Game Design & Publishing Workshop - Sun, Nov 23rd
guildofblades:
Re POD Cast. Not likely this time. I don't have the equipment for doing that properly and not sure where I would start. Its likely something I would want to do in the future, but I know it'll take me some time to get up to speed on the how-tos. Unless one of the attendees comes prepared to record, then maybe...
On retail store models. From watching the roll call of stores that have gone under since 2004 or so, it seems to me that nearly half the market for hobby stores where hobby games was the primary or a signigicant part of their business have gone out of business. I still see a lot of veteran stores out there and their closure rate has been much smaller, but still, a loss of half the stores (which surely represents the fledgling smaller half and thus far less than half the retail sales revenues for sure) is a pretty big loss and a trend that can't be ignored.
My estimation is that a number of factors have led to this. And wee established, we stocked and professionally run stores are somewhat more insulated from the affects of many of these factors, though I am sure they feel them too. Just less so, and thus not enough to force them to close. The factors as I see them are:
1) Shrinking margins on leading brands. WOTC, Upper Deck, Fantasy Flight, etc. Most top selling companies in the market are now selling to distributors at lower discounts than the rest of the market. I can tell you as a new store, on D&D stuff I am getting about a 44% discount and its more like 41.5% on Magic and A&A minis. On the recently released WOW minis, if we sold them at the same price Upper Deck sells them online for (and thus the percieved MSRP), it would be about a 37% discount. We can get into a long and detailed discussion on margins and how critically important they are to the financial viability of any business, retail or otherwise, but suffice to say, where retailers use to get 45-50% across the board, if all top selling brands which represent a large chunk of their business is now at 42%, then they've lost up to 5% of MSRP on their average sale. That's a mighty blow.
2) Distributors shifting to order fulfillment centered rather than wholesales with stocked warehouses. I could call up Alliance or ACD and be reasonably assured of an 80% order fill rate or better on most top tier products. But venture much south of the top tier and available drops dramatically. Things get put into simply not available or "back order" status. I could rant all day about the practice of back ordering as a means of handling supply logistics, but I'll leave it at simply being too broken to be a reliable supply option for professionally run stores. Business need reliably supply and you adjust your business model accordingly to match available supplies. In the market today, the majority of stores have simply given up any real plans to be well stocked and promote any product for any non top tier company. And it makes sense, sort of, for them to do that. Because why on earth should a store spend a lot of effort building interest and sales momentum for a product they can't necessarily get reliably to sell? They shouldn't. Of course, my point for years has been that if their distributor isn't giving them that reliability, it shouldn't mean drop the product, it should mean go order direct from the manufacturer to recapture it. But, well, that's doesn't happen a lot. The overall impact of all of this has been an increasing reliability by store on top tier products, which coupled with #1 above means less overall profit on same sales gross revenues.
3) Product unavailability and the drive to the Internet. As more and more games become "unavailable" or "back ordered" at the distribution level and "discountinued" more rapidly after release at the manufacturer level, as a market we create an entire supply chain that is actively fighting against growing sales by word of mouth among our consumers. Guy buys a GOB board game today. How long does it take him to get that game read, understood and then shoehorned into a game session with their weekly or bi-monthly gaming group? Well, sometimes right away, but sometimes many months down the road since the group might be actively engaged in some other games presently. Newly purchased games don't always see the light of day at the gaming table within a short time span after purchase. So, sometimes, months after purchase, this game gets played and lets say enjoyed enough by others in the game group that others want to go buy it. Ok, let's say this is 3 months after release. 3 Months after release is already one, two or three restock cycles throughthe distribution and retail chains and with most games, distributors and retailers are already moving to minimize stock or get the thing gone entirely to make room to focus on the new releases. So maybe, 90 days after release, the firs round of infection of interest for the game can lead to more sales. Ok, let's say the newly exposed gamers manage to get it locally yet. Now, how long until they, with their other game groups and friends, can gat that game onto the game table to play? Yeah, back to that maybe a few months again. So how "available" is that game at retail 180 days after release? 270? A good game spreads continously years after it is released, but how broad a base of "expansion" very much depends on the initial market penetration. Our game, The War to End All Wars, for 5 years running has grown incrementally in sales now and if you count back to its first edition, its now over 10 years old. Its "availability" through the 3 tiers died effectively around 2002 and so largely had its sales until it had been revived by a change of focus on marketing and distribution, which once again created a steady source of availability and expectation of where that availability is.
The problems game stores face is, as the "system" shoves these titles out of the B&M realm, they don't necessarily disappear, they just migrate to online sites and the manufacturer's own web pages. All the growth that the game might enjoy past those 90, 180, 270 day marks and beyond, the retailer is out of the loop on. Those would all be sales on higher margins and be a diversification of a retailer's revenue (which is always good). How many stores relied heavily on D&D minis and Clicks as collectibles to drive event revenue and sales? Now how many stores are going to be hurt with D&D minis ending as a minis game and Wiz Kids being shut down? Too much reliance on any one game can be a potential killer. Worse, as it has become more commonly known among customers that "older games" largely can't be found at game stores, customers have begun a migration to where those games ARE available. Yep, the Internet. Current stocking and sales practices at many B&M stores are literally driving customers to the competition. And that's where you find the deep discount houses selling Magic, D&D, etc at razor thin margins, sometimes just pennies over a retailer's own buy price on said games. Makes it even harder to keep up sales volumes on those top tier products they are attempting to rely on. Thus they lose on both ends of the stick.
4) Mass market availability. Magic, Pokemon, Yugio and the like changed the economic model of game stores, driving consumer targets at younger aged players and encouraging tournament events and the front list sales of collectibles. But over time, and especially with and since Pokemon, that business volume grew large enough that every mass market retailer from Walmart, Target, Meijers, etc, has the newest and hottest collectible games in their games sections. And often it larger quantity and broader availability of sets, and even with older "repackaged" package deal sets, than most hobby retailers have. And since those stores are frequently far more often by the person with the purse strings (ala, Mom), the mass market now sells vastly more quantity of collectible games than hobby stores. Hobby stores, by in large, draw revenues more from tournaments and that smaller subset of players who frequent the stores for in store gaming and those tournaments. But that leaves a large chunk of the market the game store is losing to the mass stores.
I firmly believe that for game stores to regain triumphant healthy positions as the absolute specialists of games, there needs to be a shift away from a near total focus on that younger-than-historical consumer base and a shift towards supporting the types of games that have been more traditionally a part of the hobby game market. Games for which the stores can become champions of and where the mass market just doesn't even want to play. Collectible games basically grew beyond the niche and game stores simply stopped being "the place" for such. But the store is ultimately much healthier when it is "the place" for whatever it is that its selling.
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All of that is largely industry wide trends and not really the "fault" of anyone and not the fault of any game store owner. Much of this has happened a bit at a time and only with a hindsite and a bit of extrapolation can I even begin to see the broader picture of how all of these elements have come together to literally decimate the viability of the traditional game store mode.
These are challenges any new model of game retailing must strive to overcome. I am sure in the time to come there will emmerge a number of alternative store models that address these concerns.
Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com
Eero Tuovinen:
Quote from: guildofblades on November 17, 2008, 10:02:51 AM
I firmly believe that for game stores to regain triumphant healthy positions as the absolute specialists of games, there needs to be a shift away from a near total focus on that younger-than-historical consumer base and a shift towards supporting the types of games that have been more traditionally a part of the hobby game market. Games for which the stores can become champions of and where the mass market just doesn't even want to play. Collectible games basically grew beyond the niche and game stores simply stopped being "the place" for such. But the store is ultimately much healthier when it is "the place" for whatever it is that its selling.
How true. The game store needs to be a serious center of culture - in the strong sense of the word - to survive, simply because that's the only realistic additional value they can hope to deliver on top of what web stores provide. (Your store, of course, also offers copyshop services, which are some serious additional value as well.)
Monetizing this cultural value seems to be rather tricky, though. I wouldn't even go into suggesting anything much to the prospective brick-and-mortar retailer in this regard, it's that complex a question. Libraries and other cultural centers are usually ran on public money, so the examples in other industries are less than obvious when it comes to making people pay for dynamic cultural expertise.
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