Tuesday, November 27, 2018

DSG What If? Part 2: Never Chandler

Time for the second of my whimsical hypothetical series that started last week with Neverhammer, and now continues with an even broader-range possibility.

Last week I spent a lot of time on the butterfly effect and not a lot of time on logistics and the business structure.  This time I want to move in the other direction and we'll see how this article works out.

Part 2: Never Chandler, or "What if DSG had never moved its main store to Chandler?"

We first looked at 3875 W. Ray Road waaaaaay back in early 2016, believe it or not.  Nothing came of those forays at the time, but it opened the relationship with the McRay owner/landlord that ended up making the move possible when the Gilbert lease finally expired in mid-2017, and obviated the matter of what we would do with the DSG Tempe location, formerly Tempe Comics, when its lease expired outright a couple of months later.

Tempe Comics was located on Apache Boulevard halfway between McClintock and Rural roads, about two miles southeast of the ASU Main campus.  The light rail passed immediately in front of the store.  Abundant bus options existed.  The rent costed next to nothing.

And despite all that, you need to believe me when I tell you that it was about the worst location we could possibly have had, and I would never on my life have signed a new lease for it.  Nobody who had lived their entire life in this part of the Valley would have.  The Mesa Comics / Tempe Comics owners who leased that spot did not have that same amount of background, and were apparently unaware of factors that made that location less viable.

See, regardless of what looked like useful geography, there was no close, convenient, or even useful freeway access to the store.  This is a car town.  Freeway proximity is gigantic.  Moreover, the light rail was a double-edged sword making getting in and out of the plaza troublesome from the east, and it was already bad from the west because of the train tracks and peculiar configuration of the westward neighborhoods and plazas on the south side of Apache.

But that's not all.  It's in Tempe's highest-crime area, which we got to experience firsthand with our Easter 2017 burglary.  It's next to halfway houses, behavioral health adult foster homes, homeless shelters, trailer parks and so on.  Don't get the wrong idea, I'm actually not saying the people living in those demographics are bad, or even that they are bad for business.  I am saying that they are bad for the luxury hobby tabletop game business.  If we were operating an eatery, convenience store, salon, or any of a number of other small businesses, we would be delighted to serve that customer base, as our offering would be much more closely aligned with their needs, and we could have thrived.

Due to the aspects described above, there is virtually zero accidental shopping traffic in the Tempe Comics plaza.  It's the polar opposite of, say, the San Tan Village Mall.  And that will never change, not in our business lifetime.  In this weblog I have described and explained in exhaustive detail the need to reach a blue ocean of mainstream customers. Desert Sky Games and Comics Tempe was never going to be able to do that.  Ever.  No matter what we did.  Because of attributes inextricably entwined with its location.

Accordingly, we knew it was a matter of running out the clock on DSG Tempe and fleeing for greener pastures, and that informed our decision in summer 2017 to sign our lease in Chandler.

(Cue warping noises, swirlies appear on screen, a dimensional aperture marks the breach, ascetics furiously calculate while technicians burn incense in prayer, and I see a glimpse of what might have been.)

Accordingly, we knew the cost and risk of Chandler were great, while a realignment of our business in Tempe took a lot of that risk away.  That informed our decision in summer 2017 to stand pat at DSG Tempe, exercising our option to extend the lease through November 2019, and allow the DSG Gilbert lease to terminate out on time in August.  But all decisions come with costs.

Tempe was 3600 square feet and that is enough room to do a lot of things, while being roughly half of what we would have ended up with in Chandler.  But despite space to do a lot of things, we no longer had the audience to do a lot of things.  And that meant cuts and reinvestment of resources.

Warhammer and miniature wargames overall were the first to go, and that makes this scenario so much different from the one posited last week.  All that about demographics?  How much do you think you can talk a minimum wage worker, living in a double-wide, into buying a bunch of plastic soldiers for $150 and then spending another $75 on glue, primer, paint, and varnish?  Then another $50 on a rulebook for that army.  And then another... oh, let's just say $300 on more models, to make that army competitive.  And here's the cinch: We wouldn't have had a choice.  Games Workshop provides its trade accounts with a five-mile exclusivity, and DSG Tempe was less than two miles away from Game Depot.  So right away, we'd have liquidated a bunch of plastic and given away some game tables.

Board games are something that I never wanted to get too far away from in this business because it's a part of tabletop that's elemental to the definition of what tabletop is.  But again, less than two miles away from the second-biggest board game store in town?  One that had been open for more than thirty years?  And facing a local shopper demographic that would surely have used us as a destination store for tournaments, much of which is irrelevant to the boxed game consumer?  Nope.  I am a board game player personally, but I saw the necessity to exit the category.  Unlike Warhammer, where we pulled the plug before we even got started at DSG Unified Tempe, for board games we kept things going for 90 days to see if a community for it would materialize.  None did.

Comics.  Ah, comics.  I've probably spent more ASCII on those in the past couple months here on the Backstage Pass than any other topic.  But our DSG Tempe plan flipped the script.  We had a whole bunch of cheap floor and with minis and tabletop out of the picture, not very much to do with it.  Offering a massive comic back-issue library was simplicity itself, and the store's location was within the expectations for typical comic book treasure-hunters.  With Critical Threat Comics at ASU closing down, we captured the Tempe comic reader base, for the most part.  Ash Avenue continued serving its eclectic niche, but Monster Comic Books bowed out a year sooner, 2017 instead of 2018, when DSG Tempe ascended in the category.  With plenty of halo miles between DSG and Samurai Comics, the two businesses continued to coexist enjoyably.

We stuck around in the various anime card games but just like in the main timeline, only Pokemon ended up being worthwhile.  The rest went to the dustbin.

That left Magic, and Magic was an interesting case for us at DSG Tempe because if there's one thing you can do with a lot of cheap square footage, it's max out the online business.  Not that we didn't put resources into it in Gilbert and then Chandler in the main timeline; as of this writing around 80% of all singles sales DSG makes are through TCGPlayer, despite those buyers paying a 20% higher price than our local market.  But with little to do in that space, little danger of being unable to pay for that space no matter what business we transact, and all kinds of physical space along the main axis of the room, it made sense for us to use Gilbert's fixture base to create an entire sectional office and mini-warehouse of sorts.

The big benefit of online Magic singles sales is that it scales well with personnel.  Even the existing tool base, imperfect solutions such as Crystal Commerce, TCG Pro, ION, eBay, Amazon, and so forth, functions adequately for this specific business structure much of the time.  We have user permissions.  We have logging.  We have integration.  We have pick and pull framework.  The storage situation is solved.  Frankly, I could do a lot more in the main timeline than I presently do, and have it mostly snap right into place.  But that would take space away from the game room, which we aren't really needing to do right now.

With comics and Magic both on cruise control, I had a decision to make about video games.  I don't want to be in business and not be selling video games, but that part of town is saturated for the category: in one direction we are two miles from Fallout Games, which is a great store; in another direction, three miles away from Gaming Zone, another great store.  A mile north and three miles east there exist smaller, inconsequential video game shops, and there we are.  Aside from comic back issues, and especially with the crime element, DSG Unified Tempe wants product largely off the floor and behind counters. We run video games, but it doesn't take off until the branch stores in Payson and, would you believe it, Gilbert open in late 2018 and early 2019.

Without any particular need or urgency to move on in my career, I happily guide DSG through the opening of a series of branch locations featuring Magic, video games, and comics.  Around 2024, I drop stone dead to heart failure, and my family has the asset value of the company plus a sizable life insurance disbursement to keep them taken care of for decades to come.  I never believed in ghosts until I became one, and I delighted in haunting people who defraud others and consider it to be nothing more than "wheeling and dealing."

(The warp rift opens.  A version of me jumps out, but... what is this?  Silk shirt, fit and trim body, smile on his face, thousand-dollar watch?  "It seemed like you messed up.  But you didn't!")

Accordingly, we knew the Chandler option was an all-in plan, and all-in plans have this disturbing tendency to crash the entire enterprise if they come up short.  We imagined a scenario that would finally set us free, and lo and behold, it did.  We renewed Tempe and let Gilbert finish out, and never moved to Chandler.  Abandoning the entire southeast Valley seemed like a colossal mistake, and the fans of other area stores, especially Amazing Discoveries, didn't let us forget it.  But what they failed to do was to see two moves ahead.

At first I thought that this rift was going to show me a different version of the Unified Tempe outcome.  But in reality it just skips to a later point in the story.

Magic online became big business even faster than in the main timeline.  I ended up Grand Prix vending, something I don't see much value in doing in the main timeline, purely out of a need to fuel the massive singles throughput that the online channels slurp up in their eternal hunger.  Before long my staff solely for online sales grew from four, to six, to ten, and we're now perpetually hiring as it has caught up to the rate of attrition.

Having massive singles pull is even more powerful when you're in a central location.  DSG Chandler has some amount of that in the main timeline, but the US-60 freeway is a psychological barrier and until we do something on the west side we'll never truly reach that market in terms of local players.  When you're right in mid-Tempe, that barrier isn't a concern, you're only truly far away from Surprise, north Scottsdale, and San Tan Valley.  The closer Magic stores starved out first due to our relentless growth and our ability to discount at will thanks to paying bottom rent.  Further to the east, AD had enough support from Tucson to keep going, but the rest had to turn to other games and product lines to keep afloat.  The reality struck all that the Valley actually had a Channel-Fireball-scale singles vendor, one that had literally nothing better to do and nowhere else to focus.  More than one competitor grumbled under their breath and wished that Bahr had wasted more time and money trying to grow other categories.  Nope, sorry, this time I went all in on Magic and it paid off.  From dust we are and to dust we shall return, and DSG grew out of the consequentia of my backpack dealing in MTG in the late 2000s, and like riding a bicycle, you never really forget how it's done.

By late 2018, many of my fellow retailer peers were looking to get into video games, and I reached a pivot point.  I realized the day-to-day operations at DSG Tempe were well handled by the managers and staff, except that video games now were the fiddliest things and I had not been able to find an expert to manage the category.  I could always just hook a brother up and bail out?  I realized this was the opening I had sought, a chance to step away from the wheel and let it glide, and return to the professional workforce.  I sold the entire video game business to a store farther east, and now I just show up at the store every week or two to cut the checks and take a look at any sweet high-end cards that have come in.

Passing the bar exam again was also like riding a bicycle, and in this hypothetical timeline I was back in the legal industry for good by the beginning of 2020.  It wouldn't have made sense to do it in any other scenario imaginable, but Griffin and I renewed the lease in Tempe for another two-year stint with two years of option.  If Magic died in the meanwhile, we could just push it all into a lake.  Meanwhile?  Griffin is back in software and spends two weeks every spring living in a suite at the Wynn, and I get to abandon Arizona entirely for the second half of August and sit on a beach in Maui with my family.  I still die in like 2024 though.  Actuarial science is a harsh mistress.

...

So there's the hypothetical for Never Chandler.  The great thing from a "what if" perspective is that the progression seen in this hypothetical is not off the table entirely in Chandler; we just get some additional options, such as true accidental shopper traffic, the ability to have a Games Workshop trade account still open, and slight economic pressure as we're still paying for the move and our rent isn't quite as cheap as it was in Tempe.  I don't plan to be back in comics in the future as I am happy with the deal we made with Samurai Comics, and I don't plan to be out of video games as that is the industry where I think I can monetize a lot of technical skill and expertise.  But putting overwhelming levels of attention into Magic?  Like, more than the considerable amount it already gets from me?  If I ever start getting my autistic hyperfocus tunnel-vision pointed in that direction, clear the decks, because things might be about to get really interesting.

Tuesday, November 20, 2018

DSG What If? Part 1: Neverhammer

This article kicks off a series in which I examine a critical business decision from DSG's past and speculate on what might have happened (for glory or for agony) if that decision had gone the other way.  This is pure entertainment; I don't expect any other store owners to enjoy any particular benefit from the what-may-have-been, at least for the first installment.

Part 1: Neverhammer, or "What if DSG had never gotten into Warhammer?"

Desert Sky Games started in 2012 as a Magic: the Gathering store that also had board games, other TCGs, a smattering of video games and toys, and a small vintage arcade.  In November 2013, we added comics.  In July 2014, Mike Girard separated from the company and I took over main operations, promoting my then-assistant-manager to the manager spot, a move that did not really pan out as he departed a few months later anyway.

Upon my assumption of duty in 2014, the store had been posting sub-$6k weeks of sales, and we were on the brink.  Our chance to exercise the kick-out clause in our lease was almost a year away, and I genuinely did not know if we could make it that long.  My immediate order of business was to cut off all resources into anything I didn't think would profit out soon enough to keep DSG alive.  I thought at the time that video games had too long to go to ramp up to economy of scale, and dropped the category.  This was a mistake, it would have been more correct to drop comics or, alternatively, to keep comics and Magic and video games and drop the rest of tabletop.  In fact, hold that thought.

Khans of Tarkir was awesome, and I ran things very closely myself from November through the crunch, so DSG survived the winter of 2014 and by spring 2015 we were starting to see signs of life.  Patrick Hug wanted to leave his job and manage the store, and I wanted to get back to administrating, so the two of us attended the GAMA Trade Show in Las Vegas in March and strategized what to do about our product mix.  Both of us took notice of Games Workshop's very aggressive new-account show deal, which at the topmost level got us into about $18k worth of retail product for $3k cash up front and $5k in 90 days.  Even if it had been $8k up front, that's awesome margin, quite a bit better than GW's normal short discount.

I was apprehensive about miniatures for a few reasons.  I knew Brock Berge had his magnificent store Empire Games only eight miles away, and I had no intention to run my head into the wall attempting to compete with him.  I remembered from the Arizona Gamer era and from when my friend RJ Harris was managing Games Workshop's mall store at Arizona Mills that the miniature wargames product category, especially Warhammer as a brand, was incredibly insular.  Most people who aren't in the wargames hobby already have no intention of being drawn into it.  Games Workshop themselves told their stockholders that their target market was "people who buy Warhammer;" to wit, established customers.  That didn't suggest that we were going to broaden our reach into the blue ocean of mainstream customers.  That suggested we were going to fight over the same dudes that were currently playing at other stores.

Well, in the end the numbers won out; at $8k for $18k, even if we had to blow the bottom out on clearance we would surely make back our investment.  Warhammer was coming to DSG in 2015!



(Cue warping noises, "Dark World" theme music begins, the dimensional rift opens, and I see a glimpse of... my parallel self?)

Well, in the end the numbers weren't enough; we figured the better part of ten grand would be better spent on collection buys and multiplying our way far deeper into Khans of Tarkir, Modern Masters 2015, and Zendikar Expeditions.  So that's what we did.

We jumped off Light Speed and instead of bothering with RMS ComicSuite, we went straight to Crystal Commerce a year sooner, and had 18 months on the platform before Red October ruined everything, rather than only six months.  Crystal Commerce's capability to push volume of Magic cards was unparalleled, at least at the time.  Shifting forward the known analytics from summer 2016 through the move, and assuming they would have occurred roughly the same way starting in summer 2015 instead, and multiplying money into the engine, our Magic business became an absolute monster.

Without needing paint and tools, we never bought into any other miniatures games either.  Tabletop ran reasonably well in 2015; in fact, that holiday season was the last time it posted big for DSG, but starting in 2016, with a year and a half left on our lease, we didn't see any point in continuing to chase after shrinking margins and shrinking market share.  Not with Magic booming for us beyond all booms.  We closed out the rest of tabletop in early 2016 and replaced it with... video games!

Yes, by then I had met people who had stayed in the video game business and made it work.  I wanted to be back in the category and thought I couldn't make a go of it, but with their guidance we brought it back.  But this time, I had more space to devote to it and more money to push into buys.  Our video game business grew dramatically throughout 2016, rather than the more gradual ramp we experienced.

Brock still closed Empire Games, because Brock does what he wants.  But rather than DSG moving into the empty space in the category, I wanted to focus on what we were doing well.  Patrick Hug disagreed, so just like in the original timeline, he departed the company in mid-2016 so he could open his own store in east Mesa pushing comic art, cosplay, and Warhammer.

Prime Time still sold out to Amazing Discoveries in August, but with DSG's Magic business far more robust and closer in volume to AD Tucson's, the eventual permanent AD Gilbert location in 2017 ended up a few miles further northeast, more closely replacing Mesa Comics and completely cornering out Hug's store, Apache Comics, True Believer Comics, and San Tan Comics.

Games U opened on schedule in late 2016 and had almost zero product crossover with DSG or ADG.  All three stores had ample room to capture wide swaths of their addressable markets.  All three owners prospered.

By late 2016, I was ready to exit the comic business.  We weren't going to be the best in the category, and the forward thinking was that we could wind them down in an orderly fashion.  This positioned DSG to move into the final year of our lease as a Magic and video game store entirely.  Profitable, easy to run, low labor, with more than enough room in our existing facility, we were able to hammer out a lease extension rather than moving.

The DSG Merger of 2017 never happened.  Mesa Comics folded into Tempe Comics and became the largest Magic and comic business presence in Tempe and the ASU region.  It finally became profitable and renewed its lease in November, and is still open to this day.

Desert Sky Games opened a satellite location in late 2018 in a small suite at McRay Plaza in Chandler, with this location focused on video games and with Magic as a sideline.  The Payson satellite location is slated to open in 2019 under the same structure.  I returned to my writing pursuits, as the Magic-and-video-games scope of operations proved comparatively easy for my managers and staff to handle.  They work shorter hours earning more money and greater benefits.

By mid-2018 there were enough safe havens in general tabletop for me to add board games back to the two existing locations.  That just about completed the product mix, and left me with one primary task on my desk, which was templating operations for an eventual sale to a national chain entity.  When the offer came in just north of seven figures, I pulled the trigger and left the game industry to go build cabinets and enjoy spending time with my wife and kids.

(The warp rift opens.  A haggard, bleeding version of me leaps out and grabs me by the collar.  "That's not how it went!  You assumed everything would work out logically!  People are illogical!")

As I was saying, in the end the numbers weren't enough; we figured the better part of ten grand would be better spent on collection buys and multiplying our way far deeper into Khans of Tarkir, Modern Masters 2015, and Zendikar Expeditions.  So that's what we did.

Our Magic business grew as we moved to Crystal Commerce and started pushing volume singles.  We did well, but others noticed.  And anyone who knew enough to watch what we were doing, or who was already doing it, took the easy route and said "Me too!"  Mesa Comics still added Tempe Comics.  Prime Time never sold out -- they were ready to, but nobody walks away from a heater.  Amazing Discoveries still had designs on the Valley, so they just opened where they wanted, in a plaza that was easy to reach from the I-10 for those drives from Tucson and Casa Grande.  Two more card-focused stores opened south of US-60 and east of I-10.

The saturation of card stores was a plague on the east Valley.  Tournaments almost never fired.  Margins shrunk.  To get any kind of buys, we had to pay ridiculous percentages, to the point where TCGPlayer Direct sales would be losing us money.  To get any kind of sales, we had to be on the low side of Market, and Mid was a silly dream.  The only stores in town able to do proper business were clear on the other side of the valley: Manawerx and Play or Draw got very healthy.

Tabletop entered a trough cycle.  Asmodee had not yet consolidated, nobody was protecting their brand, and anything you wanted was available on Amazon for a nickel over wholesale.  After a reasonable 2015 holiday season, I closed out the category just to make enough cash to buy into video games.  My initial forays were highly resource-limited, and the category didn't see much movement.  Early 2016 had me skip the GAMA Trade Show entirely.  What was the point?  The only thing that sold dependably for us was a commodity now.

Brock still closed Empire Games, because Brock does what he wants.  Patrick Hug wanted to move into Warhammer or else close.  We looked at the trend lines with all our business converging on a saturated Magic market, and decided it made more sense to wind up operations and walk away.  Our lease gave us the option to do so after a certain number of rolling months under a given revenue level.  In order to avoid losing the kick-out clause, we couldn't make too much money in a closeout sale, so we had to bleed down the asset base gradually, over an excruciating summer.  By the time Red October rolled around and Crystal Commerce stopped working, we barely even cared.

Our extended liquidation sale stepped on the east side's air hose, though.  Mesa Comics and Tempe Comics both closed, as well as several of the smaller outfits on our side of town.  Obviously, the merger never took place.  Griffin got back into software, Girard returned to game design, and Erik Miller consolidated his resources out in Apache Junction and survived the famine unscathed.  Play or Draw ended up opening a massive branch facility in late 2017 near Southern and the 101, and rumors swirl that they have a lease offer on deck that would achieve the impossible, a sustainable store in northern Scottsdale.  Investors from Las Vegas have contacted them about expanding into Nevada in 2019.  Joe Weber drives a Lamborghini now.

Desert Sky Games concluded operations on Black Friday weekend, closing to the public for the last time on Sunday, November 27, 2016.  The building was empty 48 hours later, and we turned in our keys on Wednesday the 30th.  Joe picked up the rest of the Magic stock from my garage, paying for it with a briefcase full of blue Benjamins and carting it up the freeway to POD Tempe.  The five DSG owners walked away with a disappointingly modest profit over our original investments, which did not account for the lost opportunity cost of investing that money someplace better for four years.  But at least we had enough scratch not to have to work for a few months, and we enjoyed a great Christmas with our families.  One of the other owners and I decided to pool our proceeds and rent a dirt-cheap commercial front and open up an arcade and pinball restoration business.  This occupied our attention as soon as New Year's festivities wound down.

Mike's Arcade and Pinball opened to the public March 30, 2017.  I administer the store part-time while serving as an adjunct professor at a nearby community college.  The other Mike is the primary technician, and we brought back a couple of DSG staffers to operate the storefront.  We broke into the black in late 2017 after a series of great container pin flips.

(The warp rift opens.  It's the original timeline.  I leap through.)

Of course, I can never know exactly how things would have played out, I can only speculate.  And yes, I took some deliberate artistic license with this article, and I'm about to do it several more times.  But DSG not only did get into Warhammer in 2015, we stayed in the category despite three near-misses that could have taken us out of it.

Once, a few months after Hug left, I fired our main miniatures employee for unrelated reasons and had a sharply reduced expertise base.  I contemplated cutting bait, but the game was posting decent numbers at the time and I didn't want to forfeit that.  A second time when Games U was preparing to open, we contemplated a buyout deal that took DSG out of Warhammer, a deal that just never came together.  And then one final time in early 2018, I was ready to kill the category on metrics.  Sales had fallen off catastrophically since the move to Chandler, and I figured the players had spoken.  As it turns out, they had a little more still to say, and with a substantial amount of effort from staff members championing the category, Warhammer stuck around and started working its way back up the scoreboard again.

In an oblique way, taking the two sides of the hypothetical as being at least plausible, DSG staying in Warhammer was responsible for DSG Chandler existing at all.  For better or for worse, whatever happens from here on out, Warhammer made the Valley's largest game store possible.  Not bad.

It is also not lost on me that both versions of the hypothetical have me out of the hobby game industry entirely when those timelines reach the present day.

That would have been pretty cool.

Tuesday, November 13, 2018

End of a Five-Year Crossover Event

[EDIT: This post was mostly written in advance of publication but Monday morning we learned the extremely sad news that Marvel's legend himself, Stan Lee, had died at age 95.  Stan will be missed to the core and True Believers everywhere mourn his passing.  I take some comfort in knowing that whatever happens to the comics industry from here on out, the last time Stan Lee saw it while alive, comic shops were still everywhere and people were still reading and enjoying comics just as he intended.]


In November 2013, Desert Sky Games became "...and Comics," and we forged our ground into the new world of periodical media, superheroes, adventures, indie mystery, and so much more.

Our game store in Gilbert went full-blast hybrid.  It later hybridized even further, into miniature wargames in early 2015, and back into video games in early 2016 (after largely abandoning them earlier, a business mistake if there ever was one).  We had, at various points in time, manager-level positions devoted almost entirely to comics and media and maximizing our reach with our collecting community in the category.

In November 2018, Desert Sky Games and Comics returns forevermore to being "Desert Sky Games," now in Chandler.  Yup, we've gone ahead and closed out our comics business, with an intention to add resources to games and refocus on our core competencies.

This was a good time to do it: we had happy boxholders so there was still value to convey, we had a friendly/ally store nearby in Samurai Comics that was able to take over where we left off, and our Diamond account had no pending invoices on terms left due so we were at liberty to walk away.  We were never going to get another chance to do this as clean as we just did.

Longtime readers will remember that DSG almost left the comic category in late 2016.  After setting forth the case for why we got into comics in the first place, we had some analytics turn sharply south and I believed it was as good a time as any to wrap the category up.  I even addressed the situation a second time to make it clear we did not see this as "nurp nurp comics suck" but instead just recognizing the direction we thought the comics industry was about to go, and realizing we weren't positioned well for it.

That direction, as I've discussed in e.g. my Commitment Quotient article earlier this year, suggests that stores that are committed to comics first, are going to be the big winners in the sunset cycle of the category.  I'm not talking doom and gloom here; as I stated in one of the 2016 articles, comics aren't going to "die" even if the monthly 24-page comic magazine ends up falling into disuse.  What's happening is that as mass media and consumptive media mature, comics mature with them, and we're going to see a gradual and vast consolidation as the format itself stratifies as a key configuration of the collectible long after it ceases being strictly necessary.  The business world is going to converge to where the two major players will be comics readers much as they are now, and comics retailers with high expertise, broad coverage, and platinum-grade brand appeal.  Nobody is going to be able to do this as a side gig anymore.

When the Mergesplosion of early 2017 occurred, and we gained a large location with a comic customer base already present, we held off on exiting the category mostly to see what would happen.  As 2017 neared its end, we moved the Gilbert store to Chandler and we let the Tempe lease expire and we could have exited comics then, but once more we decided to hold off and see what would happen.  Now, after another year of business with no other changes and nothing to distort our analytics, no wild cards still yet to be drawn and counted, we decided, in the words of my accountant, that "staying the course for one more year was no longer the thing to do."

I have enjoyed being in the comics biz quite a bit.  There's something about the comics category that lets a store be out in front of pop culture like no other category does.  Even when games are at their most cutting-edge, they can't approach the high topicality and immediacy of comics.  Great new stories, blockbuster summer movies, characters we've loved all our lives -- these are part and parcel to the world of comics, and with us being fun merchants, the category felt like a natural fit.  However there's always more to business than just the front-facing part visible to the client.  Much of the logistical, nuts-and-bolts upheaval took place backstage.

This isn't the last of the consolidations DSG will be making in the months ahead, but it's one of the biggest.  Brock Berge of Empire Games (and the Berge auto dealership empire), a savvy retailer if I ever knew one, once explained to me that there are only two ways to succeed in retail: sell some of everything or all of something.  And the mass-market like Wal-Mart and Amazon already have the some-of-everything option on lock-down.  The path to success still open to small business is to sell all of something.  We preach diversification in hobby game retail, but it can be dangerous to diversify too far beyond a closely overlapping set of supercategories.

I can say with confidence that we should have been out of comics in 2016 as planned, but I'm OK with having played that out a little further because now we know for absolutely sure.  I can say with confidence that getting out of video games in mid-2014 for lack of various resources to devote to them was a serious mistake.  Other more granular consolidations become a bit easier when we have a clearer look at the shape of our all-of-something umbrella.  For example, we recently discontinued support for all the anime trading card games again.  Yu-Gi-Oh was already "packs only" but we had event support and went a little further for the likes of Dragon Ball Super, Force of Will, and Cardfight Vanguard.  No longer; it's all gone and never coming back now.  We wanted to see if our presence in the Chandler market as a dominant card venue would solve those games and it did not.  The player bases for those games want something different and it's not a direction we are interested to go.

In terms of other games and hobbies, everything is pretty much locked in for the holiday season, but there are going to be some serious shifts after the first of the year based on what we see with another December worth of comparative analytics.  Next week is Thanksgiving and Black Friday, and while we aren't going to be blowing the doors off of everything, we have a few special treats in store that we know some of our clients will love.  See you then!

Tuesday, November 6, 2018

Shoestorm

Wizards of the Coast and Hasbro have really been on the warpath lately.  I have written several blog articles over the past few months as each successive shoe dropped.

Today's boot blast was Ultimate Masters, the more-or-less final set in the Masters series, releasing December 7th at a staggering $14/pack MSRP and $330+/box price tag, with each box containing a superpremium topper foil card out of a random set of 40 possible.

The number crunch tells us the ten fetchlands will not be in the set, guaranteeing it won't be as successful as Modern Masters 2017.  Beyond that, we're mostly in gambling territory.  Nobody is quite sure how this product is going to work out.

Three hundred bucks a box, fourteen bucks a pack, somewhat less at mass market (thanks Obama) might just be well beyond the budget of gamers.  The math is somewhat known on this.  But this product is targeted at whales, so maybe that doesn't apply?

The box-toppers are a selection of roughly ten outstanding cards, twenty great cards, five really good cards, and five woofers.  So the odds of a topper having value in any given box are good.  It's basically an anti-jackpot.  Roughly one-eighth of the time, you'll miss.  That seems good for stores opening boxes for singles.  Or players, for that matter.

Last year at this time, Iconic Masters came out and the greater Magic pundit culture dumped all over it.  Here we are a year later and I sell as much of it as I can get at full margin.  That's not as good as Modern Masters 2017, which by the aftermarket box costs about 150% of MSRP as of this writing, but it makes for decent business.  Another local dealer broke open a pallet of Iconic Masters that he picked up off the distress wire, and I think I would have done the same if it had been offered to me.  The singles value is there, never mind what Rudy Battistic wanted you all to think so he could buy in low.

Earlier this year, Masters 25 was promoted as "the Masters set you've all been waiting for."  Unfortunately, we discovered what happens when the reprint base is tilted too far toward scarcity and not enough toward utility.  Masters 25 sells very well for us today, but it joined its predecessor as a regular guest star on the Massdrop show throughout this summer.  Over time, Masters 25 will be just as demanded as most of the Masters series.  Card for card it lines up extremely well against, say, Modern Masters 2015 or Eternal Masters.   But for now people haven't felt the urgency yet.

With Ultimate Masters, given the price increase, the contents, the Wal-Mart factor, everything, it's almost as if Hasbro is daring people not to buy it, knowing they will.  "Here's the last Masters set.  Buy it or don't."  They know most Magic players are addicts, and it's never good money to bet that the crackhead is really gonna stay off the crack this time.

If I want 200 boxes of this, I'm looking at an invoice approaching forty thousand dollars at wholesale.  That's more than I have ever spent in one shot, that I can remember offhand, on any single product or release in this business.  If I buy only 60 or 70 boxes to hedge, how many sales am I missing?  It's a hell of a gamble.  If I do it right, I get to kill off a substantial amount of the store's remaining debt.  If I do it wrong, the debt gets bigger.  What's the right play?

I'll let you know when I figure it out.