Vividly COVID

So the coronavirus COVID-19, the latest evolution of what we were calling SARS over a decade ago (and they're basically variants of a common organism set) has exploded from a central outbreak point in or near Wuhan, China, and has now infected people on every continent except Antarctica, and just give it time and it will probably get there too.

I'm not going to recap everything to do with COVID-19 because if you are reading this then you surely have access to the internet.  And honestly, people dying of this infection is much more important and serious than the disruption of the supply chain for hobby gamers.  However, this is a weblog about the hobby game business, so I wanted to document the situation as it occurs to us in the moment.

Unlike the "Asian Flu" from the classic Simpsons episode, product shipments from China are not going to incubate contagious strains of the virus.  To the extent that COVID-19 might be airborne, its lifespan is short and is concentrated in highly unsanitary locations and situations.  By all means use some Purell when you're opening that parcel, but no, you won't take sick because of that Wish order, you'll just want to die because of how awful the quality of Wish's bootleg merchandise is.

Instead, we're seeing ripple effects stacked on ripple effects on the movement of goods out of or through both China and other sensitive locales on the Pacific Rim.

It doesn't help (or does it?) that this outbreak occurred roughly at the same time as Chinese New Year, which is when our entire industry stops being able to order things that aren't already in the channel, until a couple months later.  So on the one hand, publishers were topping off distributor stocks with pre-CNY shipments, but on the other hand, who knows when production will resume to prior throughput levels.  There's money involved here, mountains of it, which even for a putatively communist regime is something China can't handwave off for long.

I have thousands of dollars' worth of dice sitting in a container somewhere near Shenzhen harbor, and fortunately a lot of dice made it out under the gun a month ago so DSG's main storefront isn't bone dry on that stuff, but still.  It represents the most obvious consumable that customer-facing optics will suffer from a shortage.

Board games are no longer a central category for DSG, and likely haven't been for a while given the sales percentage they've posted for years now, but even then, disruptions in supply are definitely noticeable today.  I would chalk these up more to CNY than COVID-19 in the immediate term, and however much shortage there still is as the spring season unfolds, will start to be more the effect of labor and transportation interruptions due to the pandemic.  I warned about this.

This is the first CNY cycle where I've had new video games as a priority item to stock, and so far I've actually seen zero effect on those, and maybe it's just because of the paucity of new releases in between a holiday season that was heavy, and an upcoming one with new generation console launches involved.  But the same distribution that brings me new video games also brings me things like licensed plush, and the supply of Mario and Zelda stuffies is low, while the supply of Pokemon plush is close to nonexistent.  The latter of which is weird because Tomy's biggest toy factories are in the Jiangsu and Guangdong provinces, not in Wuhan City.  You have to figure there's a transportation and labor constraint going on countrywide.

Obviously "ain't no global freight disruptions when all the merch is used," and times like these have me leaning gratefully into the scale of "pawnshop" business I've built, both in TCG singles, video games, and miscellany.  But Wizards of the Coast prints cards in Texas, so Magic: the Gathering was going to be unaffected regardless.  Magic represents the overwhelming portion of DSG's revenue, both in-store and online, and I don't see that changing in 2020 even with video games constantly growing.

It's important to take this in perspective and realize that no matter how much inconvenience resellers face from global sourcing problems in the short term, everything will be back to normal in the long term and China will continue being the highest-volume highest-scale manufacturing base in human history.  The West (and everyone else) will once again have more plastic doodads to buy than ever before.  Indeed, what we're seeing now barely amounts to an interruption of that, compared relative to what we had even twenty years ago.

So until then, make sure you're washing your hands with soap.

Meeple Mortis

Back in November, DSG discontinued Warhammer.  (Well, we discontinued miniature wargames, but Warhammer is usually the only one that matters.)  We don't have enough data yet to evaluate that decision fully, but the Amazon FBA closeout of that stock was fairly lucrative.

And it's just as well we sold out when we did because last week broke the news that Mox Boarding House was coming to Chandler -- to a site three miles away from DSG, no less.  You may recall I visited Mox's Bellevue, Washington location in December and I know a bit about them firsthand.  Though Mox's branding is based on Magic: the Gathering, and their parent company is Card Kingdom, the audience their offering is tailored more directly is that of general tabletop and the "board game cafe" crowd.  In fact, I had considered making this article a rundown of my research regarding Mox's arrival, which was surprisingly bountiful using only public-facing sources.  But I've done the work for that and I want to enjoy the advantage of that information until somewhat later in their preparation timetable.

Mox's loadout for Warhammer is extremely on point.  Palatial game space, maxed-out tables, separation from the card players, and deep stock of everything Games Workshop prints.  In short, it is everything a Warhammer player could want, and is Tier 1, as I explained in the Horus Hiatus article.  Even the Games Workshop company store to the southeast will be forced to ante up with the exclusives fast and furious to keep the player base coming to them.  I mentioned my small-template discount wargames store model, "SWIG," as an iron-in-the-fire I would leave until such time as opportunity presents.  Based on my research of Mox's situation, I don't see them hitting ROI for the better part of a decade, and that means they are in it for the long haul.  I am discarding SWIG.  I am just never going to do it now.  The coast will not be clear until a future date sufficiently remote that I'm sure I will be doing other things by then.  So if I wasn't truly out of Warhammer already, the arrival of Mox Boarding House in all its grandeur and excess has now nailed that coffin shut.

Now, about other general tabletop.  I mentioned in the Warhammer article that:

"Board games are a bit more fluid, because players don't really need the store to have a place to play.  We can accordion that category bigger and smaller at will and it mostly won't get noticed.  Deadwood stock can be deleted from the racks quietly and sent to Amazon FBA, a process that has already been happening [...] I envision their departure from DSG happening without any announcement."

Board game sales in Q4 2019 were below my expectations, while not actually being bad in absolute dollars.  That is to say, evergreens performed.  Despite DSG not being a board game destination, we sell upward of a dozen copies of Catan a month, for example.  The base set.  Like, who doesn't have that already?  A lot of people, apparently, and I am more than happy to furnish the goods.  In fact, we see just downright great turn rates on the likes of Splendor, Azul, Betrayal at House on the Hill, Munchkin (the base set!) and Dominion.  This pace of sales emerged right around the time we experimented with dialing in modest discounts again, which was earlier in 2019, and I'm comfortable right now concluding that it's meeting a component of our local market demand in a way that market wishes to be served.

At the same time, the big fails we see in board-game-land are new releases that don't turn evergreen, such as Tapestry, new "hotness" that ends up being alphas-only like Oceans, and surprisingly, small-box party games have, ah, "nosedived" since this time last year, and now barely even register on the needle aside from Secret Hitler.  Most of the party games are publisher-blocked from being sent to FBA, but let me tell you, I sold an awful lot of other titles that were supposed to be the next great thing, by means of large boxes trucked to Rialto, California.  (That's the FBA hub nearest.)  There are clearly board game consumers for these things.  They just follow the pattern I explained in the Horus Hiatus article.  They shop Amazon first, and sometimes only.  They shop the mass market.  And they shop the brand vertical.  They may shop Tier 1 independents.  They never make it in my doors, because I'm not Tier 1 for board games, so I should never have ordered that inventory, and it was stupid and wasteful for me to do so.  I should have spent that money on Magic cards and video games.

Who are the Tier 1 independents in Phoenix for board games?  Right now Imperial Outpost is definitely one, and I think it's safe to say Game Depot is also.  To the extent that Depot's scale isn't absolutely off the charts, their laser focus makes up for it.  Their customer base surely considers them Tier 1.  Mox Boarding House will emerge from the birth canal at Tier 1, possibly even Tier 0.  DSG doesn't have a trump card in hand for this.  We're going to have to build into a working strategy.

So moving forward, here is the deployment I am going to try, including and continuing from recent adjustments that worked.  It is going to have limited flooring and only in places or on fixtures where board games make the most sense.  And it's going to have us on an exposure so minimal that I can push it all into a lake at some point if I don't think it's working.

Firstly, it will all be discounted.  Most of this is already in place, as we started discounting tabletop on a gradual basis after the disappointing 2018 Q4 and with so many aggressive competitors entering the fray last spring and summer.  If you should happen to visit and see that one of our board games is at full price (or higher than a publisher-imposed price minimum, which does exist in many cases), hang tight, we're getting to it.  If the price never changes then it's probably at the allowed minimum already.

Secondly, anything that's licensed from the IP of a video game, or is clearly branded as video-game-chic, and is not a smoking crater in terms of quality, gets to stay.  These titles have consistently sold for DSG, especially as our video game mindshare has increased.  For example, Boss Monster, Fallout, and the Chocobo series of casual titles are all proven winners and they aren't going anywhere.  I expect to do some reloads from The Op (formerly USAOpoly) to fill in this subcategory, though obviously there's enough saturation on those options that I can be selective.  Stocking these, even when they don't sell quickly, amplifies the voltage of DSG's video game branding.

Thirdly, the heavy hitting evergreens can stay, though as soon as I see signs of a soft underbelly, off to FBA it goes.  There are a reasonable number of these games, but not an infinite number.  I'm going to stop taking the Asmodee Top 40 bonus games because I have no intention of stocking the entire required list anymore.

Fourthly, the party games are going to attrition out.  Many of these are under strict publisher resale requirements and either I cannot discount them, I cannot FBA them, or both.  You can still redeem DSG Stars, of course.  I think the party game fad has run its course and board gamers are turning back to core fare, while casuals who never embraced the deeper hobby are flitting off to the next shiny thing that caught their eye.

Does this amount to DSG discontinuing board games?  I can't prove it doesn't, but I also think the glut of product released into the category has made it possible to focus on a subcategory like "video game IP" or "evergreens" and be able to leverage sales out of the lack of any need to attempt every major new release and then clog a clearance table with the ones that fail to catch fire out of the gate.  It blows my mind how much churn there is in the general tabletop category at brick/mortar and how much of it I ended up having to perform even at my lesser scale.  Contrast that with the way that Magic and video games move at DSG: We bring them in, and they'll sell when they sell.  No urgency, because for the most part, they gain value as they sit there.  There are exceptions, but they are just that, exceptions.

In the meanwhile, let's see what happens when we lay out a spread of Greatest Hits, Everyday Low Prices, and plenty of room to shop them.  It's a framework that has seen some success in the past for some business I heard of once.

A Desert Grand Prize

Over the weekend, Arizona hosted its first (and likely only, at least for a long time, statistically speaking) Magic: the Gathering Pro/Players' Tour event.  This was coupled with a major event type we've actually gotten a solid number of lately, a Grand Prix, the totality of which event is now called MagicFest but everyone still just calls it "the GP."  But the big draw was that this MF/GP had concurrency with the first ever PT Americas tournament, and all eyes were directed this way to see how things would play out.

And I missed it.  I spent the whole weekend working at the store, except for the part where I attended a cousin's wedding.  Plus spot coverage on the kids while Steph's crowded career social life did its usual thing.  The entire week was kind of a mess, really.  I was lucky that the stars aligned well enough on Wednesday that I could spend the day with a couple of friends-peers, including a trip up to the award-winning Game On in Prescott, Arizona's first WPN Premium store, for some workshopping.

Fortunately, I had my peoples at the Grand Prix, live and in person both to compete and to vend.  But honestly?  I had no intention of playing, and I had more than enough work to do at the store, and unfortunately both I and the staff got a lot done because so few customers were there to "interrupt" us.  To be clear, we would have welcomed a few more interruptions.  I'm actually relatively happy with the staff performance because the per-ticket total was above average.  Fewer humans arrived, but those who did arrive generally shopped productively.  There might be some value to learn from this, along the lines of staff having more time to engage with each visitor, but we kinda need the higher revenue that most weekends earn, so I'm not going to navel-gaze too deeply at this.

At the GP itself, it sounds like the Arizona player contingent performed well, and I'm glad to hear that.  A lot of those guys put in the hours and deserve to earn some success.  And the event was held on a spectacular early spring weekend, perfect for visitors to get a great impression of our beautiful desert resort town.  We had a cold snap the couple of days before the event, and we got hit with rain the day after, but from February 6th through 9th inclusive, it was sunny and clear with 70-degree highs.  Can't ask for much more than that.  Maybe Wizards will return to Phoenix sooner rather than later.

Theros continues to sell super hot, except the collector boosters, which I figure I'm not moving too many of because the desperation stores are fire-selling them for a nickel over cost and the mass market is racing them to the bottom as they automatically do.  I'm not in a hurry; I can wait it out.  Pokemon Sword & Shield greatly underperformed my hopes for release week, but we know Pokemon doesn't tend to "burst" sell like Magic does.  It's more of a slow burn, roughly two boxes every day, one pack-by-pack and one box sale.  At this rate I won't have to restock it for the foreseeable, but it would have been nicer for it to take off and sell out early.  And after recently adding new video games and systems, the two big winners are weeb games and the Nintendo Switch, both of which are seeing fast sell-through even as I keep ordering more.

I have a market recommendation for stores that are boardgame-focused.  Do with this as you will, at your own risk, I am not responsible if it doesn't pan out.  As of today the situation in China has gone from uncertain to downright worrisome.  Coupled with the ordinary product flow interruption from Chinese New Year, I think we're going to see substantial stock outages in distribution starting in the near future and persisting until some unknown later date.  If board games pay the bills at your store, go heavy on stock right now to the extent that your budget allows.  Buy what's there, and don't leave it for a second order.  You don't want to be sitting thin when the pantry runs dry.  Thankfully, products like Magic, Pokemon TCG, and Warhammer are not made in China and shouldn't be affected.

Don't forget to buy something cool for your significant other for Valentine's Day!

You Have My Sword and My Shield and My Axe

Pokemon leapt forward a generation back in November with the Nintendo Switch releases of the twinned video games Pokemon Sword and Pokemon Shield.  These succeeded Pokemon Sun & Moon, which in turn succeeded Pokemon X & Y, which in turn succeeded Pokemon Black & White and so on.  Each time it has largely been an excuse for Nintendo to iterate the tried-and-true game formula right around the time that spiffy new hardware was available.

To be sure, formulae are used because formulae work.  There is a reason we are excited to see yet another James Bond 007 film this year that will contain almost the same exact story beats as the last twenty-plus installments.  Pokemon, a focused distillation of the "nurturing" mechanic integral to most roleplaying games both paper and virtual, is already the most successful media IP in human history, far surpassing even Star Wars and Batman.  They are under no specific pressure to change up the game plan, but instead may refine it at their leisure.

The Pokemon Trading Card Game shot to amazing heights in 2016 during its 20th Anniversary release slate.  (Don't let that fool you Millennials into thinking your childhood cards are "Old School '96;" the game did not appear in North America in English until early 1999.)  The 20th Anniversary sets released during the XY cycle, and unfortunately the toboggan ride down afterward proved steep.  Despite the Sun & Moon sets offering some of the game's most beautiful graphics and design elements and plenty of card power, interest in Pokemon as a game in general had collapsed rather badly by about halfway through the cycle.  Demand-manipulation gimmickry like unannounced shortprints and additional chase card cycles defined the last several Sun & Moon sets, which sold passably well for all that.

This week launches a new cycle, titled Sword & Shield to match its video-game namesake, and if prerelease attendance is any indication, interest in the game may be on an upswing again.  New base sets always carry a demand premium, so we don't want to draw any big conclusions yet.  But early signs are promising and demand at Play Pokemon early-release stores like ours was strong right out of the gate yesterday.

Pokemon TCG does have some problems, both again and still.

For all its sales success, the staff devoted to managing organized play is a fraction of the personnel count that other publishers have successfully used, so any tremor in the course of scheduling, administering, and recording such activity causes considerable disruption.

With standard rotation but no compelling non-rotating "Commander" format, Pokemon's singles market is trapped in the "anime TCG" ravine of cards being either trash or treasure and nothing in between.  Cards are either in a competitive deck and thus being worth top-of-the-market, always sold out from stores, and ripe for try-hards to rip little kids off in trades with bulk holographics; or cards are not in a competitive deck and basically worth bulk regardless of rarity or popularity of the character depicted.  This whipsaw discourages stores from offering strong buy pricing like you see with Magic: the Gathering or video games, and instead resorting to essentially a "safe lowball range."  Because of this, nobody trades in the cards that are demanded, and thus the vicious cycle feeds itself.

Meanwhile, an internet full of clickbait articles promises people their old 1999 cards are worth a mortgage payment, even though everyone looking to tell just has the same ratty Ash binder full of Base Jungle Fossil missing the Charizard.  This leads to negative customer experiences no matter how much the store finesses the explanation.  Nobody wants to be told they aren't getting the jackpot they thought they had, and the messenger gets the blame, not the hype pusher.

There is some amount of "money talks so shut up" happening where I simply can't bring myself to complain too vocally about any of this.  I think the main disappointment is the sense, justified or not, that Pokemon's IP is so strong that we should be seeing far greater performance out of the TCG, relative to behemoths like Magic.  We are told that such performance does occur in the mass market, and I can't prove that isn't so, but then why bother with independent specialty retailers?  We can't possibly be little enough hassle to be worth the incremental revenue.  We're the very definition of hassle, as a tier overall.  We ingest resources and emit complaints.

Nintendo has been around for literally over a century and I'm sure they will figure out what they need to do if they decide anything is necessary.  There is a legitimate argument to be said for changing nothing and just iterating the content.  That formula is a delicious mix, as far as those imbibing it are concerned.