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Author Topic: What the industry needs (by me!)  (Read 4361 times)
Ron Edwards
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« on: August 15, 2002, 10:39:23 AM »

Hello,

I came to the following conclusions following some very intensive conversations after the Diana Jones ceremony, with two people who Shall Not Be Named but who Know Their Shit.

PART ONE
About six to ten businesses modeled along the lines of Tundra Sales Organization, basically one-man warehouse operations with a small staff. Here's how such a thing works.

- The main person represents a small line of game companies, perhaps five to ten of them. He acts as their agent and promoter to distributors and to stores. He warehouses the games and fulfils the distributors' and retailers' orders. He also fulfils on-line orders as managed by the game company itself. Any game manufacturer can tell you that distributor-promotion and fulfilment are the primary time-destructive factors.

- He is paid only by commission - a fixed rate per game, regardless of buyer. Also, selling policies (discount, buyback, etc) apply unilaterally regardless of buyer.

- He does not acquire title to the game. No money changes hands in either direction between him and the game company save for profits to the company, less commission and shipping costs.

(Woody, if you want to chip in with any other policies that he thinks are relevant to the discussion, please feel free. Eric Rowe, your insights would be very important here as well.)

One of the most important outcomes of such a business is that disclosure regarding distributors' warehouse contents and games' presence in specific stores is far more open than it is in the traditional three-tier model.

A key part of this business is that the main person is personally committed to the success of these games for reasons he can articulate to others. This concept has many consequences, but I want to emphasize that if there were several of these companies, they would not be competing, and each would have a distinctive "stable" of games.

PART TWO
A retailer who is willing to act as "buyer" for a number of allied retail stores. This person doesn't actually buy the games himself, of course, but he has a running list of what to order for the region and the games get shipped directly to the stores in question.

This is a bit of stretch, as it requires retailers in a given region to regard one another as allies rather than competitors. Payment for the buyer remains a question; several models seem reasonable, although at first glance commission isn't one of them.

The primary benefit of such an arrangement is to reduce the day-to-day solicitation efforts of the retailer, and most especially to reduce their reliance on distributor catalogues in favor of personal interactions that lack a direct profit motive. Clearly, if the buyer-person drops the ball, he will be swiftly eliminated from the position with no trouble at all.

SYNTHESIZE
If both the above phenomena develop over the next few years, then something very interesting can occur - actual tracking of game success in stores, which at this time is in total disarray. If a given store turns out to be a "D&D or die" store, well, people can find that out. Even better, and most amazingly, it means that if a game does not do well in a given store, it doesn't have to go back to the manufacturer or languish in a warehouse; it can enter the local-distribution cycle again and go to another store. One might even conceive of a "rotation" effect, in which games get something of an audition at each of the stores in a "group."

I'm currently working out a demo policy for stores that is based far more on the idea of a functional campus club than the usual brand-name-associated demo practices. With that in place in at least one of the stores in a given group ... oh man. It might even be possible to see a true Market in action in role-playing, which I will argue has never been the case below the years-long scale.

Best,
Ron
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Eugene Zee
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« Reply #1 on: August 15, 2002, 11:20:43 AM »

Ron,

That second part seems like a tough sell but I have an idea.  What if the retail buyer was someone that was neutral.  A buyer hired by the group of retailers that had no affiliation with any particular store.  Of course it is not perfect; the buyer could become closely aligned, how would the reimbursement model work, etc. but I think it might go over more smoothly than a buyer affiliated with one store or chain.

What do you think?

Regards,
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Eugene Zee
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Ron Edwards
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« Reply #2 on: August 15, 2002, 11:28:37 AM »

Hi Eugene,

Actually that #2 may have some chance to become a reality in the next few months, but I really don't know the details of the arrangement that's being discussed.

Yes, I agree that a non-store-owner would be ideal ... but obviously, it's got to be someone who's owned a retail game store and has a reputation for not driving a store into the ground. So either someone who no longer has a store (but didn't kill the store), or someone who does own a store but whose personal integrity is known and reliable.

Best,
Ron
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Eugene Zee
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« Reply #3 on: August 15, 2002, 12:23:14 PM »

Ron,

That is fast.  I would love being kept in the loop about this one if you can, when you can.  Thanks for sharing.

Regards,
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Eugene Zee
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« Reply #4 on: August 16, 2002, 02:41:54 AM »

Does the Buyer have to lay out cash to aquire the "regional stock" on behalf of the retailers?

Isn't this a sort of franchise model, really?
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Clay
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« Reply #5 on: August 16, 2002, 04:21:55 AM »

This sounds very similar to something the auto industry already uses.  Service Reps circulate among the dealerships in an area, making sure the existing supplies of service parts are sufficient, and advising dealers of new repair issues such as recalls or changes in recommended procedures. There's a fixed price that each dealership pays for parts (i.e. no discounts for bigger dealers).  In this case the Service Rep is an employee of the auto manufacturer.
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Clay Dowling
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Ron Edwards
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« Reply #6 on: August 16, 2002, 07:24:28 AM »

Hi there,

Gareth, to my understanding, the Buyer does not pay a dime to anyone. He merely organizes the orders from the various retailers. I'm awaiting further information from the people who are talking about this, as well as permission to disclose more than I have - when I get it, I'll post it for sure.

Clay, the car-industry analogy is close. But it's kind of interesting in this case that the Buyer is acting more-or-less as an "agent" for the retailers. The orders originate from them (not him; he makes no choices for them), he just collates them in order to keep the number of people at the "exchange point" to a minimum.

Best,
Ron
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mattcolville
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« Reply #7 on: August 16, 2002, 11:01:36 AM »

Quote from: Ron Edwards
Hello,

- The main person represents a small line of game companies, perhaps five to ten of them. He acts as their agent and promoter to distributors and to stores. He warehouses the games and fulfils the distributors' and retailers' orders. He also fulfils on-line orders as managed by the game company itself. Any game manufacturer can tell you that distributor-promotion and fulfilment are the primary time-destructive factors.

- He is paid only by commission - a fixed rate per game, regardless of buyer. Also, selling policies (discount, buyback, etc) apply unilaterally regardless of buyer.

- He does not acquire title to the game. No money changes hands in either direction between him and the game company save for profits to the company, less commission and shipping costs.

(Woody, if you want to chip in with any other policies that he thinks are relevant to the discussion, please feel free. Eric Rowe, your insights would be very important here as well.)

One of the most important outcomes of such a business is that disclosure regarding distributors' warehouse contents and games' presence in specific stores is far more open than it is in the traditional three-tier model.

A key part of this business is that the main person is personally committed to the success of these games for reasons he can articulate to others. This concept has many consequences, but I want to emphasize that if there were several of these companies, they would not be competing, and each would have a distinctive "stable" of games.


Problem: Presumably, the Rep is making money based on how well he does, how many of his client's games he sells. Therefore clients who have hotter or better games will make him more money. Therefore clients whose games are less hot get less of his attention and eventually find themselves not being served to the best of the rep's ability.

Each client needs to know that the rep is doing absolutely everything he can. As soon as one client's products start to do better than another's, none of the other clients should stay with that rep.

Further, the rep establishes relationships with his clients. Those with whom he is friendly get, in the course of conversation with their rep, info about the other companies that they might not be comfortable with their competition having. I see this as a not insignificant problem.

BTW; don't Excelsior and Wizard's Attic already do these things?

Quote from: Ron Edwards
PART TWO
A retailer who is willing to act as "buyer" for a number of allied retail stores. This person doesn't actually buy the games himself, of course, but he has a running list of what to order for the region and the games get shipped directly to the stores in question.

This is a bit of stretch, as it requires retailers in a given region to regard one another as allies rather than competitors. Payment for the buyer remains a question; several models seem reasonable, although at first glance commission isn't one of them.

The primary benefit of such an arrangement is to reduce the day-to-day solicitation efforts of the retailer, and most especially to reduce their reliance on distributor catalogues in favor of personal interactions that lack a direct profit motive. Clearly, if the buyer-person drops the ball, he will be swiftly eliminated from the position with no trouble at all.


I'm curious; how is this different that the dozens of microscopic distributors already out there, many of whom only service a handful of stores?

Quote from: Ron Edwards
SYNTHESIZE
If both the above phenomena develop over the next few years, then something very interesting can occur - actual tracking of game success in stores, which at this time is in total disarray.

Best,
Ron


All you need to track sellthrough is a POS system. Sooner or later, game retailers will find it's in their best interests to use one and you'll have all the sales data there is.
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Clay
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« Reply #8 on: August 16, 2002, 11:16:12 AM »

Quote from: mattcolville
All you need to track sellthrough is a POS system. Sooner or later, game retailers will find it's in their best interests to use one and you'll have all the sales data there is.


Matt,

I've spoken with retailers about this very issue.  Unfortunately the economics of it are a hard issue.  The two game sellers in my community are using cash registers that cost $100, tops (one is actually using an antique adding machine).  Contrast that with the thousands of dollars involved in purchasing POS equipment and changing your operations to accomodate the POS equipment.

I used to make my living by helping comapnies with these inventory management issues, so I know the benefits that can be gained. I've also spoken with these small retailers and I can see that there are major hurdles to implementing good inventory management practices, even when they can see the benefits.  I think Ron's suggestion of a third party, who makes their living via this management, is a good step towards overcoming these hurdles.
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Clay Dowling
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Ron Edwards
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« Reply #9 on: August 16, 2002, 11:19:39 AM »

Hi Matt,

I don't agree that there's a problem with Point #1. The Main Guy can choose his clients in the first place, which means he's already picking stuff whose success he can at least believe in, if not be sure of.

After that, he can use momentary popularity of Game X to "tide over" slow times for Game Y. This is a subtle point. The agent doesn't force a distributor or retailer to take one game in order to get another (that's the bully, GW tactic). He merely supplies updates and promo for all the games (or those that seem to serve that customer best) along with the ordered game. Woody tells me that this creates a strong synergistic effect among the games' success and a positive relationship with the customers.

A central concept here is that the Main Guy of such a business is not pushing "hot" at the retailers. The whole concept of "hot" is a foolish and self-destructive element of the business as it stands. To take Woody as an example, he is aiming at sustained sales and repeated re-orders of the games he's representing. To do this, he has to think in terms of what stores do best with what games, and in terms of months-long (not days or weeks-long) review of that success.

Wizards' Attic, as it currently stands, doesn't conform to the model I'm describing. The money works a bit differently. Also, it is primarily a warehouser, not an agent or promoter; being carried by WA does not mean being given Eric's personal stamp of approval and commitment to promotion. (This is not a criticism; WA is very upfront about the services it does and does not provide.)

[I'm emailing Woody and Eric now to join in, for clarity and in case I'm misrepresenting the biz in any way.]

You wrote,
As soon as one client's products start to do better than another's, none of the other clients should stay with that rep.

This strikes me as bizarre. Surely, expecting each and every game to do exactly the same success at every time-unit is like expecting every wave to hit precisely the same high-point on the beach, each time.

Also, you and I might have some different views on "competition" in role-playing publishing. I do not consider other companies to be competitors. We compete against other leisure activities, not against one another.

Regarding Point #2, I cannot stress highly enough that the very concept of "distributor," at any size, relies on the point-person buying the games. When a game sits in the Alliance warehouse, they own it, totally, just as if they were a customer and had bought it at a game store. This is the essence of the three-tier system, that title to the products is transferred twice before a customer ever sees it.

What I'm suggesting or perceiving, regarding a retailer-representative buyer, has nothing to do with that person himself buying anything.

I agree with you that POS tracking is key. You write,
Sooner or later, game retailers will find it's in their best interests to use one and you'll have all the sales data there is.

Yup, we agree. What I'm suggesting actually creates a shared, community-level reason to make it "sooner" rather than "later."

Best,
Ron

edited to remove a redundant sign-off
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J B Bell
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« Reply #10 on: August 16, 2002, 11:48:35 AM »

This model actually resembles federation of co-operatives, to my mind.  My housing co-op is a member of a federation; the federation does not own any housing units at all, but it concentrates and leverages the buying power of all the federated co-ops to get deals on stuff like carpeting, washing machine rentals, and so forth.  The federation charges a membership fee, and the co-ops do not regard themselves as in competition with each other--they do compete with other modes of housing somewhat, though they're motivated to be sure that members (individual people, that is) are sincere converts, since someone who prefers the traditional "pay for services" way of renting is probably going to be a lousy co-op member.

Indeed, I'm so annoyed by the retailers in my area I've quite seriously considered starting a gaming club on the co-operative model, including a library of games that can be checked out.  However, life intervenes, blah blah, so it's just a fantasy for now.

Er.  Anyway.  Because of the small scale, the regional buyer role probably can be fulfilled by one human.  I think the collective action entailed here is a brilliant idea; I hope retailers get on board with it.  If there is any way I can be helpful here, please let me know.

--JB
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"Have mechanics that focus on what the game is about. Then gloss the rest." --Mike Holmes
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« Reply #11 on: August 16, 2002, 12:06:07 PM »

My oh my. Where to begin?

Ok, Attic and Tundra are very different models. Attic is a fullfilment service; they are responsible only for receiving and sending product. Hense, it's in the interest of their clients for them to have LOTS of clients, for the bulk rates. Their clients are responsible for all their own promotion, sales, and accounting.

TSO operates more like a consolidation of certain administrative tasks (sales, accounting, and some promotion). We (hopefully) allow for our clients to focus their attentions on production and end user promotion.  Everything between is of marginal profitablity if everyone is doing the same thing, but becomes profitable for us by the same idea of "bulk"; one call to a dist covers 10 clients cheaper than each client doing it themselves.  And that's only assuming our sales ability is equal to our clients, which, in many cases, is not even close to true.

What Matt pointed out about the popular stuff getting more attention is true in some sense. I get more response to the DragonBall Z from RTG that I do for Ron's Sorcerer.  But we try hard to give everyone their shot, AND, something sneaky to consider:

Once we have made inroad with one product into a store, dist, or other market factor, our other clients get more attention and sales because the customer finds it easy(sometimes even necessary) to purchase other lines.

Today, for example, I recieved a call from a store that specializes in Anime products.  They wanted the DBZ RPG and supplements. Now they are also considering the Usagi Yojimbo line (manga, not anime), the Sengoku line (Chanbara Japan RPG), and have decided to look over the entire content of our clients.  There already will be additional sales, and that may spread.  It my job to present additional lines or products that a store would be happy to have on their shelves (which is also why I'm very picky on chosing clients).

Now, for the sodding bastard part of me (which Ron and Eugene just LUV to death): Not every client or line deserves as much attention as others. There is no inalienable right to distribution. There are times I have to say "Look, this doesn't work in the market, you should drop it". Why can I say that? Because I use 20 years of sales in this marketplace to try to keep my clients profitable, rather than getting enamored by one or two pet projects that can kill a small company.  If someone is not comfortable with me telling them that, cool, here are names of other companies that do what I do. Attic does the same thing, though they needn't be as cutthroat as I do. It's cold, yes, but I can make that call better than someone closer to the project. Ultimately, it's still their decision, but part of my job is to raise these flags as I see them.

ttfn - woody
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wizardattic
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« Reply #12 on: August 16, 2002, 12:54:46 PM »

Since Ron asked for comments, I'll add a few to his original proposal. In general, there are some things like this evolving naturally already. There are some critical issues that make the exact form this becomes different from what Ron suggests though.

Quote from: Ron Edwards
Hello,

PART ONE

- The main person represents a small line of game companies, perhaps five to ten of them. He acts as their agent and promoter to distributors and to stores. He warehouses the games and fulfils the distributors' and retailers' orders. He also fulfils on-line orders as managed by the game company itself. Any game manufacturer can tell you that distributor-promotion and fulfilment are the primary time-destructive factors.


This is a prototypical distributor function in the book industry. What our industry calls distributors are really Wholesalers, like Ingram and Baker & Taylor in the book trade.

What makes this model untenable in this industry, is that the majority of small companies needing this service are independent publishers or vanity press publishers, not companies. It makes a big difference as I'm sure Woody can elaborate on. If you had 6-10 serious companies, even if small, this would work. The problem is there are very few designers who also want their hobby to be a company.

Quote

- He is paid only by commission - a fixed rate per game, regardless of buyer. Also, selling policies (discount, buyback, etc) apply unilaterally regardless of buyer.


This is the big problem right here. If it is not done as a commision rather than fee-based, there will be a lot of issues that arrive. The person to maximise profit must concentrate on only those products that will maximise his money, and there will be heavy competition for good clients.

In the current system most of the fulfillment houses offer slightly different features that make them more or less correct for different client companies. If everyone were offering the same set service competition would be severe.

Quote
One of the most important outcomes of such a business is that disclosure regarding distributors' warehouse contents and games' presence in specific stores is far more open than it is in the traditional three-tier model.


This isn't a necessary outcome of these type businesses, nor is this type of business required for the openness you are talking about. The main restriction for open information in the industry is competition. The more competition, the less people are willing to share information. This is especailly true at the distribution levels.

Quote
A key part of this business is that the main person is personally committed to the success of these games for reasons he can articulate to others. This concept has many consequences, but I want to emphasize that if there were several of these companies, they would not be competing, and each would have a distinctive "stable" of games.


This part I'll just have to disagree with based on the previous stated assumptions. The bottom line is they will be competing. That will cause problems with this model.

Quote

PART TWO
A retailer who is willing to act as "buyer" for a number of allied retail stores. This person doesn't actually buy the games himself, of course, but he has a running list of what to order for the region and the games get shipped directly to the stores in question.


Retailers get all excited every few years about ideas like this. Purchasing groups, retailer coalitions, etc. It doesn't work. The person doing the work must be compensated, and eventually must be independent (for instance when there are allocations to be made on hot product). Basically, what you are describing here is the firsts steps to creating a standard game industry distributor. Nothing wrong with that, but it isn't any different than what we have now.

Quote

SYNTHESIZE
If both the above phenomena develop over the next few years, then something very interesting can occur - actual tracking of game success in stores, which at this time is in total disarray. If a given store turns out to be a "D&D or die" store, well, people can find that out. Even better, and most amazingly, it means that if a game does not do well in a given store, it doesn't have to go back to the manufacturer or languish in a warehouse; it can enter the local-distribution cycle again and go to another store. One might even conceive of a "rotation" effect, in which games get something of an audition at each of the stores in a "group."


Again, this doesn't actually require any changes from the current model, nor does your suggestion make it more possible than it already is. In fact, I've been talking about various racking and placement programs for several years now looking for ones that will work at all levels. There are lots of barriers to programs like this, mostly due to amount of effort required at the various levels.

Cheers,

Eric Rowe
www.wizards-attic.com
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Ron Edwards
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« Reply #13 on: August 16, 2002, 02:25:58 PM »

Hi Eric,

Thanks for the clarifications and for helpin' out.

You wrote,
If you had 6-10 serious companies, even if small, this would work. The problem is there are very few designers who also want their hobby to be a company.

This puzzles me a bit, because I am only talking about serious companies, of whatever size or product line extent. What you call an "independent publisher," I call a "company" just as much as I would call AEG a company. As long as there's a tax statement and profit/loss involved, it's a company ... Or maybe I'm just misunderstanding what you mean.

I don't mind if folks running Tundra-like businesses concentrate on "good" clients. It seems to me to be a perfectly valid element of the process. After all, publishers who don't get picked up as clients (for whatever reason) are still free to use the traditional methods of promoting themselves and fulfilling orders themselves; they're not barred from the industry or anything.

We'll probably have to agree to disagree regarding competition. Just to clarify, I don't consider myself to be competing with (say) The Riddle of Steel, for instance, or with Unknown Armies, because many people who buy and play these games will also buy and play Sorcerer, and vice versa. Also, I don't consider myself to be competing with (say) Mage or D&D3E, because the range of overlap for consistent customers of these games with Sorcerer customers is marginal.

Regarding my suggestion about cycling games around various stores, one difference between what I'm proposing and the usual practices is that such cycling would not include buyback to the distributor. But that aside, you wrote,
Again, this doesn't actually require any changes from the current model, nor does your suggestion make it more possible than it already is.

Unless I'm misreading you, it sounds like you agree at the most basic level - i.e., "Let's do it!" I'm perfectly happy not to claim that I'm offering up some kind of novel wonderfulness, but only stating something others have recognized as desirable.

Woody & Eric, thanks again for joining the discussion. We need you to keep us from getting tied up in speculation.

Best,
Ron
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wizardattic
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« Reply #14 on: August 16, 2002, 02:54:16 PM »

Quote from: Ron Edwards
Hi Eric,

This puzzles me a bit, because I am only talking about serious companies, of whatever size or product line extent. What you call an "independent publisher," I call a "company" just as much as I would call AEG a company. As long as there's a tax statement and profit/loss involved, it's a company ... Or maybe I'm just misunderstanding what you mean.


The main problem is that the size of the company IS very important. Companies the size of AEG don't need this type of service, while most companies are too small to be a valuable addition to this type of service. There just aren't that many companies that are right for this specific model.

That was my point about how currently there all the different places offer slightly different services for different needs. That's the key, size and goals of companies create different needs. Your solution is perfectly valuable for one subset of game companies. In my opinion though, that's a really small set. Most other companies need either more or less guidance and support.

And to clarify by size, I mean sales. If a fulfillment house has 6 companies each with one release a year they will starve and die, and if the company has as many as AEG they can do it themselves.

Quote
I don't mind if folks running Tundra-like businesses concentrate on "good" clients. It seems to me to be a perfectly valid element of the process. After all, publishers who don't get picked up as clients (for whatever reason) are still free to use the traditional methods of promoting themselves and fulfilling orders themselves; they're not barred from the industry or anything.


The barrier of entry created by the system developing now virtually means that yes, they are barred. Except of course large companies who I've already pointed out don't need the service. I got three calls today from companies distributors would not carry unless they came through me. That puts a huge burden on me that I'm not particularly comfortable with, but accept as reality.

Yes, there are other methods of sales, on-line, direct, etc. but that's ignoring the actual goals of most companies. Most of my clients don't want to sell games on-line, they want to be in stores. If they sell great, that's wonderful, but their actual goal is just to be carried in stores.

That's why I ask my potential clients so many questions. I have to know their goals to help them. My advice is always different depending on their actual goals and abilities.

Quote
We'll probably have to agree to disagree regarding competition. Just to clarify, I don't consider myself to be competing with (say) The Riddle of Steel, for instance, or with Unknown Armies, because many people who buy and play these games will also buy and play Sorcerer, and vice versa. Also, I don't consider myself to be competing with (say) Mage or D&D3E, because the range of overlap for consistent customers of these games with Sorcerer customers is marginal.


I'm not talking about competition between manufacturers. I'm talking about competition between fulfillment houses/distributors. Under your methodology they would fight for the better clients. Believe me, there are very few quality clients out there. Most are far more trouble than they are worth and non-WA systems don't handle them as well. (because we don't do marketing/promotions which is where problems can occur. If a WA shipped product doesn't sell it has to be the fault of the product. If from someone else, the company can blame the salesman, even if it really is the product's fault.)

Quote
Regarding my suggestion about cycling games around various stores, one difference between what I'm proposing and the usual practices is that such cycling would not include buyback to the distributor. But that aside, you wrote,
Again, this doesn't actually require any changes from the current model, nor does your suggestion make it more possible than it already is.
Unless I'm misreading you, it sounds like you agree at the most basic level - i.e., "Let's do it!" I'm perfectly happy not to claim that I'm offering up some kind of novel wonderfulness, but only stating something others have recognized as desirable.


Yeah, I was talking about that type of cycling too. And you are reading it correctly. It is desirable, and everyone already agrees with that. However, it may not be financially possible. I've been trying to put something together for two years, and know others who have tried various ideas too. They always run up against the wall of being too costly or risky or being to much work for value for distributors and retailers. Honestly, sometimes retailers won't take stuff even if you give it to them free.

Cheers,

Eric Rowe
www.wizards-attic.com


Best,
Ron[/quote]
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