Bring On That Seasonal Business

We are now ramping into our first summer at the Chandler location, and it's a little unsettling to realize that we have no idea what kind of business we're going to see.  Hot summer nights and our Pandora Radio are going to result in... what?  A mobbed game room and all the concessions business we can handle, on top of regular sales?  Or crickets and tumbleweeds?

The Gilbert location loved summer.  Deep in the suburbs, when school let out for the year, all the kids and teens had a bunch of allowance money and nothing to do.  All the college kids drove or flew back home to stay with their parents, and typically had part-time work money and nothing to do.  It was a perfect storm of making June consistently one of our best months of the year, and July near the bottom of Tier 1.

But the clarion call that School was Out For Summer that DSG Gilbert thrived upon, had precisely the opposite effect on DSG Tempe.  Arizona State University's main campus stood two miles northwest of the store, and once finals were over, it was "Hey thanks for all the Magic tournaments, we'll see you at the end of August!"  And lo, there were months of most visitors being bums Transient-Americans taking a break from riding the light rail back and forth all day every day.

What will happen in Chandler?  The store isn't deep in the suburbs like Gilbert was.  It's shallow in the suburbs.  The ASU factor should/might? function roughly the same inasmuch as the modal building in our halo, near to far, is the single-family detached residence.  But it might not.  We already saw a number of regulars bounce out of town to head back wherever and spend the summer living rent-free with their folks.  So let's call the college audience a To Be Determined on that.  The younger set is where we have other interposing factors...

The Chandler Unified School District, which envelops our store and extends far to the east and south, is on a modified year-round school schedule.  Autumn, Winter, and Spring Breaks all run two weeks apiece so we had a bit of a traffic bump during those times.  The semester finally ends on May 30th, and for a little while it's going to be just like in any other area... but then school starts back up on July 18th or something like that.  So whatever summer break business bump we enjoy from that point on will have to come from the smaller Kyrene District to our west and the smaller Tempe District to our north.  Fortunately, the Kyrene District, which encompasses all of Ahwatukee, is basically our turf now.  The younger players won't realistically enjoy bike access, especially with 117-degree highs.  But mostly people can get to us, and we're right on the main bus route through the east half of Tempe.

Our new next-door neighbors, the Swingin' Safari Mini Golf LLC, appear to be betting big on a summer of heavy business, because they pulled out all the stops to get open last week after a compressed buildout.  The East Valley Crossfit that had formerly occupied the suite was delayed in departing for their new home at a bigger facility.  The golf folks got their contractors into high gear in a hurry, an art I wish I had mastered around this time last year, and they're open for business now and drawing families to the plaza.  Their arrival basically just doubled the advertising potency of both of our marketing efforts.  Our arrivals radiate to them, and vice versa.  I'm tremendously happy about the way this played out.  During prime time, we've already seen substantial foot traffic from people who had just been mini-golfing.  And it's mainstream foot traffic, making it safer for me to bring in an even more diverse inventory offering and worry less about the fiddliest 1% of the merch we're dealing with now.

We have some senior staff members moving onward to greater things in the month ahead, and our part-timers who have waited patiently to be handed tons of hours are about to get them.  This changes the dynamic a bit as we'll be spread thinner on management.  Couple that with the increased traffic both seasonally and due to our new neighbor, and the staffing dynamic might just lurch to a configuration that's uncannily similar to what we wanted to build toward anyway.  A straighter chain of command, with the shift managers having more direct oversight over mainline staff.  More process-based workdays and fewer "night watchman" shift postures.

There is still plenty that can go wrong this summer that has nothing to do with business tempo.  Air conditioning is not optional and we haven't yet gotten a great mix of performance out of our facility's equipment on that mark.  For all we know the Magic Core Set 2019 could suck.  (But I doubt it.)  Vagaries of weather might send everyone outside for activities, or conversely, keep them at home and uninterested in making the drive over.  I don't think any of these are extremely likely scenarios.  But when you're running your own business, it's easy to imagine reasons things won't go the way we want.  As always, planning for the worst but hoping for the best is our answer.

We're a retro video game store, so obviously I have to wrap this article with The Ataris performing their cover of Don Henley's "Boys of Summer."  Because they called their band The Ataris.

Keep cool out there!

The Five-Percent Solution

If Sherlock Holmes were to examine Business Insider, he would surely wonder why that website so rarely publishes content about the insides of businesses.  What might impress Sherlock more would be a great article in which they recently charted how high-income and low-income Americans spend their money.

The lede of the article is that poor people get taken to the cleaners on housing and transportation costs, while rich people tend to spend an inordinate amount of money protecting their assets and personal position.  And within that context there's a little nugget that's relevant to the comic and hobby game industry, that rich and poor alike spend about 5% of their money on entertainment.

Further in the article we get breakdowns of household and individual spending on entertainment in raw dollars.  Household:

And individual:

The discrepancy by income level shouldn't be a surprise.  Five percent of a big number is a lot, while five percent of a smaller number is less.

But do you see the far more relevant thing, in terms of this industry?

Take a look again and see if you can get it.  I'll wait.  In fact here's a nice photo of a customized SNES console to give you some spoiler space.

See it yet?

More context.  Five percent of the total spending is on entertainment.  Of that, only some portion is going to be on tabletop games or even video games.  Some will be on movies, some on concerts, sporting events, outdoor recreation, bowling nights or beach vacations, even people visiting the glow-in-the-dark mini golf place next door to us.

Let's go out on a limb and say that our average customer is someone who spends half their entertainment dollars on our merch categories.  Then we have to remember that there are Amazon, TCGPlayer, and other comic and hobby game stores!  Let's be extremely generous and say that our specific store gets a fifth of that figure.  So a tenth of their total entertainment expenditure.

Now do you see it?

Look at how those absolute dollars correlate to the prices of the stuff we sell.

Oh my goodness, right?

Look here.  At one tenth, a rich household spending $5,919 per year on entertainment probably spends $600 in our store.  A poor household spending $1,270 per year brings us all of $120.

On the individual scale, $1,909 for the rich is just under $200 per person to us, while the poor, at $747, are going to end up spending about $75 per year as individuals.

And if there was ever a hard lesson that a store can't count on serving the same group of grinders day in and day out, that should be it.

There isn't enough money coming from any one customer segment or cohort to support the business.

Now let's be more fair.  I cater to some devoted gamers, for Magic and other games, competitive or casual but undoubtedly focused, who spend a hell of a lot more than $600 every year and aren't even rich people.  In some cases there are guys who drop most of that in a month and aren't rich, though a few of them are professionals dragging in decent coin and so they're well enough off to afford it for sure.  And hey, some people just obsess on a narrow range of hobbies.  Nothin' wrong with that.  Lord knows that's what I do.

But the reality is any given face that comes in the door, we're going to be lucky if they bring us, on average, more than $75 to $200 worth of annual sales.  While that's a number I am perfectly happy to cater to, it also is a number that tells us some crucial things:

1. We must always be acquiring new customers, because the existing regulars cannot be expected to float the entire store on their own.  It's not fair to them and not realistic to expect this.  Many, many clubhouse stores expect essentially this to occur.  We must be welcoming to the visitor who is not already deeply geek-literate.  The curious, the dabbler, the person interested enough to poke their nose in the door and see what they find.

2. We should be highly skeptical of products that sell for more than $75, and doubly so for products that sell for more than $200.  Because those products are effectively non-starters for a significant part of our audience, or would constitute nearly the entirety of their annual spending with us.  When Wizards of the Coast says that booster boxes are not a meaningful purchase configuration for the majority of Magic players, maybe they aren't as obviously wrong as Magic-focused stores and competitive players assume.  And yet we've had over a year now of product overload.  Knoweth the left hand what the right hand is doing?

3. Positive experience cultivation with each transaction is far more important than we already rated it.  And we already considered it pretty damned important!  This unfortunately empowers negative review culture, which as we all know is the clap.

4. Many aspects of the comic and hobby game industry are too fiddly to withstand the implications of these numbers.  Which, again, are skewed generously in our favor for the purpose of this exercise, so you have to imagine they're worse in application.  Comics look better proportionately when you consider this; a pull-box customer who gets four titles a month is well within the parameters.  Wide categories like video games and board games are a bit safer here.  For something like Warhammer, it seems like they're utterly dependent on deeply committed hobbyists way on one end of the scale.  I can't imagine how other wargame miniatures ever gain traction.

5. A gasoline price spike basically wipes out the entertainment fund for poorer people, if we're taking into consideration the initial graph showing that they incur an outsized burden from housing and transportation expenses.  Did it happen that way in the past?  It's tough to isolate this effect from the general economic meltdown of 2008-2009, but we already know a ton of game stores went under during that time-frame; was this another piece of the equation?  I bet if we had sufficient data collection to see the expenditures by income level, we'd see the poor player spending dropped off right around the time we were at $4/gallon.

It seems like every time I learn more about business, I wonder why I'm in this particular industry that seems to swim against every economic and social tide with such reckless abandon.  That might just be our value proposition, the fact that we're here to delight the people whom the rest of the recreation industries have disregarded.  But it sure does suggest that we've voluntarily made it more difficult for ourselves to make a living.

Anyway, time for me to go enjoy some of that food that I spent somewhere between 11% and 15% of my household income on.

I Was an Oblivious Customer

This is a story about when I was an oblivious game store customer.  But so you understand the significance of what I was doing and the bad assumptions I was making, I first must teach a lesson about the product that was central to my behavior.

Once I graduated from law school and didn't yet have a multitude of children occupying my time and attention, I re-indulged myself in the video game collecting hobby.  One of the rare items then, and one that was visibly getting rarer as we went, was the Nintendo Gamecube Official Component Cable, shown in this photo.

The GCN OCC was only marketed in Japan and thus only available via import distributors or stores that did business though them.  The OCC used an ASIC (Application-Specific Integrated Circuit, or in other words, "a custom chip with secret innards") to process video for output.  Nintendo never published the specs of the ASIC, so third-party cable manufacturers could not create substitute cables.  For 16 years, if you wanted to get 480p video out of your Gamecube, it was the OCC or nothing, and there weren't enough OCCs to go around.

(Aside: As of 2006 we could play most Gamecube games in 480p on the Wii, which had a cheap and abundant component cable.  However, the Wii did not work with all Gamecube games, it did not work with all third-party Gamecube accessories, and it did not work with the Game Boy Player, a non-trivial drawback at a time when the Game Boy Advance was getting hot titles like Metroid Zero Mission that played great on a television.  And if you wanted to speedrun or play competitively, you had to use the original hardware for your time or score to count.)

At the time I was seeking it, the OCC ran anywhere from $80 to $140 on Amazon and eBay, depending whether it had the original packaging or was used, and if so, its condition.  I tried to hunt one down in the wild, naturally assuming that any video game store that had one would be unaware of its value and would surely sell it to me for the MSRP of $29.99 or so.  After all, knowing the value of video game merchandise was only how they literally made their living, so surely they'd punt that and I could roll them.

Every time I visited a video game shop of any stripe, I would browse what they had, and naturally I wanted to be left alone because autism.  But I knew I'd eventually be greeted and asked if I needed help.  The question I had locked and loaded for that was "Do you have any Gamecube Official Component Cables?"

They never had the cable and only rarely did they offer to "special order" it, which I imagine meant getting it at a haircut less than full market value from an import distributor and marking it up, because they would throw back numbers like $200 and $250, to which I would reply "never mind." I wanted it, but not enough to really pay for it.  I wanted it to be essentially given to me for way less than it was really worth.  This was not a realistic expectation.

I would then judge that store to be "not a serious video game store" or "worthless" or "incompetent," depending what mood I was in at the time or whether I thought the owner had sufficiently kissed my ring and acknowledged my clear and impressive expertise in knowing to ask for such a rare and sought-after niche product.  It was self-centeredness to the point of narcissism, the kind of oblivious "whatevs, I got mine" attitude that is becoming more common every day, especially among the youth.

I eventually got an OCC in a Gamecube collection buy.  The other guy knew the value of it, and thanks to combining up the games and system into a lump sum, I ended up paying $150 or so for the cable at a time when the average eBay sold listing was around $175.  Not too bad and we both got what we wanted.  I made a joke post to Facebook with a photo of the cable complaining, "I bought a Gamecube and the stupid TV cable has the wrong colors!  What the hell!"

Today, the GCN OCC market price is down to around $250, after a couple years in $500 territory for complete-in-box and $350 bought loose.  The reason the price actually started coming back down to earth is that players finally got another option.  In late 2017, sixteen years after the Gamecube hit the market, someone finally reverse-engineered the OCC ASIC and produced direct-to-HDMI output adapters for the Gamecube.  We carry them in the store, the EON GCHD, and it's $149.  Not cheap, but far cheaper than the alternative, and it works beautifully and is well-suited to modern televisions which don't even always have component input jacks anymore.

So, anyway, the point was that I was an absolutely oblivious customer and my behaviors were way out of line with reality, both in terms of the market overall and in terms of how I interacted with store personnel.  And at the time I had no awareness or insight into that.  I was just another blowhard who had no idea how stupid I looked to the pros behind the counter, and I was a tire-kicker to boot.

Most of my customers today don't behave the way I behaved.  Most have realistic expectations, or more to the point, they want a thing and it's within the core of what we offer, and that's why they showed up, and all is right in the world.  Most understand intuitively that the store makes its hay selling the stuff that's new and/or broadly in demand, and that we won't necessarily be sitting on a secret stash of GCN OCCs or graded Summer Magic or an unopened case of NBA Elite 11.  It's not that we don't want to sell such things, obviously we do.  It's just that rare things are, well, rare, and the economics don't reward us for seeking out such goods and then deep-sixing them into the vault for who knows how long, rather than reselling them now.  Most people understand that, and those who do seek holy-grail-level collectibles aren't offended when the object of their desire isn't in stock all that often.  Most people don't obsess over having us kiss the ring.  But sometimes we get people who exhibit exactly one or more or my regrettable former traits.  And that's just how it goes, it's part of the trade.

Our solution to this from the staffing side is to be attentive toward new arrivals and to put a bit of extra care into how we service the more friendly and sociable of our regulars.  By starting people off on the right track and then providing a social payoff for exemplary behavior from the people we already know, we send a message that an inclusive and fun experience is what we're about, everyone who's on board with that are going to get our "A" game, and the scrappers are welcome to go be somebody else's problem.

My solution to this from the ownership side is to understand the psychology of the behavior I am seeing out of the one guy who's acting as I once did.  If possible, there may be common ground from which a positive experience can result.  There may be good in him yet.  If not, I accept that we're not going to please everyone, and reorient my focus toward the next visitor who arrives.

These solutions are imperfect, but a general goes to battle with the army we've got, not the army we wish we had.

Lefty Loosey, Righty Tighty

I wonder just how far into the world of electronic restoration this business might profitably go.  It is admittedly a pretty far cry from the selling of boxed analog tabletop game products, which we do on the regular.  But I'm having to face the possibility that if I don't to something in that space, I'm failing to monetize skill assets the company holds ready, and could train and develop further.

Sunday, our cash register iMac decided its hard drive had served long enough.  Beachballing so hard it could no longer load Safari or Mail, the terminal became useless, and I knew I had to replace or repair it.

Unfortunately, repairing iMacs isn't as easy as dusting crops, boy.

The 2012 and newer models are particularly difficult to service because the shell is held together by adhesive.  That's aside from the RAM drawer, which is the easiest ever to get into and requires no tools and even has instructions printed on the casing nearby.

Fortunately, this was a 2011 iMac, so I could get into it without cutting through destructible matter.  All it required was a heavy suction cup to unfasten the front glass, which is attached via a combination of fittings and magnets.  Then a Torx screwdriver keyed me the rest of the way in.  Had I only a RAM replacement to perform on this model, that can be done with nothing more than a Phillips and a few spare minutes.

The 3.5" SATA hard drive was easy enough to remove, though it has a custom thermal sensor rather than a SMART system so the iMac's fan will run too much unless or until I find a more effective solution than resetting the System Management Controller, which only temporarily convinced it to stand down.  Heat may not be as much of an issue because I replaced the bad hard disk with a solid-state drive I rescued from our old shipping desk PC that suffered motherboard failure a few months ago.  In fact, lacking a reinstall disc for macOS, I simply powered the system back up and it booted Windows 10 without incident.  It doesn't like to cooperate with the printers, likely due to driver mismatches, but I'm going to put High Sierra back on it anyway so that will be solved soon enough.  Bottom line, we have our cash register terminal back and it should run fine for a few years before being put out to pasture.

Most of you probably don't know or care what any of the foregoing means so I will tell you that the TL;DR of it is that I was able to perform a non-trivial repair on a computer that's not designed to be user-serviceable, saving the company $700 to $1200 depending on what a replacement would have ended up setting us back, or some several hundred dollars in repair labor and/or parts from a professional outfit somewhere in town.  And if someone had walked in the door with a similar need, provided that I had researched a bulletproof solution to the thermal sensor issue and practiced the repair in general, I could have had them out the door in under an hour with money in the bank on an economically sustainable deliverable.

And though it blew my Sunday itinerary out of the water because I was learning as I went, repairing that iMac was still high-value work.  If there's one thing owners in the greater comic and hobby game industry too often fail to do, it's to systematize basic or core work and spend more time doing higher-value work.

Core work is still important, because it runs the business.  But the people we hire are there to do the core work.  Moreover, it's what they expect to be doing.  Giving them good training and clear processes and turning them loose to impress you with their initiative is often the best way to have that core work be performed well.  Core work is going to succeed when you've cultivated competency and judgment through training.

Then the expert-mode play is to start training our standout staff members on how to do higher-value work.

What's the difference?  It's more than just how much money the work produces or saves for the company, though that's surely an important element.  With higher-value work, competency is upgraded to knowledge and skill, while judgment increases in responsibility.

Every time I teach a staff member how to do higher-value work, and they internalize and perform that work successfully, they get better and the business gets better.  And everyone's job actually gets easier, including their own.  I have given them greater agency.  And with effective conveyance of agency, an owner can start to achieve true duplication.  That achieves the dual purpose of making it possible for the jobs you hire to become careers, and freeing the owner from being chained to the dashboard.

So, does this mean I should start soliciting Mac repairs, as yet another step toward building this amazing business with high-value work and robust investiture of agency in my people and a bold future promising power strips on every countertop?  Well, maybe.  Probably not yet.  But looking forward, combined with some other things I'm keeping under wraps for now that I was intending to develop, this is looking like a sensible direction.

DSG already does a limited assortment of video game hardware repairs, a menu limited primarily by my ability to systematize it and train others to do it when neither me nor our silent partner who is an electrical engineer are available.  But it's an area that has already done well for us and where we are learning the problems now so we can set it up better as we go.  I already discovered we charged too little for a common NES repair.  Our success rate has been 100% on units serviced, and the process is close to mastered.  We can build in some gross margin and it's still a competitive price for the consumer.  That's solving a process.

Sadly, this suggests to me that my internal reservation that the store should have gone small, not big, and cut its focus down to Magic and video games, may have been the smarter course.  I still like the other things DSG does, and in fact as a gamer I am a board game player first and most often.  But mastery of a value proposition has more power, pound for pound, than diversity of value propositions.

The converse, however, is that diversity of value propositions makes the business far more resistant to failure, with revenue coming in from a nondependent array of sources.  That, coupled with our industry's headlong rush toward Third Place mechanisms, suggests that the gigantic space with a favorable lease was the correct long play after all.  We had better hope so, because we have 53 months left on that favorable lease.

I don't want to overthink the business implications of having swapped out the storage device in a broken computer.  But big things are made up of little things, and sometimes little things pack an outsized punch.  I wonder if this is one of those times.