Stores ordering from multiple sources

[guildofblades]

>>Based on the credentials you've presented, you have no idea what you're talking about.  Even dealing with just 4-6 distributors instead of the 400 vendors I carried in my store took 6-10 hours/week. <<

Hi Lloyd,

I often hear this excuse from game stores for not ordering product from anywhere other than their primary one, two or three distributors. I too am of the opinion that this is just lazy business. Back in the late 80s and early 90s a game store or hobby store could reasonably source the majority of its game related products for 5 or less vendors. Tha reality of todays much more diversified marketplace is, that is just not true anymore. Most distributors try and present the "illusion" that they can service most of a stores needs, but the reality is that even a majority of what they offer is not stocked or under stocked to the point that the distributors are simply NOT realiable sources for those goods. hey merely want to present the appearance that they are to stores to forestall an absolute neccessary evolution in stores odering methodology and sourcing.

You say it is unrealistic. But the truth is, many, many small business order from many sources regularly, including many small retail shops. Your average party store is a perfect example of that. They regularly deal with 50 to 100 vendors and sometimes even more. It CAN be done. But it does require WORK and ORGANIZATIONAL SKILLS, both which appear to be rather lacking in a sizable chuck of game retail stores. An the trend I have noticed is that is the case for a large number of stores that rely solely on what their primary and secondary distributor spoon feed them. But the real world mandates that these stores adapt or die. I have absolutely no use for any store that tells me they can't bother to order from multiple vendors. Indeed, when we identify such a store, we cross them off our list of stores as potential prospects. And not because we don't think that might be able to eventually sell to them, but rather because we're not about to expend that much energy ona store we really don't believe will even be in business 2-5 years from now. Because we're interested in forging relationships and building business together with stores with staying power.

And as for dealing with multiple vendors, I can tell you that my little game manufacturing company deals with at least 10 more vendors that your average game store does. Off the top of my head I can think of at least 22 different vendors and if I go take a look at all the suppliers and service providers we utilize on a regular basis, my bet is it would actually be closer to 30.

It is absolutely my opinion that stores unwilling to utilize more vendors are indeed just lazzy. But in their defense, this is also what they have been taught. Been taught be existing store owners who learned this practice when that was a feasiable business strategy, been told this and given the impression that this was viable from their distributors, and told and literally forced by an industry culture supported by the leading retailers, distributors and manufacturer to "support the 3 tier system" above all else. The days where that was good advice have long since departed. I expect those stores that are too lazy to adapt will simply be going out of business within the next few years. Sad to see game retailers leave the industry, but the bright spot for business is their exist from the industry mike open the way for a new breed of retailer that is actually willing to do what is neccessary to succeed in todays market.

[JarrodHenry]

Now see, I disagree.

Having a friend who runs a game store, he spends nearly 90 hours a week doing it.  He makes a little less in profit than your typical gas station manager. 

Now you're saying he's lazy because he doesn't want to source out and stock the fringe items?  That's just somewhat silly.  Most of these guys can't afford to do that.  It's hard enough in a market where the distributors give massive discounts to chain stores and leave little room for markup for smaller stores. 

You want to blame someone, blame wal-mart, target, toys'r'us , and the like.   Even if the game stores did source out more distributors to carry indie games, they couldn't afford them.

[daMoose_Neo]

Jarrod, the discussion being trailed across several threads doesn't pertain to stores being able to afford the product, but willing to stock the product. If your friend's margins a tighter, he wouldn't really consider indie stuff anyway. Its the stores that do, but won't, that are at discussion.
The idea is this: I am a hypothetical store owner. You come to me with your game. I have decent sales, have some flexable cash and can order fringe items, show an interest in the game, indeed given the type of gamers in my area it could even sell well. I'm all set and ask one final question: "Do you deal with Distributor X?", to which your response is "No, because I lose money dealing with distribution and my other game store clients normally have difficulty recieving my product when I was in distribution. We find its easier for all parties to deal direct with our retailers to make sure you get what you need, when you need it, and get a better break."

As a store owner, what would your answer be? To most store owners, we would't get past the "No-". They have the capability, but because of what they have been told they won't deal with anyone NOT their distributor. And I have seen some stores stock some real poo compared to my, and other, indie products, but they would refuse to deal with me because I wasn't listed in distribution. And THAT is lazy. When a developer/publisher approaches you with good material that has the potential to sell and you turn them away because its not convienient for you it says a lot about the character of the owner. Someone says "FREE MONEY!" and you're unable to invest a bit of extra time? Yup.

[JarrodHenry]

True enough.

I just get concerned when I see people getting upset at store owners who really do have enough on their minds.  In case nobody's figured it out, the in things now are card games and some minatures.   The local game stores are not even getting the option to sell it first, and companies like wal-mart are getting exclusivity and deep discounts. 

I predict within ten years, the FLGS will be a thing of the past.

[Luke]

True enough.

I just get concerned when I see people getting upset at store owners who really do have enough on their minds.  In case nobody's figured it out, the in things now are card games and some minatures.   The local game stores are not even getting the option to sell it first, and companies like wal-mart are getting exclusivity and deep discounts. 

I predict within ten years, the FLGS will be a thing of the past.

I assume that your friend's too busy to post, which is a shame. I'd love to hear from more retailers. Perhaps you could ask him: so what does he have on his mind in regard to roleplaying games? Your "card and minis" comment implies that he doesn't put much effort into selling rpgs.

-L

[guildofblades]

>>I just get concerned when I see people getting upset at store owners who really do have enough on their minds.  In case nobody's figured it out, the in things now are card games and some minatures.   The local game stores are not even getting the option to sell it first, and companies like wal-mart are getting exclusivity and deep discounts. <<

Hi Jarrod,

The ever constant rule in business is adapt or die.

You see, the problem is, hobby gaming as an industry has grown a great deal in the last 10 to 15 years. Now big stores like Walmart and many others now sell the leading brands from within our industry. And yes, when massive chains like those come up to a game manufacturer with purchase orders worth millions and millions of dollars, those manufacturers usually grab at them, even if it means giving them better terms, or first crack at selling.

Small indie stores have to stop complaining about it. It is fiscal reality and is not going to change the business practices of those leading manufacturers. None of them are going to turn away those millions of dollars. The indie stores have to adapt, to differentiate themselves now from those mass market stores. As you said, they can't compete on price. They often can not compete with exclusives on the leading brands, nor wil they get first shots at a virgin market very often. I see many of them reach for "customer service" and "product knowledge", and sure,those are a couple useful tools. But I would argue they are not dominant business advantages upon themselves. They are, frankly, what one expects when they chose to shop at a small mom and pop type store rather than at the ig bix stores.

However...for the leading brands, the customerd ALREADY know about the products and what they want. They don't particularly need great customer service and certainly they are probably as knowledable as the store employees with regards to those products. This is their hobby after all. So stores have to understand, they are NOT going to dominate the market for the leading brands. They don't have the buying power or marketing clout to get the sorts of advantages they need to compete heads up on the factors most important to many of the consumers of the leading brands.

The single greatest advantage an indie store can have is in their ability to offer a diversified stock of the types of items these consumers are most likely to enjoy. This means stocking things OTHER than the leading brands. Yes, you have to stock the leading brands too...its just expected. But since you can't effectively compete on them, your competitive advantage becomes everything else you can offer other than the leading brands. But to make that strategy effective, you have to stock those product alternatives, promote those product alternatives,  offer that specialized knowledge on those product alternatives, and general work to convert players of just one leading brand, weather it be D&D, Magic, Pokemon, Warhammer or whatever, into general gaming consumers who will experiment and try many other things. This requires MORE work, strong organizational skills, sourcing product beyond what the distributors will spoon feed them, etc, etc.

You think Walmart sells so much stuff solely because the manufacturers do all the promoting for them? Nope. Walmart is a marketing machine, both in outreach and in in store merchandising. Often, when Walmart decides it will turn something into a sales success in their stores, it is because they get off their duff and make that happen. Most game retailers sit back and just wait for the manufacturer run marketing programs to generate interest in products and sales in their stores.

The other thing to consider is margin. Larger profit margins on items makes for a healthier business. Over the last 4 to 5 years, the leading manufacturers (WOTC, Upper Deck, Wiz Kids, GW) have reduced the margins at which retailers can get their goods. "Average" discounts from distributors range around 47% or so, but these leading brands are often short discounted a few extra points, or have capped discount rates. So my bet is, the overall discount that is had on the leading brands is about 45%. Factoring in shrinkage and discounted sales, a store is doing well to keep their total Costs OF Goods Sold (COGS) around 60%. Once you toss in salaries, lease payments, insurance, credit card processing fees, and all other related overhead, a decent store is actually doing well to end up with a 2-10% profit. For my purposes here, lets call it 5%.

Now, stores who get on board with the Guild of Blades best retailer program, bulk order discounts notwithstanding, can get a 60% discount from us. Factoring in shrinkage and the occassional shipping costs of doing returns (we offer free product exchanges, so retailers should never have to discount our products to clear them out), lets say the retailers' total COGS is now 45%. You'll note, that is 15% more of MSRP that the retailer keeps on every product of ours they sell. Or to put it another way, selling the same MSRP worth of our product as product from those short discounted brands, the retailers makes FOUR TIMES the profit on our games.

Do our games sell as well as the leading brands? No, no they don't. Could they sell better in each store they were in, if the retailer got behind them more? Ran gaming events for the products like they did for the leading brands? Participated in the promotions we sponsor from time to time? You betcha. My point? Retailers have to look beyond the obvious gravy sales that are spoon fed to them by the promotional efforts of the leading manufacturers coupled with the easy supply of the distributors. They have to find hidden and unique profit centers that every other tom dick and harry mass marketets hasn't already tapped. In doing so, they will make their store mores unique, and more appealing to return to, and they will forge stronger reputations among gamers as being "The Place" to go when looking for something new. And hey, making 4 times the profit is neverbad either.

Hobby retailers (general hobby, comic stores, game stores, etc) use to be THE MARKET for the leading hobby games. They just aren't anymore. Now they are just A MARKET, and nowhere near the largest one. Adapt or die.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guidlofblades.com

[JarrodHenry]

I'll ask Karl for his comments regarding things.. so I cannot speak for him directly but just for what he tells me.

That said, yes, the motto is adapt or die.  It's really hard to adapt when you don't have people coming into this fandom at the rate they were once coming in.  Karl's RPG collection is top rate, whenever someone orders something from him, he usually buys two or three copies in an attempt to generate interest.  He runs gaming sessions with indie games and the like.

His problem isn't the profits.  It's the fact that the common foot traffic have real problems getting past what the cartoons, movies, tv shows, games, and such are selling.  So he has to, to some degree, cater to the masses. 

And then, he has to cater to the smaller groups. 

I will ask him what he considers his greatest threat and the like.  I'm just watching the beginning of the end of game stores in Nashville, and it's depressing.

[Ron Edwards]

Hi Jarrod,

You may not be aware of the series of Forge threads called the Infamous Five, from a couple of years ago. I suggest checking them all out, but especially the two sets headed by "Actual play in stores" and "Mainstream: a revision." You can find the links in the Site Discussion forum.

Also, see my older essay "Nuking the Applecart" in the Articles section, linked at the top of the page.

As a general rule, it's difficult to post as representative of another person. You have to deal with our comments and guess what he would say at the same time; it always leads to confusion. I suggest instead that you post strictly on the basis of what you observe and think, and if your retailer friend wants his view represented, then he can provide it.

Best,
Ron

[JarrodHenry]

Thanks for the references, Ron, I'll definatly check them out.

And much of what I'm saying is my own observation.. the reason I'm curious to what Karl thinks is because I'm not certain what he is planning on doing or making known to people.  I know a lot more than I'm saying, but I don't want to speak out of turn, as it were.

[daMoose_Neo]

Ryans comments are really important, especially in regard to retailers needing to be behind the products more than relying on just the company marketing.
This is ancedotal, but its my experiance: Last year, when my card game debuted, locally we had two stores open about the same time.
Both owners approached me, had me demo the game for them, and they both wanted to carry it. We worked out comission rates as I'm local and could keep them instock at all times, and got ready for the summer.

Retailer #1 put my box of cards, all my fliers, and my sample/promotional behind the counter and in an odd corner.
Retailer #2 put my flier and sample cards into a poster frame right at the front of the store and the box of cards right at the register.

Retailer #1 sold three decks in about a month. Retailer #2 sold 36. Retailer #1's sales stemmed from Retailer #2's efforts.

Retailer #2 was an RC Hobby shop and knew nothing about gaming, but made sure to mention it to customers, let them look at the sample cards. Retailer #1 fell victim to what has been described above: stocked all the mass-marketed titles, ran a Magic event each weekend, but generally sat on his thumbs. Retailer #2 got a decent local player base, had me down to the store a couple times over the course of the month prior to GenCon, and we even had the paper down to do a quick blurb about a local author debuting his game. Retailer #1's sole sale of three decks? Someone walked into the store, saw the box in the corner, and said "Hey, isn't that the game the local guy did? Cool!"

End result? "Hey, this game is neat, check it out sometime" netted Retailer #2 an extra hundred dollars. Retailer #1? $9.

[LloydBrown]

. The indie stores have to adapt, to differentiate themselves now from those mass market stores. As you said, they can't compete on price.

I increased sales every year for five years, selling at full price or even higher.  Some items I marked up to a 75% margin.  Stores shouldn't compete on price; they don't have to.

They often can not compete with exclusives on the leading brands,

Exclusives in the gaming industry?  Uh, Alliance sometimes has those, but that's a distribution exclusive, not a retail exclusive.  Can you mention a specific example?

nor wil they get first shots at a virgin market very often.

A substantial difference in release date for industry vs. mass market is the exception, not the rule.  That's why it makes store owners angry--it shouldn't happen at all.

However...for the leading brands, the customer ALREADY know about the products and what they want. They don't particularly need great customer service and certainly they are probably as knowledable as the store employees with regards to those products.

This is somewhat true for most existing customers.  However, if you only sold to existing customers, you'd be out of business soon.  You have to have sales skills in order to create new customers.

So stores have to understand, they are NOT going to dominate the market for the leading brands.

I believe independent retail stores do have the majority of the retail market.  Not a plurality since probably Pokemon, but still the largest pie slice.

They don't have the buying power or marketing clout to get the sorts of advantages they need to compete heads up on the factors most important to many of the consumers of the leading brands.

The most-cited reason for leaving the hobby is "couldn't find anybody to play with."  Retail stores are better-suited for fixing that than any online source I've seen, any mass-market source I've seen, or any publisher I've seen. The second (I believe) is "not enough time."  I don't think anybody can fix that.  Wait--instead of me responding to this right now, why don't you state what you think these "most important [factors] to many of the consumers of the leading brands" are?

The single greatest advantage an indie store can have is in their ability to offer a diversified stock of the types of items these consumers are most likely to enjoy. This means stocking things OTHER than the leading brands.

I believe that to be the advantage of the online store, who can store stuff 10 feet high in boxes in his warehouse for which he pays $2.50 psf, instead of a retailer who might have to pay $18 psf and has to display his product so that people can browse through it.  A retail store w/ 1800 sf that includes a game room has maybe 800 sf to work with after counting off for supply closets and other wasted space. 

offer that specialized knowledge on those product alternatives, and general work to convert players of just one leading brand, weather it be D&D, Magic, Pokemon, Warhammer or whatever, into general gaming consumers who will experiment and try many other things. This requires MORE work, strong organizational skills, sourcing product beyond what the distributors will spoon feed them, etc, etc.

Not all of your customers become those cross-gaming customers who try many things.  The majority play a favorite game and stick with it.  Yes, I believe it's a goal worth trying for, but if you think that the only difference between a D&D player and a Indie Game X player is the dedication of the local retailer, you're blind to reality. 

You think Walmart sells so much stuff solely because the manufacturers do all the promoting for them?

Hello...price?  RJR Nabisco takes a loss on its sales through Wal-Mart because they value the top-of-the-mind awareness they get from millions of shoppers seeing their products on the wall.  Wal-Mart competes on price and broad selection (not necessarily within a single category).  It's their volume that gives them promotion capability.  1% of a gazillion (or whatever their ad budget is) is a ton of ads. 

The other thing to consider is margin.

You're right that margins are shrinking.  There are ways to fight that, however, if you're good.  War Dogs, for example, is now up to an average of 50% gross profit. 

Now, stores who get on board with the Guild of Blades best retailer program, bulk order discounts notwithstanding, can get a 60% discount from us. Factoring in shrinkage and the occassional shipping costs of doing returns (we offer free product exchanges, so retailers should never have to discount our products to clear them out), lets say the retailers' total COGS is now 45%. You'll note, that is 15% more of MSRP that the retailer keeps on every product of ours they sell. Or to put it another way, selling the same MSRP worth of our product as product from those short discounted brands, the retailers makes FOUR TIMES the profit on our games.

Whoa, there.  Your comparison isn't a straight line.  In a couple of directions.

First, how many Best Retailers do you have?  That's a fairly significant buy-in for most stores.  Your regular discount is 55%, not 60%, and the retailer pays shipping--probably bringing the total bill to the equivalent of 50% discount--the same as I get on everything non-Wizards from Premier Hobby Distribution. 

Second, you forgot to factor in that loss number you so gratuitously threw out, so let's knock another 5% off (that's the same number, you'll notice).  Your "greater margin" is now 5% less. 

And if you're going to compare profit margins, you compare profit margins.  Gross profit margin, by the way, has a definition.  It's not a term that varies from person to person.  A retailer who orders wisely (either by cherry-picking the best price among multiple distributors or by concentrating ordering with one distributor for best volume discount) can buy SJG, for example, at 50% off.  Gross profit margin on GURPS is 50%.  If gross profit margin on Heroes Forever is 45% or even 60%, it isn't 4 times as much. 

Do our games sell as well as the leading brands? No, no they don't.

Which leads to the final inaccurate comparison.  A turn rate of 3 on the SJG games line and a turn rate of 1.5 on the Heroes Forever line means that SJG puts far more money in the store's bank account, regardless of the margin comparison. 

Could they sell better in each store they were in, if the retailer got behind them more? Ran gaming events for the products like they did for the leading brands? Participated in the promotions we sponsor from time to time? You betcha.

Which is exactly why retailer support games with a large customer base and enough product behind them to make the sales.  For all the complaining about GW, a 40k customer is worth over $1,500.  Hence, Rogue Trader tournaments, painting clinics, contests, demos, etc, to attract them.  A Heroes Forever customer is worth (at most) $64, and on average, probably less.

[Ron Edwards]

Lloyd, this is a moderator post. The entire format of your reply is not acceptable here. This is line-by-line, defensive posting. I know that it's Standard Operating Procedure to react line by line to another's post at every other website on the internet, but not here.

Also, no one is attacking you. You serve no purpose in defending your own practices or justifying others'. If you feel attacked, put that feeling aside when composing the post. The information and experience you can provide for everyone here is valuable, and I know that I and other publishers are interested. But we can't get it from you if you hurl it out as a barrier or as torpedoes.

Every thread at the Forge has a specific, clear, and focused topic. The topic for this one concerns ordering from multiple suppliers. It is not about retailing in general or every imaginable thing a retailer faces. You've already stated your point about that topic.

H'mm. That makes me think. This isn't a Lloyd issue after all. This whole thread is actually a bit off-topic for the site, because we aren't here to tell retailers what to do. Perhaps that's the source of the problem. I think that it's also suffering from being an opinion/values topic, which has been a bit of a disease in this forum lately.

So let's call it closed. Lloyd, I hope you can see that this is an attempt to include you in the site, not shutting you down. If there are some points you'd like to make that are pertinent to independent publishing, please feel free to start more threads.

Best,
Ron