sold a lot lately.

F: Thirty grand!

M: Right?

F: Thirty thousand dollars in your pocket!

M: Heck of a Christmas.  I imagine a lot of it would cover some store costs and go to the war chest.  But like bare minimum I would be personally getting paid at least ten K.

F: Well, a couple of things.  First, did you overbuy?

M: I definitely did for Warhammer.  That game still has a solid following but I got in way too deep.  Took my eye off the ball.  For the board game stuff, I had better sales at the time, my buying numbers felt right.

F: Alright.  I think you overbought there too, because you kept talking about having no room and you didn't get a move accomplished because of buying out another partner this year and then you couldn't land that lease on Arizona Avenue.  So I think you should have been on smaller numbers and let yourself sell out of things more often.  This also affected your labor load.  You kept saying payroll was high, payroll was high.  You bought yourself work, to pay your staff to do.  And with your limited space you should be focusing, not broadening.  When you get a bigger place you can have all the things.  Not until then.

M: Customer shows up and you don't have it, a lot of times you just lost them to Amazon pretty resoundingly.  Having the goods is still the gold standard.

F: That's the second thing.  You have whole product lines that are just eaten up by Amazon.  Even when you price-matched you couldn't get the sales volume up high enough to feel the improvement.  What do you sell that Amazon doesn't crush?

M: Magic and video games.  Pokemon too.  Three minis games have been solid, Warhammer and HeroClix and X-Wing.  Comics has other problems but it's okay in this regard.

F: That's what you need to carry.  Ditch everything else.

M: I'm kind of on that road at this point.  I wish I had started the process sooner.

F: You've been banging your head against this wall for years now.  I hear you say it again and again.  Prices this, Amazon that.  What's your payroll every month right now?

M: Eleven grand, give or take, after taxes and all.

F: I bet you cost yourself an FTE or two PTEs being so deep in product that wasn't moving.  That's like a grand a month.  This year alone you're down another ten grand as of this month.  Add to your thirty and now you are down forty grand.

M: More than that, because I've floated credit cards and such to get through dry spells.  Interest is in there.

F: For the love of God, man!  Are you going for fifty??

M: Bless me, Father, for I have sinned.

F: Can you take yourself off the payroll yet?

M: No.  I'm closer than I have been, the current staff are running good, but too much store is still unbuilt.  About half a wall of Magic cards are still not listed in the inventory, we're only a fraction of the way done with that.

F: So you can't go get your law license yet either.

M: Nope, still can't.

F: No time to get yourself back into your profession.  For a field where the worst jobs around pay you six grand a month.  So this year alone you're down sixty grand not being a lawyer.  So you're down a total of $110 grand.  That's enough to pay your student loan off and all your credit cards in one shot.

M: I'd take half of that salary if I could just have a normal schedule and see my kids.

F: You still writing?

M: I write all the marketing material for the store, and I write the blog.

F: Okay, so you're getting paid to write, kind of.  Are you doing the writing you most want to be doing?

M: Not even close.

F: If you were off the payroll and the store could distribute your current paycheck to you in profits, would you let the staff run the store and just write?

M: Pretty much.  My pure admin work isn't super taxing on time.  I used to be able to do it on the side when I worked full-time at the state.

F: That's all you would show up for, is your admin work?

M: I'm sure I would find it hard to stay away, I'd go in and tinker, but based on what some of my peers are doing who have that kind of process mastery in their stores, I'd be in the way if I did much more than backstage projects and special events.  Or using my tech skills for special jobs, repairing video games and doing mods and such.  Profitable stuff that just needs dedicated space and time, the two things I don't have enough of right now.

F: And you would be able to write the rest of the time?  Or even get your law license and maybe percolate on that for a while?

M: Yeah.

F: How many racks of board games are you planning to keep?

M: It's down to about two and a half.  Three if I spread things out so they aren't cramped.

F: And how many racks of minis or whatever?

M: We're reducing from fifteen down to about five.

F: So like eight racks of product.

M: Eight racks.

F: Would you trade all eight of them for $110 grand?

M: In a heartbeat.

F: So why don't you?

M: Hah!  You have a buyer lined up for me?  I'll pack the boxes tomorrow.

F: I mean why don't you clear every last item that you aren't keeping, that is in a safe category.  I know those racks probably aren't six figures even if they all sold to empty for full price, right?

M: They're a good bit of the way there, but no, not that much.

F: But don't you see?  You get more than just the value of the products.  You get to reduce total payroll costs because you aren't buying yourself as much work.  You get to free up time to focus on better products which means the money you are spending turns faster and more profitably.  Within four months I bet you're back at the same revenue level and with a higher net income by far.

M: There are a couple of things holding me off from that.

F: Things worth a hundred thousand dollars?

M: Well, maybe.  The holidays is the one time of the year people actually come looking for board games the most.  I've spent a lot of marketing and clientele development and contact trying to cultivate a customer base that will do that.  They will come looking and I need to be ready to make the sale.  Last year I had my price-matching going and that was the one time period where the volume was high enough to make it more profitable overall.  The other thing is that I need to clear product in order of least popular to most popular.  You have to have the most popular stuff be the last stuff you have.  Because while the less popular stuff, the games that weren't big hits, are on sale, you can be turning the popular stuff at normal price.  And also if you don't have the most popular stuff at all, people won't come back.

F: I thought you said Codenames was a hit, your video showed that game on sale.

M: That's just a loss leader.  I want people to come in.

F: Fair enough, I do that too.

M: Yeah, once people make it into the store and shop the rack, they usually find stuff they like.  It's a shame I had to put those titles on closeout to get that sale but at least I eventually got it.

F: No dumpster fires this time?

M: There will be dumpster fires.  There will be large donations of unsold goods at market valuation, right around December 29th.

F: And after the holidays that stuff is gone?

M: There are some high-profile new releases landing, if any become hits it will make retail sense to keep them.  There's a collectible game called Star Wars Destiny that I'm watching very closely.  And a Final Fantasy card game that has already almost sold out on pre-orders.

F: How close do you have to get to being out of those categories before people stop coming in looking for the stuff in those categories?

M: Oh man.  I wonder how close I am to that now.  Almost all the expected survivors are "system" games.  Stuff with monthly expansions or add-on modules.  I can carry them and still have an audience even if I don't have the mainstream titles.  Question becomes, am I going to lose too many sales not having no-brainer mainstream titles like Catan and Ticket to Ride and Munchkin?  I'm concerned that I might.

F: You're still spreading out, weakening your focus, putting money into stuff that isn't your best stuff. Why are you not spending that money on Magic.  Or video games.

M: I'm running out of good answers to that question lately.

F: You said comics had other problems.  What about clearing comics?

M: Easier said than done.  It takes time to get into them and time to get out of them.  But I think comics will get healthy again.  They just had a bad quarter, the content wasn't that great.

F: Do you need comics?

M: No.

F: So why have them?

M: When they are punching their weight class, it's dependable revenue week in and week out with solid margins, not a swingy roller-coaster of revenue and traffic like Magic has.  And it gives me one of my best connections to mainstream visitors, because everybody knows what comics are, and it overlaps into almost everything I do.

F: Are they labor hogs?

M: Oh yes.

F: Well, I hope they improve pretty soon, then.

M: So do I.  We've got top men working on it right now.

F: Who?

M: Top men.

F: Well good luck with your sale, buddy.  I think you know what you have to do.  I know why you keep trying to take every chance to make something work.  But if I were in your shoes I would just turtle up and focus on what you know works best.  You could keep your location, renew your lease, be able to stay in one of the best shopping plazas in the entire east Valley, and you said it yourself, moving is death, it gives away the game store's biggest asset, continuity.  You're better off staying put and that means changing your business model to suit your situation, not changing your situation in hopes you won't be forced to fix your business model.

M: Can you just once be wrong?

F: I try not to be, it cuts into profits.

And now all of you reading from home know why Friend is my secret weapon.

I've been tremendously busy doing... things... but I expect to be back next week as usual with some pithy observations about the industry around me and my struggle to find a sustainable place in it.  Thank you and have a great week!


Monday, October 10, 2016

Glorious Consistency

For many people, doing the same thing over and over again is boring.  Nay, intolerable.  Not so in business.  Consistency in business is an achievement devoutly to be wish'd.  With consistency comes predictability.  With predictability comes certainty.  With certainty comes efficiency.  And with efficiency comes net income.
The fine folks at the Facebook feed of The Same Photo of Jeff Goldblum Every day (sic) are absolute paragons of consistency, offering up the same smoldering visage of Ian Malcolm / Seth Brundle at 12:33 each and every afternoon.  Theirs is perhaps the far extreme of consistency, with absolutely zero variation in their content or delivery.  Yet they have two hundred and sixty thousand "Likes."  People may say they want adventure and spontaneity, but then when push comes to shove, they drive through at Mickey Dee's.  Consistency works.

Consistency starts on the operations side of the fence.

Every Monday, I confirm that the weekend's deposits have landed, then I pay the bills, then I place my primary game orders and pre-orders.  That's most of my work for the day aside from advancing projects, and lately the shipping duties as I've been between fulfillment staffers.  Lately this has been a day for Reimbursement Invoices as well.

Every Tuesday the Diamond comic order comes in and the staff's general day of work is set from open to close.  Since I put in orders from video game suppliers and other various vendors over the weekend, they tend to arrive Tuesday also.

Every Wednesday I pick up my stock order at the Phoenix GTS warehouse, and by the time I have returned to the store with it, the Alliance weekly order has appeared as well.  The early afternoon is all about inventory.  Entry, merchandising, prep, and display.  Later in the day we have another RI and we prepare the room for X-Wing, the one organized play weekly that requires adjustment to our table arrangement.

Thursdays we receive any other lingering orders and the staff focuses on processing through as many Magic singles as possible for the weekend ahead, which basically starts that evening with Commander and Standard paired up.

Friday is when the Games Workshop order usually arrives, because naturally it takes four days for a parcel to ground from Memphis to Phoenix.  From Friday night through Sunday evening, the staging is mostly over and it's pure customer business.  My media manager is on site for about half of that timespan so comic projects get some advancement as well.

On the customer side of the fence, consistency is less about the labor calendar and more about what's going on under the hood.

Elon Musk of PayPal, SpaceX, and Tesla fame recently observed that price variation hurts a business's integrity.  The rationale underlying Musk's policy is sound business psychology: Most price-sensitivity is driven by a fear of missing out on a better deal.  Perhaps that better deal comes from shopping another vendor; proximity counts for a lot, so mostly this won't kill the sale if there is some degree of value parity there.  But you don't see anyone shopping around (much) for deals on Apple, LEGO, or Nintendo merchandise because there aren't any.  The product is almost never discounted.  You can buy that iPhone or MacBook Pro with confidence knowing that the price you paid is basically the price everyone is paying.

And there we reach the part of Musk's equation that hits hardest in the comic and hobby game trade.  Since so many of our stores look little better than flea markets, many customers naturally feel inclined to haggle.  And they continue to do so because often neophyte business owners give in to them.  What this does is drives other customers away.  Customers who are not given a "special deal" believe that door has been closed to them arbitrarily, because they failed to guess the magic words.  Even for items where brick-and-mortar has price parity, such as used merch, a customer gives up and just orders online or visits a competitor instead.  Nobody wants to think they got the sucker's deal.  So it's crucially important that we as retailers not offer sucker's deals!  De profundis, I know.

Consistency in policy reaches farther than just pricing, of course.  Beyond the soft/social factors of treating all arrived customers with respect and inclusion, there are matters of how we handle store credit (good for any purchase on anything, ever, the end); affording table priority to calendared events even when someone wants them for open play on a more popular game; consistent tournament prizing, which I still think we need to refine a bit; and simple things like fast transactions, greeting every visitor, and being open on time every day.

Observing chains within our industry (GameStop, say) and outside it (Starbucks, for example), the structured policies that are executed in a uniform fashion across a multitude of locations, markets, and customer demographics, lend tremendous strength to the organization.  Nobody haggles at Starbucks.  Nobody but the most dense try-hard haggles at GameStop, and when they do it's on buy pricing rather than retail.  Price integrity is highly consistent, so shoppers visit knowing they will get a fair deal and not a sucker's deal.  The deployment and customer experience are sufficiently predictable that a customer has a benchmark against which to expect a positive experience, and that prophecy helps fulfill itself.  And because of the consistency throughout, when something goes wrong, the customer knows there is going to be a conduit of redress to make things right.

My individual store is, for now, just one store.  But these are just some of the ways I can emphasize and improve the consistency of my own operations and the customer experience.  Predictability, certainty, and efficiency follow... leading to dependable net income.  And that net income isn't skinned off the back of a "sucker."  It is fairly earned by doing business with integrity.  Everyone is looking for the get-rich-quick shortcut, but the reality is that quietly, consistently, dependably doing business with integrity every day, on both sides of the counter, is the truest path to success.  Consistency in business is truly a glorious thing.

Tuesday, October 4, 2016

Kaladesh Release Post-Mortem

I've written articles like this for every Magic: the Gathering expansion released since this business blog began!  They are some of the most heavily read and linked articles on this blog, so evidently people enjoy these observations.  Good enough for me!  (Enough that I basically copy the template and write in the details afresh each time.)  Here, then, is DSG's experience with the release of Magic: the Gathering: Kaladesh!
It was only a matter of time before Magic introduced a setting based on south Asia, and a setting based on steampunk themes, and Kaladesh is Wizards of the Coast's attempt at both.  There was some grousing online about Kaladesh being a poor analogue for India and the regional culture, and there was some merit to the complaints.  On balance I believe Mark Rosewater's explanation that the design team was apprehensive about mimicking so closely as to appear stereotypical and disrespectful.  It was a tightrope to walk; maybe they nailed it, maybe they missed somewhat.  I don't know what the long-range impression is going to be, but we will get a chance to see them try again in Amonkhet, the Ancient-Egyptian-themed set announced to start the next block in the spring of 2017.  I'd like to return to high fantasy for the late 2017 main set, with a new setting, but I think we're more likely to see another existing setting return.  Ravnica 3: The City Blows Up.

Kaladesh is good.  Overall, anyway.  I'll get to the specifics of that below, but I want to assert from the outset that it's good, because that puts into context how it had our second-worst pre-order numbers (after Conspiracy 2: Electric Boogaloo) in store history.  Some of that comes from the explosion of new stores in the region, including one dumping boxes at barely over cost.  Surely he got some numbers I would otherwise have gotten, though he didn't get much benefit out of them.  But the real culprit was wallet fatigue, continuing with this last of five booster releases in a six-month span.  We have no new booster releases due until Aether Revolt in January, and thank the good Lord for that.  Even devoted players only have so much money at a time.  I expect Kaladesh to have legs, but the great prerelease and release weekend sales we saw could have been far better, and could have sustained far more robustly.  With only Commander 2016 and the Planechase Anthology on the horizon, we're set up for another November Swoon like last year's, and this time I will be ready.

Here is a quick bulleted list of what Kaladesh gave us:

  • Masterpieces!  Continuing the Zendikar Expeditions chase card tradition evermore, according to Mark Rosewater, we have in this block a collection of artifacts called the Kaladesh Inventions.  Virtually the entire roster are great Commander and eternal format cards that either have broad popularity among players or badly needed reprints.  Our first-ever foil of Mana Vault, which I predicted for Conspiracy 2 in my Eldritch Moon article, headlines the list.  We also got gorgeous entries of Sol Ring, Scroll Rack, Lotus Petal, Mana Crypt, three Swords of Thing and Thing, the five Jaegers, and much more.  Will these crush the value of the rest of the set's contents the way the Expeditions did for the Battle for Zendikar block?  Yeah, probably.  Whatever.  It will be worth it.  And that makes Standard more affordable for more players.
  • Huge mythics!  Chandra the Mind Sculptor, viable-looking Nissa, and newcomers Saheeli Rai and Dovin Bann joined the planeswalker roster.  Meanwhile, the Pacific-Rim-Jaeger-esque Gearhulks gave each color a new artifact titan to crash to the table.  For that matter, much of the rest of the mythic and rare roster looks like it could potentially be of some constructed use.
  • Meaningful rare lands!  The enemy-colored "fast lands" were great to see arriving at last, this time with generic names so they can reappear on blocks that are not set on the plane of Mirrodin.  (There ain't no Darkslick Shores on Alara, folks.)
  • A new subtype: Vehicle!  Artifacts that can be "crewed" by whatever creature you have handy, such as the eerily compatible Lupine Prototype from Eldritch Moon.  The silver-and-brown card frame for vehicles calls back to the original brown artifact frames and I am in the visible minority online who thinks it looks great.  At least a couple appear tournament-viable as well, the Smuggler's Copter ("ROFLcopter/looter-scooter") and Fleetwheel Cruiser ("the racecar").  
  • A new resource: Energy!  No, not Pokemon Energy, though it resembles the Lightning variety of same.  Earned and spent like credits from Android: Netrunner, Kaladesh's Energy is generated in various ways and kept until needed and used.  This parallel colorless mana of sorts does a nice job of evoking the steampunk side of the setting.  And,
  • Planeswalker Decks!  A new introductory product that has proven thus far to be an absolute hit, popular across player types.  Well done, Wizards of the Coast.

Meanwhile, here is what Kaladesh did not deliver:

  • Heavy pre-order activity and significant release-weekend sales.  As discussed above, I think they're just squeezing blood from a stone at this point.  For release Saturday, Magic wasn't even the top-selling category at my store.  That's concerning.  I think Kaladesh will have legs that will lead to a nice protein burn all month long, though.
  • ...that's it.  The content really stood up this time, as far as I can tell.  There are some long-term market implications and there is a lot going on that may or may not lead to a vibrant and diverse Standard metagame, but this time around we don't really have a gaping hole of expectations unmet.  No, the enemy-color fetchlands did not appear, but since we got enemy-color fastlands, it's all bueno.  With the announcement of Modern Masters 2017, plus a setting-compatible block to come in Amonkhet, it's only a matter of time before we have another shot at Arid Mesa, Marsh Flats, Misty Rainforest, Scalding Tarn, and Verdant Catacombs.
Attendance for the Pre-release tournament undershot expectations, with an allocation of not quite 500 packs bringing in less than 400 players.  As with Eldritch Moon, pre-registration was mostly very easy through Crystal Commerce, both in-store and on the website.  We sussed out a few more exception situations and learned more to optimize the workflow, but mostly things got done.  One thing we learned was to stage up the pre-registrations sooner, because our entire Saturday roster of start times ran late.  The one time we might have been on time, for the 3pm Two-Headed Giant start time, was when Wizards Event Reporter decided to be touchy and drop players from the team list instead of entering them consistently.  All told we lost over an hour to late starts.  That is going to be a primary focus for Aether Revolt in January.

DSG opened big on cases yet again, since that strategy has worked well several times in a row now and with more and more competitive players simply buying singles from us and nothing else, we wanted our pantry to be full.  With release weekend in the books we've still got 100% stock on non-foil Kaladesh cards and reasonable stock of foils and even a few Inventions.  The optimal labor scenario has us not doing case breaks on an ongoing basis unless we get a big buy opportunity at a great price, which meant attempting to get essentially the entire store seed stock in one shot.  It appears we did it.  There is no point in listing our yield as we basically opened plenty of everything.

With prerelease attendance just under our Shadows Over Innistrad level, we had enough packs remaining to break an entire case live on camera last Tuesday morning for marketing purposes.  This was watched by literally hundreds of viewers on Facebook.  Considering we did not announce it in advance or anything, that number pleased me greatly.  We received plenty of feedback about it and we're going to look at our results and work on polishing them up to improve.  The case break was simultaneously recorded with a dedicated camera for editing and release on our YouTube channel, with meaningless packs sped up and commentary focusing on the big opens.  Every attempt I see my social media staff sharpening their craft.  I think Tanner and Josh have a good voice for this kind of thing, one that connects well with our primarily Millennial audience for the videos.  As you can tell by what you're reading right this moment, I am not going to abandon the printed word or even photographs.  But I think there's room for us to do more and in a wider array of media, to bring our games to our players in an immersive fashion.

Next week I'll write about something else, so hope you enjoyed this look at the business side of the Kaladesh release!  Today is 10/4, so I'll just wrap with a breaker breaker, over and out.