Shuttered

Monday, the order finally came from the governor that all non-essential businesses had to close to the public in order to slow the spread of the COVID-19 coronavirus.  There was some imprecise language in the "essential" definition list of what could remain open, but rather than fighting the tide, DSG ownership anticipated this and decided to set up to take what advantage we could.

Let me dispose of the fact right away that I think the lockdown is an overreaction and that the scorched-earth economy is going to cause more deaths than the unchecked virus ever could, as I explained in last week's article, from a combination of crime, drug overdoses, suicides, medical problems needing resources exhausted by COVID cases, and so on, especially as the lockout goes on longer.  But I also recognize that no politician can do the correct thing here, because no matter what they do, the media will crucify them with every COVID death in their jurisdiction, so they need to be looking like there's no bridge they won't cross to "fight this pandemic."  We're all going to be paying for this forever.  There's no way to prevail now.  May as well ride the toboggan down.

Anyway, since we're all going to pay for this forever, I wanted our staff to get as much of that money for themselves as they possibly could, so we laid them all off so they could claim unemployment.  They will receive the Wage Report in the mail shortly, which will match up with the W-2 payroll-taxed wages we paid them.  A lot of game stores and other questionable businesses who paid their people under the table are about to get caught with their legal pants down rather badly.  Those businesses' saving grace is that Departments of Revenue across the continent will be overworked and understaffed right now to do much investigating.

With no staff and only Griffin and me to run the store, we figured we'd be pretty slammed for the most part, but with only six or so open hours per day, we could do the shipping in a dark store, and still receive deliveries and so forth normally, and within a week or less, we'd be forced to close regardless by the state so what did it matter if we had a tough few days.  Our wait was less than 48 hours, and that counted taking our respective Sundays off to rest and recuperate.  We ran a fruitful Monday with a modest count of arrivals but each one absolutely determined to stock their game rooms, and we hope today is similarly solid.  Then we can close the doors and go about the deliberate and relatively tranquil work of selling solely online.

Make no mistake, in-store transactions are the most efficient, bar none.  It's why we make sure our best merch can be purchased in-store, including that being the exclusive conveyance channel for the effective entirety of our video game stock.  So we didn't actually want to have to close the storefront, but we accepted a closed store with online shipping as a likely scenario.  Two weeks ago, I didn't think Amazon would turn off FBA shipments, and that has put a significant cramp in my style.  I expected to be offloading meaningful amounts of overflow there.  And the closure of TCGPlayer Direct makes my best marketplace channel for online singles into a metaphorical Paralympian, which fortunately is sufficient when everyone else in competition is under the same constraints.  And eBay is just bad these days.  Putting the three together, I expect Griffin and I to spend at least the next week mostly just processing singles through the store's digestive system.  We're backed up to all eternity with collection buys anyway.  Time to regain some ground.

I'm hoping online orders maintain such volume that we can't do much else until the eventual reopening.  If the store gets funded by one of the CARES Act business relief provisions, we'll bring the staff back pronto and they can pick up this stethoscope and walk.  Griffin and I will then be at liberty to perform substantial infrastructure improvements under the enforced emptiness.  The last thing on the agenda will be filling out front-of-house video game stock, since we can't convert that to money until absolutely re-opening the doors.  With a long haul of uncertain, uh, longness, ahead... we need to make sure we're not spending a dollar that isn't going to turn back into more dollars somehow.

That's about it, I guess.  See you on the other side!

What Then?

Stores all over the hobby industry are facing various degrees of closure right now thanks to federal, state, and local governments' edicts, and the decisions of ownership and management.

As I write this over the weekend, Desert Sky Games has a closed game room and closed arcade, but is open for transactions Monday through Saturday from noon to 7pm, and in order not to leave our staff starving, we've got most of their assigned hours directed toward online replenishment and fulfillment.  Online sales are down, but still represent meaningful volume.  But things seem to change practically within hours, and by the time this article goes live, we might be forced to close the storefront -- or we might do it unforced, because some curveball has spiked the risk of being a contagion vector, outweighing whatever business might be walking in the door.  

In the first week of no-gameplay low-hours, the store hasn't been crowded, people are coming in small numbers at a time and keeping their distance, contact is minimal, and the risk is at lottery-ticket levels.  And it's critical that we try to do business if we can, because regular sales are way down, and revenue coming in is keeping us away from the danger zone that leads to being dead in the water.  Right now with Gamestop not accepting trade-ins, we've got virtually unimpeded access to that market, and Clorox wipes and gloves are right there at the buy counter for our staff.  Since the two biggest things in our business are Magic cards and video games, we want to continue to buy, sell, and trade them as long as possible, and if we can move other products too, so much the better.  (We don't wipe the cards, but we do sequester trade-in singles for a few days.)

But a cliff is coming.  Customers who work in shutdown industries, such as waiters, bartenders, travel sales, personal trainers, and (I assume) strippers, are going to start running out of money.  The cascade effect is that people will wind down their purchasing.  The store doorbell will stop ringing, and we will lock it and process online orders exclusively from then on, unless or until a full quarantine order is issued.  All the staff have been excused if they want to be, for those who wish to self-isolate.  Most declined.

The work we're doing now is less in service of immediate survival, since we're stable, and more in service of whatever comes next.  And when will that be?  Something to keep in mind as the media stokes fear with tales of months-long shutdowns is that it basically can't happen.  There are several reasons for this:

• First and foremost, it isn't necessary.  Wuhan and Hubei are already on the other side of the spike, opening back up.  And they did almost nothing to stop the spread until it was too late.
• Americans will tolerate pretty strict rules... for a limited time.  My personal prediction of the breaking point is going to be near the end of April.  If we aren't already back to work by then, you're going to see the masses go "F**k it.  They can't arrest all of us."  (See file photo below.)
• Speaking of which, they can't arrest all of us.  Breathless fantasizing that there will be martial law or some other severe lockdown beyond even what we're seeing in Europe is absurd and people repeating that stuff are stupid and should feel bad for being so stupid.  There are not enough soldiers, police officers, guardsmen, and reservists on the rolls to detain 340 million of us.  And we coordinate.  We possess technology.
• Most importantly, the longer this shutdown goes on in some form, the more you'll start to see a death toll far higher than the virus, from such causes as crime, drug overdoses, suicides, medical problems that weren't able to get hospital resources, and so on.  We all want every possible coronavirus sufferer to be saved -- except maybe those students from spring break -- but it hardly makes sense to keep humanity at a standstill if we lose ten, fifty, a hundred, or more people to the above causes for each virus victim that makes it through.

So we can say with reasonable certainty that this economic catastrophe has a time limit, even if nobody in charge of anything dares whisper what they think that time limit might be.  This is justifiable for now, because an unpopular answer could bring about reflexive nonparticipation in the isolation practices that are so very beneficial thanks to us having done them sooner than later.

And since we know that this will end, but not when or how, that puts small businesses like mine in quite the predicament.  It is difficult to plan and prepare our deployments, processes, finances, procurement, scheduling, and everything else, on such scant certainty.  

Especially where it comes to the hobby game industry.  Will players roar back to in-store events with a passion, or will they stay away?  Will governments even give them any choice, if mandates remain in place long after the crisis that gatherings must be small?  I can talk a pretty big fight if you need me to, but anyone could run into a gut check when they show up to a 100-player prerelease and hear some jackwagon coughing from the fifth table.  Are you sure you want to sit down in this throng for four hours?  

It's difficult to emphasize enough just how uncertain this point is.  Will Magic actually push to Arena in a way that wasn't really happening, but everybody thought was happening? Will that crash the value of the paper Magic secondary market for years to come?  (I stand to lose six figures of moneys if this is the outcome.)  Or will this kick off a renaissance of in-store play where attendance peaks and players remember why it is that they craved the social aspect of the game?  Resulting then in a boom of market prices and vaulting every store's inventory value into the stratosphere?  (I'm sure all of them will dutifully report the value increment and pay taxes on it.)

On the supply side of Magic, Wizards of the Coast has been about as reasonable as any retailer could ask.  Back before we knew how bad things were going to get, they reassured us that lack of event attendance wouldn't crash our metrics, which is a big deal when those metrics are what assures a store is able to continue to fuel its product engine.  (And for that matter, part of the cycle is self-amplifying.)  They haven't announced anything more recently than that, which makes sense if many of them are working from home or otherwise isolating.  If I had to guess, based on no inside information whatsoever, I would expect the Ikoria expansion to be delayed into May.  Wizards spends way too much on a high-profile booster product to release it into a maelstrom.  They don't have to make that call yet, but likely will within the next couple of weeks.

I've been following the board game scene mostly vicariously, through friends and peers.  In-store play wasn't the norm for that category anyway, and once again it's hard to know how much of that will come back once this is all over with.  From among those game stores that reported their COVID closure is going to be permanent, almost all have been "board game cafes."  Rough break.  In terms of product sales, online channels already represented a substantial portion of all transactions of boxed games that don't require much in the way of organized play support.  I don't know how much the present pandemic is going to push that trend along, but it sure won't help.  On a related note, we sold out of Pandemic and its expansions, and had to restock.  I guess some people like their entertainment extra-real.

Dungeons & Dragons represents probably the highest per-capita risk of virus transmission among all of tabletop, because your typical Adventure League game puts five to eight humans at a table, in a circle, all breathing toward each other for three hours.  This entire time I've been skeptical of the "Stranger Things Boom" for D&D and it wouldn't shock and astound me to see the fervor evaporate as quickly as it materialized.  But nobody wants that because we love selling dice, minis, accessories, and even the occasional sourcebook.  So we'll see.

Not much to report about video games.  Every Nintendo Switch that any store could lay hands on basically sold out in the ramp-up to isolation.  My main distributor has zero in stock.  More will surely be on the way, but the used market has spiked in response.  Sales of other consoles have been absolutely outstanding and in some cases we barely have had time to Clorox wipe an inbound unit, run a system reset, and then sell it right out the door.  The huge "console wall" is looking pretty bare right now, which is just as well because we're installing new fixtures anyway.

What's that?  New fixtures?  Yes.  Among the things we can do in a mostly-empty store are projects that require that there not be very many people around.  We have seized the chance and moved right ahead on it.  It's spending that I'd rather not do with such an uncertain revenue picture, but a meaningful amount of it was already committed and in absolute terms it's not a large outlay anyway.  We had some electrical work done in the suite as well and we're able to power more areas, and better, than we were before.  In particular the arcade is vastly better in playability now that we've set it up where the ceiling lights don't reflect in the screens for the most part.

We don't know when this will end, or how, and in the face of uncertainty all we can do is take courses of action that are "correct" across as many branches of the outcome tree as possible.  That means maximizing our online throughout capability, keeping our personnel as healthy as possible, careful procurement, and making sure we don't waste windows of opportunity to upgrade the physical plant.  And if the powers-that-be tell us to knock it all off, I'll come into the store myself and quietly catch up on my task backlog.  Keep moving forward, everyone.  You'll want the momentum when the barricades fall.

That Escalated Quickly

It seems silly that a few weeks ago, the only thing I really observed about the onset of COVID-19 was that it would probably disrupt the supply chain a bit.

Over a very short window of time, a few days really, we went from being told to cancel large gatherings, to empty shelves where the bottled water and bog roll* used to be, to being told to cancel medium-sized gatherings, to schools being closed for the rest of the month, to various cities going into much more serious levels of "lockdown," to being told to cancel essentially any gathering, even as small as a few people, and here we are.  Monday afternoon, I closed the DSG game room and vintage arcade entirely, and we're postponing pretty much everything.  The store is still open for buying, selling, and trading, unless and until we're told we can't do that either.

I've been preferring to take guidance from my old employer, the Arizona Department of Health Services.  I know the people working backstage there, and they know what they are doing.  The data don't suggest that we need this degree of isolation and shutdown, but hard numbers aren't what motivates people to buy out all the bog roll.  AZDHS has to provide guidance that's a little safer than sorrier, and then as other governmental entities keep upping the ante, we essentially had to go along with the tide of public opinion or risk being drowned in the undercurrent.

So now it's St. Patrick's Day, March 17th, and it's anyone's guess what today is going to be like.  It seems wrong on an almost religious level not to have everyone partying the night away to their Flogging Molly and Dropkick Murphys playlists.  In hobby game land, Dungeons & Dragons has two pretty sweet looking new releases, the Explorers Guide to Wildemount and the Laeral Silverhands dice set.  Those showed up late last week so we've been sitting on them and readying for deployment.  A sellout would be awesome, but it won't break my heart if we fall somewhat short of that.  Animal Crossing comes out on Switch later this week and we have a good day-zero stock of it on a truck somewhere heading this way.

Looking forward, the real danger isn't in the short term at all to our bottom line.  We do a lot of online business, and my staff is going to be nicely occupied in catching up on the processing work that feeds into that.  The revenue streams from TCGPlayer, Amazon, and eBay aren't so great that we can wave off in-store sales, but they're enough protein to keep us alive for a while.  The real danger is if this mess goes on and on for months.  Then we start to have true, unrecoupable, immitigable losses, as overhead costs begin to mount whether we're selling things or not.

See, among the hardest business impacted are restaurants, bars, concert halls, and movie theaters, because a night of service revenue, once missed, is gone.  There's no getting that back.  If DSG doesn't sell a thing, we still have that merch.  Imagine if our merch disappeared into the aether if it wasn't sold the day it arrived.  (Obviously there's an aspect of this in spoilage, like for new comics, but of a far different degree.)  Anyway, this is called evanescent revenue, earnings that are available to be captured for a certain time, and then disappear whether successfully converted to money or not.  Airline seat-miles are the archetypical evanescent module.  Empty seats on a moving airplane are a full and unrecoupable loss for the airline.  Their situation isn't so great right now either, in fact.

People whose earnings are the most variable, and front-line, and are the most evanescent, are food servers and bartenders.  There are a non-trivial number of those among the clientele of your typical hobby game store.  And if they go bust for money, then we have a problem upstream of them at the vendor level.  Henry Ford had a point when he said it's bad if nobody can afford to buy his products.  He just meant in ordinary time.  Now that we're under Pandemic 2020, we get to see this effect that ordinarily would not be that pronounced.

So right now we basically watch and wait, and take the time we do have to finish infrastructure projects, clean and clean again, sort cards, and try to make DSG's return to full cruising altitude as glorious as it can possibly be.  I'd say "see you on the other side," but we're still open, so I'd be delighted to see you whenever you happen to visit.  Stay safe!

*I learned just yesterday that "bog roll" is British slang for toilet paper, and now I can't stop using it.  The term, I mean, not the bog roll.

Northwestern Nevada Nexus

Last November I made the case for anyone in the hobby game industry contemplating attending the GAMA Trade Show, now the GAMA Expo, in Reno next week.  To summarize, most of you should be planning to attend.

I'm not going this year, because I've skipped five straight spring breaks and my kids are passing through their prime childhood years all too quickly.  I'll likely return for 2021.  My business partner, Mike Griffin, will be in attendance and will be looking to do the kind of networking that I'm really bad at.  If you've been wanting to connect with the DSG brain trust and in past years you haven't been able to conquer my autistic social arrhythmia, Griffin's presence might be a boon to you.  He also brings some expertises I don't possess, such as software development.

Of course this all assumes the show goes on, which I do believe it will, even with the media doing its level best to turn the coronavirus spread into a full-on public panic.  The official GAMA statement is both credible and sensible, and canceling the show is really unnecessary.  And you're not reading this from a pure layperson; remember that I spent almost eight years working at the Arizona Department of Health Services.  I was backstage during the 2009 H1N1 epidemic, and I can tell you that the state health agencies are generally staffed with consummate professionals who know how to direct and manage public behaviors and health resources to inhibit the spread of the illness and to deploy treatment where it is needed most.  I would classify the response from Trump and Pence as disappointing so far, but there are fifty different state agencies who are a lot better at this kind of thing than they are.  Cooperate with yours and odds are you'll be fine.

While the show is certainly going to go on, I would not be surprised to see many attendees bow out or cancel, which will be an interesting change from last year's completely-sold-out standing-room-only event.  Hopefully there isn't too much of this, but in the event there is, you will get to take advantage of not missing out on any seminars or activities that have filled up.  That happened relatively often last year and I ended up missing some speakers I really wanted to see.

The show schedule has now been posted, and the roster of retail tradecraft seminars is astoundingly good this year, despite not featuring yours truly extolling the virtues of video games.  If I tried to write a recommended itinerary for you, it would be too long.  I do have a few notes and I'm going to mention some seminars you might otherwise overlook:

Monday at 10am you'll be forced to pick only one of three highly relevant seminars happening at the same time: Stephen Smith from Big Easy Comics on buying and selling entire stores, which is either irrelevant to you or the single most important thing you'll hear about all week; John Stephens and Tim Blakely from Total Escape Games on management structure where an owner is absent, again either irrelevant or extremely critical to you; and Jamison Sacks from Common Ground Games on the true costs of running events and when they might not be helping you.

Monday at 11am are two seminars delivered by people who know these topics in such immense depth that if your store is in that category, you really can't skip them.  And fortunately, a lot of stores that are heavy in one are not involved in the other.  Michael Caffrey from Tales of Adventure will share his expert playbook on better buying of secondary market merch, which is an absolutely critical skill for the TCGs, comics, video games, and toys categories.  I served as a test audience while Caffrey workshopped this seminar and I can tell you for stores like mine, this one is must-see.  Next door, David Finn and Jon Galvin from Giga-Bites Cafe will teach the methods and means for success with miniature wargames such as Warhammer.  Giga might be the strongest store in the world in that product category; they are surely no worse than top 3 depending how you argue it.  If you were opening a steakhouse you'd pay to have Gordon Ramsay teach you.  If your store is significant in minis, you need to attend this.

Monday at 2pm has the largest slate of seminars and there are several that may be important for you specifically.  The only one I'll single out for this slot will be Josh Fohrman from Game On Arizona discussing Quickbooks and accounting admin for game stores.  That's one of my jobs with DSG, and let me tell you, doing it wrong is a good way to have the Tax Enforcement People whip a padlock on your door that no locksmith can overcome.  If you outsource all your admin somehow, or you aren't the one who does it, there are multiple other great options at 2pm.

Monday at 3pm, you're in a spot.  Literally every single option is a recommend and you can't see them all.  If you saw Finn and Galvin at 11am and wanted to see Caffrey also, he encores in this slot. If your store has felt the cash-flow pinch, you may want to hear Josh Wilhelmi from Game Goblins discussing capital financing at the FLGS scale.  That's a seminar I'd love to have seen in 2015 or 2016 before DSG's costly move and construction the following year.

The Monday 4pm slot is great because it's mostly encores from earlier, so this may be your chance to catch a seminar you were double-booked on earlier.  Among non-encores, for those of you in competitive major-metro markets where brand impression punches extra hard, you may want to check out Brooke Rutledge from Little Shop of Magic discussing how to craft and develop the perceived value of your store and customer perception.  Brooke encores on Tuesday in case you miss it.

Monday's final slot at 5pm offers a batch of encores again, and there's so much value to be gained in essentially every offering here.  For those of you steering your store's offering away from "pure sales" and toward the service and event end of the spectrum, Rob Gruber from Good Times Games is at the absolute cutting edge of this part of the hobby game industry and he's doing things most of us never even realized could work.  He teaches his secrets right here at GAMA.  Also, Jennifer Ward of Crazy Squirrel Game Store teaches growth planning, highly relevant as she just completed a gargantuan store move that made DSG's big 2017 upheaval look amateur by comparison.

The GAMA Retail Division Board elections will be the very first night of show programming, Monday, just before dinner.  There are four Board positions up for grabs.  While the slate of seven announced candidates are pretty much all excellent people -- and others may be nominated the evening of, if I understand the rules correctly -- there are four candidates who I formally endorse, as I know each of them personally and I trust to their integrity and judgment: Erik Bigglestone of Games of Berkeley, John Coviello of Little Shop of Magic, Dave Salisbury of Fan Boy 3, and Jennifer Ward of the Crazy Squirrel Game Store.  I was the one who nominated Jennifer back in 2018 and I still believe today as I did then that her expertises are tremendous assets to the Board, with years in management and journalism living and working in locales like Texas and California, each of them very different communities and markets.  Vote your conscience and your judgment of course, and if you have another candidate you believe in, then by all means write down their name.  (Retail attendees get four votes per store and the four highest total votes decide the winners.)  If you don't know any of the candidates in particular, then I hope my endorsements may help as you weigh your options.

Tuesday's first two morning slots are mostly encores from the Monday retailer seminars, so use this as an opportunity to catch ones you missed.  Starting at 11am, the publisher presentations will provide a look at what's going on with each of their upcoming releases and programs.  These are always variable in quality, though they got a bit better last year in some cases.  I always recommend seeing publishers that either figure heavily into your store's merchandise mix, or that you have never heard of.  The ones you skip are the ones you know about, and don't carry or plan to carry.  The value of your heavy hitters should be obvious.  The value of those you've never heard of can be sneakily great as well, especially if it introduces you to a product range that you never realized your customers might be interested in.  These presentations continue into Wednesday morning.

The rest of the show schedule is pretty straightforward -- go to the game nights if you are interested, everyone goes to the exhibit floor for at least one of the two days, and something I'm seeing this time that I don't remember seeing before are plenty of after-hours and off-track presentations, panels, and similar meet-ups between retailers, publishers, manufacturers, and others.  It seems like that might be a good place to make some acquaintances.  TCGPlayer typically hosts a very high-end cocktail party on Tuesday evening and displays some eye-opening initiative or feature they've been working on, and I guarantee it will be the talk of the show afterward.

I'll offer one final piece of advice for your GAMA guidance this year, and it's something I wasn't good at in my early trips to the show because I just didn't realize the lay of the land and did a poor job of understanding this until later.  And that advice is: Be sociable.  Not necessarily interacting with anyone and everyone the entire time -- an autistic introvert like me would never recommend such a thing and as I've said, I'm bad at it anyway.  What I mean is, expect that you're going to meet some people whose importance to your business might seem tenuous at best, or might not become apparent until afterward or later.  And if you meet someone whose store or company seems like it may be on the outs, disregard that and network like a professional.  A lot of people this industry counted out have come roaring back and your courtesy today could end up giving you the inside track to a windfall tomorrow.  And that means being on your "A" game with everyone and making a friendly, positive connection even if you're not sure whether it's going to matter.  I can tell you I would definitely have better relationships with publishers, distributors, and other retailers today if I had been more sociable years ago.  Fortunately, many of them are forgiving and I've mended a lot of fences since.

Since I'll be on a semi-vacation, semi-staycation with the family next week, I won't have a blog post on March 10th in all likelihood, and the stuff I have started sketching my notes on will come later.  Have a great beginning-of-spring and keep washing those hands with soap!