Anchor Points

 

Although we focus on boardgames, cardgames, TCG and miniatures, we do carry comics as a sideline and participate in the annual Free Comic Book Day. I will leave it to other stores that focus more heavily on comics to discuss the ins, outs and successes of the event. However, an incident took place that got me thinking about behavioral economics and one of my favorite concepts therein, the anchor point.

I have mentioned the concept of the anchor point in past columns. Anchor points come into play when a business sets a price on a product in a category either higher or lower than normal which then causes consumers to re-evaluate their perceptions of the price on other items in the category based on the high or low priced item.

For example, Wal-mart often uses the anchor point to create a perception of low prices on everything within a category by reducing the price abnormally low on just one item. By reducing the price on, say, a TV to $149.99, the company sets a low anchor point for the other TVs it sells. The anchor point Wal-mart sets on that particular TV is lower than the price a customer would find on that particular television wherever they shopped. Wal-mart then prices its other televisions similarly to what other retailers sell price them but, because of the low anchor point, the other televisions are also seen as lower prices.

Anchor points are often used with high priced products, making them seem cheaper. A few years ago, during the GAMA Trade Show, I had the opportunity to have dinner with a couple of other store owners at Gordon Ramsay’s Steak. Now, when I typically go out to eat, I will spend $10 to $20 on a meal. However, at Steak, the average entre runs about $100. When a Porterhouse steak sells for $117, it makes the roasted chicken breast at $36 seem like a steal. Very few people order the Porterhouse steak. It is there to make other items on the menu look much more reasonably priced and lower customer resistance to purchasing them.

This is why I like to have expensive Magic cards on display at the store. We very seldom sell them but having a card in the case selling for four figures makes that $25 Mox Amber look much more reasonably price.

Story in the Southern

Today's Southern Illinoisan has a nice story on the store in the business section of the paper. Game stores are very much like restaurants and bars in that they are among the few places customers expect to provide seating to use their product after they purchase it.

Fun with Surveys

The “Game Stores Booming” survey that ICV2 published earlier this week raised a mild kerfluffle among game stores in a couple of online industry groups, unlike the comic retailer survey published just before that was greeted with a collective “Meh”.

The main concerns raised were 1) Who participated in the survey and 2) How was the data collected. Who participated in the survey is an especially valid question, given that the article gives no indication as to how many stores were contacted. Sample size, as I taught students in a statistics class many moons ago, is vitally important in determining the validity of a survey. I can take a survey of 10 stores, have 8 of them say they are doing great and voila “80% of stores contacted in my survey said they are doing great.” Very hard to generalize that to the industry as a whole, especially when we are looking at somewhere between 1500-5000 stores, depending on what criteria you use. Now if a larger number a number of stores were contacted, my old statistics textbooks said a minimum of 30 to come up with any generalizable numbers but the more the better, so if we are looking at 75 to 200 stores contacted then that over 80% number looks a lot more reasonable. Incidentally, this is why a lot of scientific studies testing nutritional supplements and assorted diets don’t hold up under close examination. Their results are based on studies of the effects of a diet or supplement on only a few dozen people, meaning it takes on a small number of positive responses to show a significant percentage of improvement.

Secondly, how was the data collected? Ideally and to made the data most generalizable to the overall population, ICV2 used a random sample. From a large pool of game store contacts, the surveyor uses some form of randomizer, random.com comes to mind, and contacts a group of stores selected at random. The fact that almost all game retailers still have land lines and have listings in the white pages makes this a much easier proposition that those poor pollsters who have to contact individuals for polls, since there is no central list for cell phones, as of yet, as there is for land lines. More than likely however, ICV2 used what is called a “convenience sample”. Whoever conducted the survey likely said, “Hand me that list of stores we have tucked away. We will call some number of them to see how they did in 2015.” The results are certainly reflective of stores within that pool. The problem is that the results are only reflective of that pool and must be used with caution if anyone tries to generalize the results to the overall populations.  That is why academic studies using a convenience sample always state so in the study limitations.

All that being said and being curious myself, I took a quick convenience self-selected sample, meaning that I posted a survey and other stores could respond or not. Of those stores responding, just over 90% indicated they were up at least 1% over 2014 and just over 75% indicated a sales increase of over 10% for the same time frame, correlating with ICV2’s results. Now, I didn’t break out length of time open, size of store, location of store, number of stores or if there had been any remodeling or expansion, all of which could affect sales increases. There is also the possibility that stores with sales declines didn’t want to respond. Still, the similar results give me hope for a good 2016. Please feel free to send your comments to ICV2.

Galactic Connections

The Galactic Connections game from Topp's has all the earmarks of a “You guys make collectable trading cards, right? Here, make us a Star Wars game, get it in the store really fast and give people some reason to collect and keep buying it. “ Topp’s, knowing a good deal when they hear it ( I knew a manufacturer who once said that he could put tables of trash in the main aisle of a Wal-mart and, due to their customer traffic, it would sell), likely jumped at the offer, though their track record with trading card games isn’t that great.  Anyone remember Monsuno? Came out from Topps in 2012 and died, oh about 2012. 

Topp’s though may not be great in trading card games but the collectability of trading cards and the creation of chase items, now at that they are great.  Galactic Connections comes with common discs, uncommon ones, rare ones, ultra rare ones, ultra ultra rare ones, ultra ultra ultra rarer ones and the rarest of all, the 14K gold Slave Leia disc, plus discs only available at specific stores. All this while ignoring the basic driver behind collectable games these days, Organized Play and a place to run it. Wal-mart has not hosted an Organized Play program for any trading card game since the original Pokemon boom back in the 1990’s when Wal-mart stores actually did host Pokemon tournaments. In order to keep any trading whatever game viable these days, a company almost has to have an OP program in place. Not a whisper of one for Galactic Connections. 

Possibly the plan is to reach out to the Local Gaming Store and ask it to host tournaments.  I remember years ago a company launched a trading card game with product only available in the mass market. The business model was to have the mass market, who buys and moves a lot of product, sell the game to players and the local gaming store got to run the tournaments. The plan, as the company saw it, was that store hosted tournaments would draw players in who would pay tournament fees and buy snacks and other products while in the store. A win-win for everyone, in the eyes of whomever developed this plan. Needless to say, stores did not embrace this idea, figuring their time better spent hosting tournaments and otherwise promoting products they could sell in the store, rather than giving customers a reason to buy more stuff elsewhere. Yep, that was a winning business plan.

I expect Galactic Connections to do decently for Wal-mart and but not gangbusters, so no OP program put in place at the store and, once the movie hype dies down, so will interest in the game.

Final Thoughts on Gencon 2105

Wrapping up a Magic Game Day weekend while grading final exams makes for a very busy weekend but I still had some thoughts about last week’s Gencon:

1.        Attendance.  Reported attendance topped 61,000 people. That’s over double 2010’s attendance of  just over 30,000 through the door and, while still just under half the attendance of the pre-eminent pop-culture convention, San Diego Comic Con, the numbers GenCon posts far eclipse that of the second largest gaming convention, Origins, which posted n numbers of just under 16,000 this year. Whatever else one might say about Gencon, and lots of people have lots of things to say, the people running it are certainly doing something right to generate those kinds of numbers.

2.       Dealer’s/Exhibit Hall.  With the kind of attendance numbers GenCon has generated the past decade, the convention has become THE place to be if you are a game company, especially if you are a smaller game company or a seller of gaming related paraphernalia, such as t-shirts, bags, etc. As I mentioned last week, a number of companies reported selling out of their con stock of a production run on day one (Looney Labs and Green Ronin come to mind) and had to get a rush delivery to restock for the rest of the con. However , the huge demand for space in the hall has caused GenCon to move to a priority points based system for allocation of space, with vendors needing to accumulate so many points in order to get a booth. Factors determining the number of priority points a vendor gets include number of years displaying at Gencon, size of the booth, sponsorship level and other factors that I wasn’t able to find with a quick search.  This means that smaller vendors with low priority point levels get relegated to less desirable spots in the hall. Couple that with a booth fee in excess of $1500 for a 10’ x 10’ booth and smaller vendors can feel  quite squeezed, to the point where they may find it financially infeasible to return to the show.

3.       GenCon Releases.  Still quite a bit of a problem with small publishers even after all these years. Wanting to make a splash and draw attention to their booths, publishers hold or target new releases for GenCon (see the aforementioned Looney Labs and Green Ronin.  Batman Fluxx released the week after Gencon and we still have not seen Fantasy Age or Titansgrave in store yet). This doesn’t hurt stores that are a good distance away from Indianapolis. However, one of the selling points for Indianapolis as a location for GenCon is that 70% of the US’s population lies within about a day’s drive of the city, meaning that a good number of stores lose sales to Gencon.  It’s also possible to look at this problem in another way. True, the store lost sales to Gencon, but the store can also look at this as a demo opportunity. I know of stores that have customers come back with Gencon purchases and want to play them in the store. Instead of getting angry, the store manager looks at this as a promotional opportunity, taking advantage to show the game off to those customers that did not get to go to Gencon, and there are a lot of them out there.

And with that, Gencon 2015 is on the books.

8 Points if You Want to Open a Game Store

If you really want to open here are some things you ought to know and do:

1)      You will probably fail. Failure rates for new businesses after 5 years, according to the Bureau for Labor Statistics, run anywhere from 50 to 90%. That means there’s a pretty good likelihood you won’t make it.

2)      Plan on giving up most of your life outside the store. Most game store owners work in, or on, their business between 55 to 80 hours a week. That gaming you were planning to do with your friends? It’s not included in those hours.

3)      Have capital to invest you can afford to lose (See #1). Due to the high failure rate, few banks will offer a business loan on this type of operation. You can get a loan but it will likely be a personal loan, meaning it is guaranteed with your other assets.

4)      Make a business plan (Failing to plan is planning to fail—Alan Lakein, among others). You can find samples from the Small Business Administration or help from the Service Corps of Retired Executives  (SCORE). Both are great sources of information on starting a business.

5)      Find a copy of Dave Wallace’s A Specialty Retailer's Handbook: Games and Comics. Wallace owns the Fantasy Shop chain of comic and game stores in St. Louis and is responsible for helping more store owners become successful than any other person I know.

6)      Join the Game Store Resource Forum on Delphi (http://forums.delphiforums.com/gamestore). It is the only place of which I know which welcomes potential game store owners and has a group of experienced store owners willing to answer questions from their years of experience. While not nearly as active as several years ago, a number of experienced store owners still frequent it.

7)      Attend the GAMA Trade Show in Las Vegas next March (http://www.gamatradeshow.com). The GTS typically has a track of programming targeted specifically for potential and new store owners. You may attend, even if you do not have an operating store but are excluded from receiving the Retailer Appreciation Package, a perk reserved for operating stores.

8)      Follow Black Diamond Games’ Quest for Fun Blog (http://blackdiamondgames.blogspot.com/). There are a number of game store blogs out there but Gary Ray of Black Diamond Games operates one of the best when it comes to explaining the whys and wherefores of game store operation. Do a site search for posts tagged “Tradecraft” and you won’t be disappointed.

There’s a whole lot more to running a game store than just opening a few boxes of boosters and pricing singles. If you seriously want to open a game store, start preparing now.

You Don't Want to Open a Game Store. Really, You Don't.

It’s the beginning of the year, a year filled with bright and shining possibilities and what does any self- respecting gamer want to do? Why open a game store of course. What could be better than playing games with your friends all day and getting the newest and shiniest titles when they first hit the street?

Two Words:  Don’t. Seriously, don’t. Take your money and invest it in bonds, the stock market, corn futures. You are liable to do a lot better there. Paraphrasing an old saying from the real estate field:  “Do you the easiest way to make a million dollars in the game industry? Start with two million.”

80-90% of all game stores, heck all new businesses, close within 5 years, most within 18 months. The odds are against you.  However, if you really want to open one, see Wednesday's post.

The Game Store Model

Midway through release weekend for Khans of Tarkir and it is the quiet time of the evening so naturally I got to musing about how the typical hobby game store has changed over the years and just how uniquely the hobby game store model has developed compared to other store categories with which it is typically lumped, such as comic book and pop culture stores. Despite the fact that we operate using the same basic model of distribution as do Macy’s, Target, Dollar General, Hibbit’s, even Toys r Us and Olive Garden, the hobby game store, with the encouragement of manufacturers, has developed a very unique business plan closely tying sales to events.

In the traditional or full model of distribution, which even mighty Amazon uses in a modified format, the manufacturer makes the product, then sells it to the retailer, who then sells it to the consumer, who then takes it home and uses it. For many products, the distributor also fits into the channel, positioned between the manufacturer and retailer.

The difference between the hobby game store and almost every other type of retailer out there is that hobby game stores sell the product and then are expected to facilitate their use. Take Macys. Macys sells you clothes, shoes, curtains, bedding, etc. The customer buys them and takes them home, then wears them, puts them on the bed, hangs them on the windows and so forth.

Contrast that with the typical hobby game store. Not only do we sell the customer a product but we provide play space for the product and organize events in which customers can participate, with most stores running events every day, many of which have prizes and organization provided by the manufacturer. Structured play has developed into such an important facet of the industry that we call it Organized Play or OP and most game companies have some form of OP program in place, with more companies looking to start up their own OP programs every week or so it seems. I just received an email from Japanime Games, asking us if we had any interest in starting OP for Tanto Cuore and/or Krosmaster:  Arena. Currently, I can think of Organized Play programs from WOTC, AEG, Privateer, Alderac, Bushiroad, Konami, Arcane Wonders, Fantasy Flight Games, StoneBridge, Paizo and probably others that I cannot think of at the moment.

The thing is, no other retail category (with the possible exception of the traditional hobby i.e. RC, model railroads, etc.) has developed a model in which they sell a product to the customer then provides the customer with places and times in which to use it. We sell customers Magic cards, then are expected to run Magic tournaments. We sell customers Warhammer 40,000 figures then are expected to have terrain and table space available. We sell people King of Tokyo and are expected to host King of Tokyo championships. A common question from manufacturers when stores apply for OP status is how many players can the store seat and many stores I have seen run their merchandise displays along the walls with table space in the center.

We do this because, over time, we, and I mean both stores and manufacturers, have found that this model promotes more sales.  WOTC often refers to studies the company has done showing that OP boosts sales. It’s a no-brainer for most stores but it is also a fairly unique model we have developed.