GOB Retail/Distribution Store Overview

[guildofblades]

Hi All,

Eero requested that I expand upon some of the details about the Guild of Blades Retail Group's plans for its B&M stores, from what I had written on a thread over on Story Games. He thought this was the best place to dump it on you, um, I mean, to go into more details.

Before I venture into the nuts and bolts of our plan its probably best if I go over a couple things first. It'll help make understanding the business model we've cooked up a bit easier. The first is an overview of what I feel is wrong with both game distribution and game retailing today. The second is a bit of what led us down the path of wanting to open our own B&M stores. We open to accept all feedback on our plan and to discuss what you think is good and what seems half baked.

What's wrong with Hobby Game Retailing?

I firmly believe the industry is in trouble. The overall business model of the average game store in simply broken. At least in today's market. Back in the day, a couple decades ago (or more) there were almost no pure game stores. The economics of selling games would not support such a store. Or at least it did so in rare, rare occasions. The reasons for this were there were not a lot of cash cows in gaming then and most games were available for hobby distributors at around a 40% discount. Given the dollar volume of such sales, a 40% discount was simply too small a margin from which to operate an entire store out of. For an example, if you adjust for inflation so we can talk about things in "today's dollars" for our examples, lets say such a store could sell $200,000 a year in merchandise. Before Magic, the growth of GW and the emergence of the whole collectibles side of the market, that would have been a darn good performance for a purely game store. Once you factor is the cost of shipping, shrinkage (theft) and the liquidation of slow selling merchandise a retailer would be running a lean and efficient shop of their overall gross margin on the stuff they bought ended up being 35% (just losing 5% due to all of those factors, above their buy in price). On $200,000 in sales, the store would have just $70,000 left after paying the cost of goods sold (only what it costs them to bring in and stock those products). You take out around $2,000 a month for general lease and other overhead and you are down to $50,000. Insurance, fixtures, fixture repair and replacement, other had asset management like signage, gaming tables and chairs, monthly advertising and a whole host of other assorted bills would bring that down another $10,000 to $15,000 a year easy, bringing us down to just $35,000. This is before the owner has attempted to pay himself a salary. Once he does that, there is no profit left for the business. With no profit, how does this business afford to invest capital to expand? They certainly can't use lines of credit, credit cards or other loans, as clearly, there is no margin in that business model from which to pay even the interest on any borrowed money. So, back in the day, 98-99% of games only stores survived as hobby (part time) ventures or through the willpower of the owner to exist on a take home salary of maybe $10K to $20K (remember, we are talking about adjusted dollars, so that would be in todays money).

So "back then" game sales were predominantly through other venues. largely as a department of a broader hobby store. Train stores, general hobby stores, etc. In later years, the train stores would mostly die off and the hobby stores became dominated (very dependent) by RC and such. Now, games "fit" with those stores as a form of hobby entertainment and many other types of "hobby" merchandise was also bought at lower margins (ala, 35-40%). However, as larger stores with broader merchandise and with some of that merchandise having upper level price tags in the hundreds, those broader hobby stores ran under a different economic model. With sales of $500,000 to $1,000,000 (again, in adjusted dollars), even at just a gross margin of 30% they could operate on a gross profit (what's left after the cost of goods sold) of $150,000 to $300,000. Sure, they had more expensive leases and more staff, but it was still supportable (for a time).

Game stores began to emerge as their own stand alone entities much more dominantly after the arrival of Magic. Magic pumped money into those stores at such levels is was like doubling the total revenue base for the store, or tripling it. Small footprint stores popped up for a few years that did absolutely nothing but Magic (of course, their dependency on Magic killed all those stores too, once the boom leveled off), illustrating the level of money Magic was bringing into the industry. Directly following Magic were a slew of other TCGs attempting to ride that same wave of success. The money coming in gave rise to more "Games Only" type distributors or refocused some distributors who had been general hobby distributors to nearly abandon all of their broader merchandise and migrate into games only distributors. Distributors like ACD got their start shuffling Magic cards around. The rise in game store revenue and thus game store purchasing led to increase competition at the wholesale level and increased pressure for greater discounts offered to retailers. Where in the 80's discounts were down around 40% and the low 40%'s by the late 80's, just past the peak and crash of the first TCG bust cycle (1995-1996) Chessex Distribution had driven retailer discounts as high as 52% off of MSRP. In this era, a store doing just $250,000 a year (adjusted upwards $50K due to Magic and the TCG scene), at a 52% average discount or roughly a 47% gross margin, could wield gross profits of around $117,500. While not "rolling in the dough" it a comfortable enough gross profit for most stores to pay their lease and other overhead expenses, their owner $30k to $35k a year, hirer a part timer or two and still have a few thousand profit to show at the end of the year. Enterprising stores could do a couple hundred grand more in total sales and fiscally be doing very well. During this time period a goodly number of the more successful retailer stores expanded into multi store operations.

That boom cycle for retailers was about scheduled to begin failing after the distribution mergers of the late 90's and Hasbro's acquisition of WOTC. Several major shifts had begun within the industry. The first and most influential was a downward trend in discounts to retailers. First, the survivors of the distributor consolidations scaled things back to 50% or under, as the deep discounts of over 50% that Chessex had been offering in its bid to dominate the wholesale tier had clearly be non sustainable (its one of the reasons Chessex had to be bought out by the Armory, lending to the creation of Alliance). Further, if I remember correctly, 1997 GTS is when I first remember WOTC announcing its first incremental step is lowering the discount on Magic. That began an industry downward trend in discounts, which most any company with a modestly successful game brand has embraced. Such as retailers having discount caps today on Magic at around 42%, GW at 35% only if you order from a distributor instead of GW direct, Upper Deck around $40-42%, Flames of War 40%, some of Fantast Flights products as low as 38% and so on and so forth. The second major event was the arrival of the Internet, which has essentially log jammed a 15 year old distribution practice of stocking on the fast turning merchandise well and spot ordering slow stuff for the broader category of manufacturers. With the Internet came the rapid availability of information and thus many consumers are far more aware of game not available at their local retailer and they also know when the 3 tier system and their local store are bungling the job of making that product available to them. I'm not trying to cast blame, as each tier has its challenges and a very large amount of product to attempt to deal with, but in most every case where its not dealt with efficiently, the consumer now has alternative access to that product. they have knowledge of that product and a knowledge that even sometimes surpasses the retailer's knowledge of the product. This failure to reliably be able to get consumers product they want has driven elements of the consumer base online for their product and entire segments of that base that never or hardly ever bother to go to the local game store anymore. This distribution snafu has cost retail stores permanent customers and stores now suffer an inability to capitalize on the "long tail" of the industry; the literal thousands of good and interesting games that never manage to grace the shelves of game retailers, or see ever so scant presence as to come in on pre orders, sell out, never to be re ordered. The consumers now go online to find this stuff.

Now, years later, with the booms of Pokemon and Yugio come and gone and retailers back to the days with low 40ish discounts on merchandise that represents significant portions of their business, the ability for full fledge games only stores to survive and flourish is very much in danger. A whole lot of folks that got wedded to the industry structure as it was have spent some years now with heads shoved in the sand, ignoring the ramifications of the these fundamental shifts within the industry. As the reliability of distribution of non top tier products failed, it only became natural for retailers to more strongly embrace the top tier products. Further, our little industry has expanded tenfold at least since the early days of TSR. Those top tier products grew in popularity so much that they now have permanent homes in the toy sections of Walmart and other mass merchandise retailers and book chains such as Barns & Noble, Borders, etc. Anything hot or trendy in our market will become widely available in the mass market as well. To such a degree that those products really aren't "our market's" product anymore. The broad availability of most top tier games has also turned them into commodities rather than quirky little games from a cottage industry, leading to deep discounts like Amazon.com and many other to be selling them at 30-40% off. Darn near the prices that independent hobby stores can buy the stuff at from their distributors.

The consequences of all of these changes in the industry has led to closures of near or greater than half the independent stores that once were and many more on the brink of closure. While it is sad to see so many people passionate about games suffer loses at business, the writing had been on the wall for years. The golden rule of business is always innovate or die. A business model largely begun and unchanged since 1993 in todays rapidly transforming industry is sure to fail. Its just that simple. It is my sincerest hope, that of the game stores that remain, they innovate and adapt to be better equipped to profit and grow in the new market. I've seen Marcus King at Titan Games migrate from being a games only store to a broader category "Entertainment" store where he now sells used video games, books, dvds, comics, etc, etc, and yes, he still sells some games too. His store is simply not "all about" games anymore as reality hit and he needed to change his store to survive and prosper. Its good for the game industry that he was able to change his business to stay in business and is still there selling games, albeit a smaller selection than once before. The success his model has encountered is leading a stampede of retailers to follow in his wake. Other stores have migrated from simply being game stores and turned into "event centers", focusing on making revenue on the top tier games in ways that Walmart and others simply can't.

So change is now the name of the game in game retailing. After having studied the market intensely for years and watched many of these changed take place, we've arrived at a number of conclusions. The most obviously is the old model of game retailing is dead. A goodly number of stores are now walking corpses. We've identified three general approaches to surviving as a B&M store selling games, and from those three approaches fashioned our own unique model. The three general approaches I foresee as being able to sustain and grow in the future are:

The most important thing ANY retailers looking to sell games in the current market need to realize is THEY AREN"T THE ONLY GAME IN TOWN. Those high profile games put out by WOTC, Nintendo, Upper Deck, Wiz Kids, Bandai, etc, those are productions by multi million or billion dollar corporations with deep and broad roots in the larger toy industry. Those products will be sold far and wide and NO ONE should be surprised when mega giants like Barns & Noble, Walmart, etc take advantage of their dominant positions with limited edition promos, early sale of products before street dates, deep discounting, etc. They have the power in those relationships and in spite of the manufacturers of those games being giants in our industry, they are flies compared to those giant retailers. They have no power to say boo. Additionally, within our own industry cash strapped distributors run discount online stores or flip products to them in order to make their minimum orders or just a few extra bucks. Complaining about these things is like complaining about the wind: good luck stopping it. They are market realities that non of us small companies can change. Gotta work around them. Its quite obviously that the games industry has grown into a big business. A small retailer has zero hope of effectively stocking, representing and selling its entire vastness. Getting upset that games, in some capacity, are sold in other venues besides your own store is just silly. Products with demand always find a market, even if it be a niche. Getting mad at the indie developer selling games from their website or a big company like Fantasy Flight selling its products at Gen Con in order to cover the hundred grand they likely spent to be there promoting their products is likewise very silly. As a retailer, we must stake out a piece of the market we can dominate or do well with and if that piece isn't large enough to be your entire enterprise, then the business will need to diversify.

1) Diversification. Where games are no long the "focus" of the entire store, but rather just a category of the store and where another primary category or two pull a larger share of the gross profit. Ala, a remake of the old hobby store concept with game departments. Titan Games refashioning into a broader category entertainment store where the games are just a category. Comic stores with a smaller focus on games may yet thrive. For GOB Retail, our diversification leaves product retailing and ventures into services, doing the whole copy and print shop (ala, a Kinkos), because we've found a lot of synergies between the two. There are numerous ways to diversify and I'm quite sure we'll be seeing more of them over the next 5 and 10 years.

2) Go big box. This somewhat ties into the concept of diversifying into other categories of products, but its actually possible to be a medium sized retailers almost exclusively on gaming products. Take, for instance, the Sentry Boxes 13,000 square feet and over a million dollars of inventory. They stock  a rich enough diversity of games that they are able to catch a healthy portion of the "long tail". That mass of slower selling, but still good titles, games that comprise the larger majority of the overall game industry, product wise. A large store with such diversity becomes far, far less reliant on just the WOTCs of the industry and while the lower margin items from the top sellers, I am sure, puts a dent in their gross profits, the higher margin long tail products balances that out a bit. There are maybe 50 or so largish stores within our industry at present (that may be generous) and these stores already have the diversity to survive, so long as they can continue to adapt on the product sourcing side, as needed, to maintain that diversity. Of course, by "big box" I expect in the next 10 years we'll see game type stores themselves move into a big box format. Yes, I mean those larger format stores that can be anchors to major shopping centers or malls. Ala, 40,000+ square feet. Such a store would obviously have to sell an absolutely astonishingly large portion of what is available in our industry at present, plus a wide selection of electronic games and several other gaming categories as well. Essentially taking the toy isles at Walmart, the sentry Boxes 13,000 feet of hobby game store, a Game Stops entire inventory, toss in a food vendor or two, network gaming, lots of tables for event gaming (and event fees), an arcade and who knows what all else. But as gaming goes more mainstream, this type of store is coming.

3) Events and Clubs. A number of smaller stores have already evolved themselves into event stores. But of those that I have seen, I think this is just the beginning. I see mid sized and large metro areas being able to support membership based gaming clubs (think like Gyms, but all set up to support all sorts of gaming instead) that are linked to modest sized game stores (or large ones). Basically, take Sentry Box's 13,000 square foot store, trim out all the play space and cut the store down to just 10,000 square feet, but then slap on an adjoinning club with another 25,000 to 40,000 square feet of game club, all built out to support the full range of gaming activities. This model would be membership fee driven.

That's what we see for the future of game retailing. A fair bit of evolution on the multitude of small stores we have today, but a small yet diversified store (group #1) will be able to survive and that is the basis of GOB Retail's first store model, though we have eventual plans to eventually follow model #3 as well. I'll dive into the details of our model next post.

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]

This is very interesting; I'll be keen to see what others think of this, and not the least because my own understanding of the retail side of things is spotty at best.

One thought I've myself developed about the failure of game retail is the fact that the role of the retailer as a cultural cornerstone of the hobby has been pre-empted by the Internet and the fracturization of the market - 15 years ago I could still go to the game store and pretty much meet the guy who knew this stuff best. Today I am, frankly, more knowledgeable than anybody in the game store, staffed by marginally interested Warhammer players or whatever, with no knowledge (not to speak of play experience) at all about the product their stock or sell. If I'm not paying for expertise, what am I paying for, then?

This leads me to consider the role of the game store as a kind of a permanent convention booth - essentially an art gallery that sells not only product (which you can get very cheap in the internet, too), but also expert consultation on what to buy and how to use it. It seems to me that this is a big function of the game store in the cultural consciousness: web comics and customer accounts often tell of how the customer goes to the game store to engage people about their hobby. The trick to a successful game store might then be about monetizing this interaction somehow... higher prices on stuff might work if the product needed support or guarantees, like car dealerships work. Or the club model seems to work well, also. Regardless, it seems that the store needs to specialize pretty strongly - the most successful game store model I know are the Games Workshop stores that combine a narrow focus with vertical integration into an obvious shopping destination for anybody playing those few games. I could well imagine something similar based on D&D, wargames or even indie; basically anything with a clearly defined target audience.

The interesting question is - whatever sort of game store you're planning - what kind of customer profile one would expect to service, and how one would reach that customer.

[guildofblades]

>>This leads me to consider the role of the game store as a kind of a permanent convention booth - essentially an art gallery that sells not only product (which you can get very cheap in the internet, too), but also expert consultation on what to buy and how to use it.<<

I would argue that back in the late 70s and early 80 to mid 80's that most of the hobby stores that sold games didn't have all that much knowledge either. Customers who buy products, in any field, are often more knowledgeable than the staff that sells them. This would be especially true for commodity type items as opposed to high end luxury goods.

I would argue that stores the world over are more about distribution logistics and convenience. If you happy to find staff that is both knowledgeable and passionate about what they are selling, then that's a bonus. The best of game stores out there in recent years have been trying very hard for knowledge and good service to overcome increasing flaws in the distribution logistics. But since the distribution logistics are the most essential aspect, so there is only so much well trained staff can make up for.

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

[guildofblades]

Continued from Post #1

In its most basic form our store can be summarized as (Kinkos + Game Store). That is so massively an oversimplification its

not even funny, but that is more or less how we have been describing it to the real estate and local city officials as of

late, so its a good summary.

What drove us to come up with our business model is that we've been looking for additional physical retail opportunities for

our products. When we cut our lines out from distribution back in 2004 our web sales were already had a sharp rise, but they

grew dramatically once we really focused on selling online. They grew well in 2005 and 2006, where the company was able to go

from two part timers (the two partners) to two full times and a couple partners. It grew even better in 2007, sort of a

steamroller affect going on. Or the achievement of a sort of critical mass. But here in 2008, while sales have grown, its

been only a small amount by comparison. It could be that back in 2004 when that growth began a whole lot of folks had no clue

who we were and now they do, so we've reached a ceiling of r a sorts for online sales. Or it could simply means we need to

diversify more in what we manufacturer and sell so we can cast a wider net when marketing the web site. We are, honestly, not

entirely certain. I suspect it a bit of both. The company has seen great growth in revenue from advertising and its MMO

initiative is still making progress, but we're frankly, not happy about the minimal growth this year for the printed games.

Back in 2006 we had begun a process to effectively upgrade and relaunch most of the board game titles we produced. They were

in serious need of cosmetic face lifts. We bought one (used), then another color copier to bring color printing in house and

began turning an aweful lot of B&W material into color material. It was an improvement, but still not what I wanted to

achieve. So we began eyeballing some of the top of the line new digital printers so we could see what they could do for us.

At that time we had already begun to realize we would need to begin to diversify our products lines more as well, but being

so busy with new edition remakes, we hadn't had time to get underway on such. Also during that time we had been watching

first Rapid Pods attempt at POD cards and then also eagerly awaited to see what sort of POD Card service Avalon Innovations

was going to offer, as they kept saying they intended to offer such a service. We had wanted to expand our lines into a range

of card games for a year, but based on our direct business model, several thousand decks of cards just never made fiscal

sense. So when it became clear that those companies were not going to come through with a reliable POD Card offering, we

expanded our digital printer search to include one capable of doing our own POD Card printing.

With some of the other printing and binding equipment we had added to our line up at that time, we rather noticed that the

digital printer was about the last piece of equipment we would need to be able to run a complete print shop. This expanded

our line of thinking with regards to just using the equipment for our own products. It ultimately proved not true that we had

everything that we needed, and since making the decision to set up the Guild of Blades Retail Group as its own entity, we

ended up going on to get duplicates of some stuff as well. But anyways, by late 2007 we had realized we had the makings of a

near complete copy shop and the ramifications of such. I began trolling RPG.net and a few other forums at that time to see

what sort of interest there might be in POD Cards. Books, of course, there was already a strong market for and obvious

potential.

Now, going back to 1999 or so, the Guild of Blades Publishing Group test modeled a small retail store. We went and got a

month to month lease on a small 1,000 square foot store in a fairly crappy location and we set about an experiment. We set up

a store that was about 80% gaming space with barely 200 square feet dedicated to for sale merchandise. That merchandise was

our own line of product, which back then, was rather not what it is today (to say the least), plus a variety of small press

games. We stocked not a lick of D&D or White Wolf, barely any Magic and virtually no products from other leading companies at

the time. Yes, we had Pokemon because in 1999 you would be insane not to have Pokemon. That test store focused on small press

games nearly exclusively. Heck, behind Pokemon but ahead of Magic, On the Edge was our #2 best selling trading card game. It

was so because while "several years dead" in the industry's eyes, the truth was it was a good game, we demoed it for folks

and we were able to sell it cheap because we got it at liquidation prices. We were just running the Guild part time back

then, so we ultimately chose to close the store down because it was sucking too much time away our efforts to grow our

publishing venture. But it helped to prove (to us) the theory we set out to prove, which was good games from small companies,

when showed, demoed and played, could sell plenty well in a store. That a store need not focus on selling, GW, WOTC, etc to

survive and make money. Of course, we were test modeling that theory the most for our own products, but it proved itself

across many small press products.

In 2004 we had left distribution and by mid 2005, once we had reformatted our website to focus more on internet sales, we

also began a direct marketing campaign to try and get our products into more game stores. After a good year of effort in that

quest, I had to more or less chalk it up as a failure. Sure, we picked up some more retailers, but nowhere near enough to

justify the effort. After 2005 we sort of backed off those efforts and just let retailers come to us that were interested.

All the evidence from our own store and from tracking sell through at various retailers told us that if our product got the

right kind of retail exposure, it sold perfectly well. Of course, its one thing for a publisher to "know" this about their

product and entirely another to convince retailers of this. So by 2006 the idea of going into retail ourselves began bouncing

around. 2006 was a pretty busy year and an illness with one of our staff through parts of 2007 left us rather short handed

so, as these things go, its taken us a while to get serious about putting all the pieces of the puzzle together.

Its not too difficult how we came up with our retail model. All the necessary equipment to run a digital print shop + your

own fairly extensive line of games. Hmm. lol. The rest has just been taking what we know of game retailing and what we've

learned over the years from our test model store and from the lessons garnered through our retailer acquaintances  and

watching years of retailer discussion on the GIF and then the GIN. Industry history has taught us retailers operating at 47%

profit margins are a great deal more healthy than a retailer operating at a 38% profit margin. You can set up the number for

yourself and run them through. Set up a store doing $250,000 a year in sales and look at their gross margins at a 35% gross

margin, a 40% gross margin, a 50% gross margin, etc, etc. The difference in just 5% gross margin is profound. A nearly 20%

gross margin difference is so huge, its astonishing. Like night and day. The great thing about the copy and print business is

that is runs at about 65-70% gross margin. I've had talks with Managers of Staples and their copy centered are extremely

important parts of their business due to its high gross margins, which helps offset some low margins from office furniture

and such. Since we've set up the Guild of Blades Retail Group as its own company, it'll be ordering product from the Guild of

Blades Publishing Group as the very same terms GOB Publishing offers other retailers on its preferred retailer program. 60%

off, free shipping, based on certain buy in a display standards and whatnot. So after shrinkage and factoring in slow turns

on accessories and such, its floating around 57% gross margin for the store. Some other lines, which I am not at liberty to

discuss terms about, will be similar is gross margin. Gross margin is a huge (HUGE) factor in a store's profitability and

sustainability and its an important aspect of the model we are setting up.

Our stores will essentially have the following major revenue categories.

Copy and Print (ala Kinkos. Copying, printing, laminations, etc)
POD Cards (printing service)
POD Books (printing service)
Guild of Blades Games
POD Games (games printed POD for in store sales)
New Games (games order at wholesale or from distributors)
Used Games
Used Video Games
Custom Art merchandise
Snacks and Drinks
Events (games & seminars)
Services (graphic design, web design, internet and marketing consulting, etc)

In general, the stores are designed to be both a game store and a copy shop, plus production centers for our POD printing

services. Locally, they are also being positioned as a business that supports folks looking to go into self publishing

(games, fiction, non fiction, etc). Everything in the store is designed to be high margin with an overall expected gross

margin of 60-65%. Copy and print services ran the gambit of your usual fair such as B&W and color copies, laminations,

business cards, fliers, catalogs and so on. POD books and POD cards are fairly self explanitory and don't really require

"retail" space to be done, but since we do need to expand into commercial space to get really efficient in their production,

mixing that with retail makes the most sense. Guild of Blades games, sort of a no brainer Its sort of rather where this drive

to retail first began. In addition to operating profitable retail stores in and of themselves, we also intend to use sale of

GOB products in our own stores as a showcase example of what other retailers can also do with our lines. Leading by example,

so to speak.

A unique aspect of combining a POD printing operation and game retail store is that we have the capability of POD printing a

goodly portion of what gets sold in ou stores. With that, we're going to be interested in working with a lot of the small

press/indie publishers out there to get them signed up with our retail and wholesale programs. Through those programs we'll

bare the cost of printing the product to be inventoried on the shelf, so our manufacturer partners have nothing invested at

all (excepting, of course, their IP) to make their games available for sale through us. Generally speaking, if a title can be

POD printed, thats the method we're going to prefer for inventorying it. Its simply far more efficient for us to stock and

sell titles in that fashion. For example, a title with an MSRP, if purchased through a distributor would cost our store

around $11 to put on our shelf. That same title might cost $4.00 is POD printed through us normally and cost US maybe $2 to

actually print and put on the shelf. So as a retailer the opportunity to sell that title costs us $2.00 in capital invested

rather than $11. Of course, we have to then pay the manufacturer commission when it sells, which actually drops the gross

margin down to only about 50% (what a regular retailer might expect when ordering that title direct), but in fiscal risk vs

rewards terms, we invested $2 to earn $10 and that makes for a perfectly fine return on investment. Under such a structure we

can afford to try our hand at selling a wide, wide variety of indie product, including previously unproven materials. Our

largest challenge with this program will come later when the store is jam packed with products on display and we have to make

the difficult choices of which titles will get retail shelf space and which titles get overflowed into print on demand

catalog pages available for customers to browse through and order from. Learning how to best balance and rotate that stock to

get the maximum exposure and sales for such a breadth a products will take some time to master.

New games are going to consist of a few things. Simply all new gaming product which isn't GOB product or POD printed product.

We'll have to order stuff like Magic, D&D, reaper minis and other type gaming goodies from distributors or direct with said

companies. There are simply some companies that won't be enticed to go POD with us, nor can we print "hard covers" or

"miniatures" (except for those paper miniatures). So some stuff has to be ordered the old fashion way. Of this stuff, only a

very limited amount is going to be top tier products like Magic and D&D. Simply put, as a game store you almost NEED to have

a little bit of this stuff so as to avoid gamer culture shock since its simply expected that a game store will sell this

stuff. But we see them as low margin products and products that every tom dick and harry are selling (either early or at

discount), so for the life of me I can not see a unique true market advantage we can hoarde with regards to those products.

So they'll be stock and sold in limited amount and special ordered beyond that. Otherwise our store makes more money and

secures a stronger future for itself by selling small press and indie stuff instead.

Used games. We intend to selective buy and resell used games. Some of that materials won't head to store shelves, but will

instead simply be sold online. But there will be used game section in the store also. In today's industry of products that

come and go in a blink of the eye, especially among top tier products (ala, the stuff still on the supplement treadmill), to

effectively offer said products for sale sometimes we'll simply have to dip into used material. But we can and will be

selective about this because by not doing so it'll be easy enough to drown in junk. Naturally, used product that "can't" be

POD printed are going demand better buy rates than ones that can, because if a product can be POD printed, there is zero

incestive to buy and sell it used unless is bought mighty cheap. Used games, are, however, a high profit margin area, so

that's one darn fine reason to support such a section. Additionally, they are product we can profit from without the need to

buy from any distributors or other official wholesale source. If you cast an eye over the range of product GOB Retail will

sell, mighty little of it is bought through the traditional 3 tier system and yeah, that is not by accident. We are carefully

crafting our supply chain in such a manner that it is virtually imposible for any significant portion of the store's product

to somehow become unavailable to us.

Used video games. Since we expect to have a fairly broad consumer base come through our doors for our print and copy

services, we want to sell both hobby games and video games. Since its near suicide for a small retailer to order new

video/console games via wholesale for resale, we'll be taking a page from the Marcus King playbook and buying an selling the

new stuff. The footprint for said material will be much smaller than some of our other product categories, but we can also

stock and sell a pretty large range of this stuff in a fairly small area. The stuff is extremely profitable, with gross

margins up over 80%, so in a store striving for high margins in the first place, this is an ideal category of goods for us. Additionally, with our general consumer base coming in for the copy and print business, console games ought to simply be a product format more of the are familiar with. While I'll enjoy the chance to show some of those customers our various table top games in the store, got to be realistic and offer them something they are acustom to as well.

Custom Art Merchandise. One of those things that our print set up will allow us to do. We have relationships with various freelance artists who have licensed us to sell their artwork to be used in a variety of custom merchandise. We're still adding to the list of things we can do this for, but so far have calendars, poker decks, perfect bound blank journal books, laminated art dust jackets, bookmarks, custom greeting cards, photo books, art prints and artwork for the back cover of PDF books that don't come with a back cover. We will have binders of art pieces available for customers to browse through and they'll be able to pick one or more art pieces that we can then print onto the custom merchandise of their choice. As a sort of cross over between custom art merchandise and POD books, we will also have a computer station in our store where customers may sit down to buy PDF products from the Guild of Blades One Bookshelf Affiliate store, opening up 6000+ PDFs that can be purchased through our B&M store. We will be providing incestive discounts to then print and bind those PDFs for customers in store. Or at least all PDFs without restrictive licensing that might prohibit that.

Snacks and drinks. Pretty self explanitory.

Our events will come in two kinds. Your standard organized play type competitive events and open play for various games. Standard fair for a game store with play space. However, since we can POD print so much material, we can also be host to author/publisher signing and play-with-the-creator events and be able to guarantee our ability to have product on hand and never run out for said events. That will clearly work well with anyone we're set up to POD print their products for our retail and whole programs. In addition to that, we plan to organize publishing seminars 3-4 times a year.

Lastly, our services. One major theme of our store is supporting folks printing and publishing endeveours. That means being able to provide support services in those fields. So we can offer graphic design, layouts, web design, internet marketing, publishig consulting, custom computer applications programming and such. These are not the focus of the business and we're not going to have skilled persons in each of these areas as we expand into multiple stores, so long as we have one person capable in these areas in each store region, we should be able to sufficiently handle our customers needs.

----

Continued....

[guildofblades]

Our first store is very much intended as the test case for opening a chain. As the only print on demand card printing in the world, we very much the market to continue to mature for that service. Coupled with our POD book printing and other potential POD partnerships we have in the works, we anticipate our capability to keep up at one location to eventually be outstripped by demand. We can upgrade our equipment once or twice, but there will come a point where machines that use a modestly small footprint will simply not be enough. If we were only a POD printer, conventional wisdom would suggest continuing to upgrade the machinery into the biggest baddest machines available. However, we're working on setting everything up to be knit together by a robust IT backbone and when one store is reaching its maximum capacity, we intend to open another store, duplicating our POD set up into each store. That'll power the retail engine in the new store and we can then balance the POD work between several locations. The overflow of the growing POD business actually then becomes the core basis to support a new store while the store itself is given more time to mature into the community in which it is based.

Eventually (and I can't yet begin to prodict how long this will be), once we have the Detroit metro area suitably well covered with our small format copy/print game stores, we will then move into creating something of a larger physical store tied to a sizable game club. Come that point, each of the local copy/print game stores effectively become recruitment centers for the club memberships and events.

That is the general basis of our plan. There are, of course, a great deal more details, but I think that's a pretty decent overview. Now we just need a lease for a good location for our first store. With a little luck we'll have that worked out by the end of next week, but we'll see.

Eero had asked what you all could do to help to see this venture succeed. To be honest, just one or a couple things. The first is, if you publish a game product and would like to see what kind of extra sales our B&M store and online store can generate for you, with zero investment from you, send me an e-mail, dowrie@guildofblades.com , and tell us about your product. We're pretty open to representing most folks. Our model lends itself to us being pretty open in that regard. Though I can't promise that we'll represent everything. if you are an artist, odds are pretty good we would like to work with you for our Art Merchandise programs. If you are an author or game designer and want to come on up to our store once open, we'll make an event of it.

You can find details on our Retail and Wholesale programs on the links below.

Retail Program: http://www.guildofblades.com/retailprogram.php
Wholesale Program: http://www.guildofblades.com/wholesaleprogram.php

Its not exactly the same topic, but if anyone is interested I can go into the details of those programs. Our wholesale program, once the IT side is fully complete, will be offering some unique marketing opportunities and unparalled access to information. But while bring run from the B&M stores, its a different animal and I would discuss that separately to help avoid confusion.

Alrighty. Comments. Are we half baked?

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]

Ha ha, that's excellent stuff. I can't wait to see how that plays out. I'm sure there'll be lots of indie folks who'll find your model of retail much more doable than the traditional sort. Be sure to keep us posted on your progress and the sort of product lineup you're gathering for the first store - I wouldn't mind seeing my own games in there if the type of stuff you'll retail seems a logical fit.

The vertical integration and synergy advantages here seem pretty considerable. Do you have some sort of local marketing plan thought out? Is this store supposed to be a shopping destination, or will you try to attract walk-ins? What sort of image will you sell for the average gamer? Somehow it seems to me that "we sell marginal stuff you haven't heard of!" will need to be honed somewhat to make it something that the majority of hobbyists will get excited about.

[guildofblades]

>>Be sure to keep us posted on your progress and the sort of product lineup you're gathering for the first store - I wouldn't mind seeing my own games in there if the type of stuff you'll retail seems a logical fit.<<

Well, game wise, for stuff we have under the Retail and/or Wholesale program, you'll begin to see that stuff going up onto our e-commerce site over the next month. For your game Zombie Cinema, the challenge would be your unique packaging. I know we can POD print elements of the game, obviously, but we would have to work out a means for us to to get ahold of or replicate the rest.

One other approach we're taking to retailing is, we're not categorizing product by product type or genre. If we carry enough of a single company's products, then that company will be getting its own section with its own branded signage above that section. Where we just have a couple products from a company, it'll get inventoried in our general new product section, which will be loosely categorized by game format (ala, RPGs, Card Games, Board Games, etc). Where possible, we're going to focus on individual brands and selecting enterprising small press companies to champion in doing so.

>>The vertical integration and synergy advantages here seem pretty considerable. Do you have some sort of local marketing plan thought out?<<

Extensively.

>> Is this store supposed to be a shopping destination, or will you try to attract walk-ins?<<

Well, we are currently trying to cut through all the red tape to get ourselves into one of the "downtown" locations in our small city's downtown area. Its in a medium rent district, being the downtown area of an otherwise fairly quiet town. Casual game sales will benefit from our location (as will many GOB games as more general audiences have always been our primary target), but the big reason for this location is the copy and print aspects of the store. Of the downtown locations we are looking at, we'll be squarely in the middle of many other smallish downtown businesses and just two blocks from the high school and middle school. Smaller businesses and students are high potential customers for our copy and printing business, as larger businesses and chains tend to have most of their marketing materials and printed goods printed en mass by corporate and sent to them (ala, no need for us). That students just happens to be ideal for both the copy and print and for the games is, of course, ideal.

>> What sort of image will you sell for the average gamer? Somehow it seems to me that "we sell marginal stuff you haven't heard of!" will need to be honed somewhat to make it something that the majority of hobbyists will get excited about.<<

Well, if we market the stuff as "marginal" that's sure to rub off on the consumers. But really, we're after the type of gamers that is open to more than just Magic and D&D. And non gamers or folks who've maybe just played Magic, D&D, A&A or Risk casually, where we can introduce a whole lot more to them. An awful lot of true hobbyist are fairly open to trying new games and if happen to be able to show them a whole lot of cool new games they've hardly heard or or never heard of, then that works for them. The folks who walk in the door ONLY looking for the newest D&D official WOTC book or similar top tier product is, frankly, not someone I am likely to be able to bind long term as an exclusive customer. They would buy from me if it was convenient or cheap or on impulse, but I would be just as likely to lose many of said customers if another store opened down the street offering discounts or other perks. Its just not the ideal kind of customer for the long term for us. Not that we won't "try" and serve those customers to, only I'll a whole lot of that stuff in stock for them and will have to lean on special ordering for them. Sort of the inverse of other game stores, who stock that stuff and then try and special order the small press stuff. Only difference is where small press stuff is down right nearly impossible to special order for a retailer, the newest D&D book is not. For the old school RPGers, there is the cool little fact that if they buy any of the 1000+ old 1st and 2nd edition PDFs available through the One Bookshelf download sites, we'll be able to print and bind it for them.

For folks walking into our store for copy and print services, our plan is to have a mix set of game product from electronic games, rpgs, card games, board games, miniatures, etc and stuff like our custom art merchandise from which to sell them on. Besides our gaming tables, there will be 2 to 3 permanent demo tables set up, ready to showcase a game to someone new at a moments notice. For existing gamers, well, we'll have a healthy amount of in store game space, we'll have the PDF download store front (OBS affiliate site) and cool ability to print their goodies. I know that without a doubt it'll be impossible to please them all. Some might actually get offended by the overall lack of dedicated shelf space for games like D&D or Magic. But this goes back to what I said earlier. Our little cottage industry isn't so cottage anymore. Huge tracks of games are now sold through the mass markets. Its impossible for a small store to service it all. All a retailer can do is stake out the slice they are best suited to serve best. I'm simply choosing not to stake my business on product where I have to compete heads up with Walmart on. If Walmart thusly gets the bulk of the business on those goods, then that is perfectly ok with me. Like most other retailers, I'll pick up the scraps from the Walmart table on those products and simply be thankful that my business has such a wealth of other quality games to introduce people to. Even if our store needs to have a plan to be a bit more proactive in how we shelf, inventory, advertise and sell those products so they can get the kind of attention they need to not be "marginal" in our store.

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]

For the old school RPGers, there is the cool little fact that if they buy any of the 1000+ old 1st and 2nd edition PDFs available through the One Bookshelf download sites, we'll be able to print and bind it for them.

Ah, now THAT is a killer application of your production arrangement. Heck, if I had something like that here, I'd go browse me some old out-of-print rpg stuff right now.

Just saying.

[guildofblades]

The thing is, I can only print a single copy for a customer only after they buy the PDF (assuming the WOTC PDFs don't specifically prohibit the customer from having it printed in the document licensing). I can't print them up in advance to shelf or resell. Even buying the PDF ourselves, we would not have that right, as PDF rights to print are almost always for personal use only. So we can only provide the printing and binding service for someone else's PDF that they themselves bought.

That said, yeah, it is pretty cool. There are 6000+ (maybe more like 8000+) digital products available in the OBS catalogues. PDFs have grown immensely as a product format in recent years. They will only grow more powerful as a piece of the overall industry. If other retailers don't start figuring out how to get a piece of that pie, in short order they'll find themselves physically unable to sell over half the gaming material on the market today.

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]

Yes, that is the situation now. But prove your store concept, and I think you'll find no problem in negotiating special arrangements with the pdf purveyors of your choice. It's just a matter of workflow to make the user interface of your POD pdf store seamless from the customer viewpoint while simultaneously respecting the rights and work of the webstore backend that provides the data.

And meanwhile, I don't think it'd be exactly illegal for you to buy and print some choice samples yourself strictly for preview purposes - at least under the Finnish law you could easily showcase whatever you want, whether you own the copyright to it or not.

Regardless, it looks like you might be getting a leg up on the new electronic industry - I remember that we speculated about something like this here at the Forge a couple of years ago, but of course you can't realize a sensible in-store pdf printing system without full POD ability, which is unfeasible for a traditional game store. Ideally you'll manage to brand yourself as the first choice destination for gamers who need to get their stuff printed, whether they buy the product in the store or bring it in with them. The branding would probably have something to do with how you understand the needs of the gamer better than a generic copy shop, I imagine.

[guildofblades]

>>Regardless, it looks like you might be getting a leg up on the new electronic industry - I remember that we speculated about something like this here at the Forge a couple of years ago, but of course you can't realize a sensible in-store pdf printing system without full POD ability, which is unfeasible for a traditional game store.<<

Yeah, the full POD set up is necessary to do this. And if a traditional game store invested all the money to have a full POD set up, I imagine they would be looking to operate some variation of the store we're setting up. Because you don't buy a bunch of equipment with those costs and then not utilize them every way you can.

>> Ideally you'll manage to brand yourself as the first choice destination for gamers who need to get their stuff printed, whether they buy the product in the store or bring it in with them. The branding would probably have something to do with how you understand the needs of the gamer better than a generic copy shop, I imagine.<<

Your average copy shop can't do professional perfect binding. Kinkos, Staples, etc rarely have a perfect binding machine. They have the cheaper thermal glue binders which can only glue your booklet into pre made cover specifically designed to have a glue strip melted into it. But yeah, from professional binds, to price, game space, PDF downloads and more, there would just be no good reason for any gamer to go to Kinkos instead of us. A nice little working theory is that all those gamers will then also bring us their non gaming photo copying and digital printing jobs. And they'll offer us up as a local option in their work spaces when the topic of printing needs arises. We're going to strive to use the gamer word-of-mouth network to aid us in branding our copy and print services in the local market. There really is a lot of synergy in combining games with the copy and print.

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