This week we talk about a particularly bloody October in retail, as well as some of the challenges we face and how to best prepare for them.
The retailpocalypse is upon us! Run for shelter! Yes, I'm trying to be funny, but it's been a rough second half of 2017 for specialty game retail, and it ramped up in a particularly bloody October. At last count I know of thirty-five individual stores that have closed in the second half of 2017, and another dozen or so in a Death Watch status; they've quietly announced a closure, or are known to be looking at getting out. Every year this industry sees some end of year thinning, and here in the Denver metro area I've lost count of the number of stores that have opened and/or closed over the course of the last decade, but I can't remember as bloody a second half of a year in my time in this industry. I've also been surprised by the number of stores hanging up their 'OPEN' signs in September and October, it's pretty typical if you get through September to hold on through the holidays and snag some sweet sweet grandma money. This year has been different, so today I want to talk about why we're seeing what we're seeing. For my retail friends this is already understood, for my publishing friends hopefully they'll garner a little new information here, and for those of you reading this because you're contemplating opening a game store, I hope this will help better prepare you.
What Challenges Does Retail Face?
It's worth starting here. I believe that each year I've been in this business it has gotten more and more challenging to succeed. At the same time, the rewards for doing it have gotten better and better, even if it's just feeling awesome because you did it again. Specifically, let's talk about some of the issues facing retail. 1.) The end of the CCG boom. If you want to be technical this probably ended years ago, but Magic was still wrong, and as the big head in the three-headed CCG monster (with Yu-Gi-Oh and Pokemon), Magic and the various card games could keep stores going that weren't doing anything else well. These days, Magic is weaker than I can remember in my six plus years of doing this. Most recently we've seen bad draft formats, a Standard format that people hated for the last eighteen months, and Modern and Legacy formats with a barrier to entry that kept newer players out of those arenas. Magic and its collectible cohorts truly gave rise to the stores that were opened on $2,000 and a dream, and for a long time that worked. You could build a card shop and people would come, but those times are over, because there are tons of card shops in every major city. If you're just doing CCGs you better be doing them better than everyone else in town, because if someone is happy to sell it cheaper, or give more prizes, you're in trouble. 2.) Margins! Margins! Margins! B&M retailers are being assaulted on both sides by the margin fight. We purchase the product we sell at some percentage off retail, so we can sell it at retail and pay our bills. Over the last half decade we've been assaulted on both sides of that equation, as distribution and publishing takes points back from us in the purchasing of product, and online 'retailers' who have no overhead for physical space take points from us by selling things below MSRP, because in the world of online retailing the only thing you can compete on is price. Take a hypothetical store that sells $250,000 in new board games annually. They used to spend about $125,000 buying that product, based on their purchase habits with various distributors and publishers. Now, $250,000 in retail board games could cost them $137,500 or so, depending on which publishers they're selling $250,000 in board games through. COGS is far more complicated than this, but the shrinking margins from some board game publishers and from the largest CCG in the world have placed additional pressure on B&M retailers. Our hypothetical example store suddenly has $12,000 or so less to pay their staff, expand their merchandise selection, or do other upgrades. That's real money for a lot of stores. 3.) Shorter Board Game Tails (Retail Glut) If you're thinking about joining this industry, you should know the term 'tail'. It's all about how long we can keep selling something as being cool. How long something stays cool isn't actually directly correlated to how cool something is, but is instead related to how much stuff is coming out every week. Much like the music industry, things used to stay cool longer in the game trade, but now publishing is hammering us with a ton of products. I don't say that to be negative, but the fact is that even well-funded stores are making difficult choices now. Our medium sized-store (my own judgment, other people say we're a large store, but I have a different opinion on 'large' store) used to be 6/2/1/0 on a new board game launch. If I had a ton of faith in it I would buy six and put it on a demo table. If I thought it looked cool, but I wasn't sure, I'd buy two copies. If it was from a company I trusted but not a game I was sure on, I'd buy one. A game from a company I don't totally trust and a game I haven't personally seen means that I didn't buy it. That structure has totally changed, as now we're 6+/1/0/0. Either you are demo worthy and I'm going deep and putting it on a demo table, or you're not. If you're not at least six, you're one or none, and more things are none than one these days. There is too much product for retailers to keep track of it all, and not all publishers do a good enough job of getting us that information. The long tail is a thing of the past, it's turn and burn quickly.
So How Do I Better Prepare?
A failure to plan is a plan to fail. So, how do you better plan for success? How do you gather in the information that you need to best plan for success? You join GAMA. Seriously.
(Disclosure time - I am a member of the GAMA Retail Division Board of Directors, and I will not pretend to be unbiased about GAMA.) What felt like many many moons ago I attended my first GAMA Trade Show, then held at the horrid ghetto that is Bally's in the horrid ghetto that is Las Vegas. I sat in retailer to retailer seminars and learned from people who have been doing this a long time. Then I shook hands and introduced myself, and asked questions about whatever I just learned. Then I sat in publisher seminars, and I learned things there, and after those seminars I'd talk to them and ask questions. The next year I did it again. And then I did it again. And last year I started giving back to GAMA, as a thank you for what it has given me. My business is successful because of what I learned at GAMA from other retailers, and because of the contacts I have made with my friends in publishing in distribution. I get that is can be difficult. I understand that a week out of the store is expensive for us, and it can be nigh impossible for some stores, where ownership is the only employee, or where you'd have to entrust your store to a single person while you are gone for a week. I understand that as small business owners we have to think about the bottom line, and we have to look at the cost of plane tickets, and hotels, and meals, and then try to figure out how that fits into everything else. I'm here to tell you that you have to figure it out. You have to figure out how to make GAMA part of your reality, and there is really no time like the present to do so. With the move of the GAMA Trade Show to the Peppermill Resort in Reno, GAMA has gotten cheaper than it used to be, and is way cheaper this year with the Double Down Deal offered by GAMA. If you book a room night at the Peppermill, they'll pay one night for each night you pay for, up to two nights, and at only $99 per night. The cheapest room in our room block is $99 a night, so you can save $200 on hotels through this deal. (If you upgrade to a nicer room, you're only getting a $99 credit, which I still took advantage of, because the bath tubs in those suites look awesome.) I understand that while we look at the bottom line we have to understand that education is priceless. It may have a price tag, but every year I leave GAMA with new ideas, new plans, and new contacts. My store gets better every year because of GAMA, and I believe that everyone should have that same experience if they want to survive the next wave of retail apocalypse. Are you a GAMA member already? If not, check it out at GAMA.org to see what else GAMA has to offer. If you're already a member of GAMA, registration for the GAMA Trade Show is open, just click that link to get there. If you're a GAMA member, and you've registered for the show, make sure you also got yourself a room by visiting the Room Block and making sure you have a place to lay your head. There is no better opportunity for networking and education for retailers in our industry, so I hope to see you all there.
