Training Employees

One of your business goals should be to make yourself redundant. When your store works just fine without you, you’re free to focus your time and effort on growing the business, take vacations, expand to multiple locations if you want, or otherwise have options that you don’t have when the business depends on you for daily needs.

An early step in this process is training employees. We’ll skip choosing what you need, the hiring process, the review process, and all that for now and go straight to the process of training a new hire.

Written Procedures

Ideally, you have written down all your procedures and employees can refer to these procedures as needed. A written guide isn’t a substitute for real training; it’s a crutch that employees can refer to for a quick reference. It’s also a means of standardization that can ensure that everyone is being taught the same thing. You can produce it on demand if there’s ever a question.

Duration of Training

I was spending four days at FLGS training a new hire, but I was about to increase the time to five days.  In my experience, training for 4 days allowed time to teach all of the procedures, but it didn’t allow enough time to practice those techniques under supervision, and the common exceptions to the rules didn’t always show up. You might spend more time training if you have multiple departments or categories to your business; FLGS didn’t sell comics, for example, so my operations might be simpler than yours.

You might spend less time if you schedule multiple employees together. Mine generally worked solo, so they had to have a full skills set before they were allowed to “fly solo.” In this case, you’re still training; you’re just shortening the full-time training period.

Training the Trainers

When you’re ready, train a permanent staff member to train new hires the way you want. Monitor their progress and check up on employees. Constantly fine-tune the process for regular improvement. My trainers used a training checklist. I am certain that operations require material not listed on the checklist.

I’m giving you my actual training checklist that my trainers use. Some of it might be particular to FLGS and meaningless to use. Some items might refer to specific brands or software, but you can figure out which items those are.

If you see missing components, feel free to mention it to me. That sort of information is useful for my ongoing attempts at educating store owners.

Local Market Store Comparison

It’s important to conduct an objective, honest analysis of where you stand in your local market. It tells you where you need to improve. It shows you what angles to promote in your local marketing and advertising.

For this comparison, you might feel a natural inclination to share only the areas in which you excel. I recommend that you favor your own store in your public comparison, but don’t make it all one-sided in your personal notes. Be honest, because you’re using this information to make business decisions. Lying to yourself will guide your store in the wrong direction.

Some of these metrics should not be yes/no. For example, with Games Workshop’s products, there’s a big difference between a store that splashes new releases, a stockist store, and a store that meets all of GW’s metrics for the different modules.  Some stores might offer special-ordering services but handle them poorly, so a check-mark does not accurately indicate the customer experience. A better metric would have a percentage of special orders filled, which is difficult or impossible to gauge at another store.

For this article, I removed the specific names of the local stores, and I made up some entries to avoid identifying who’s who. Since I started this comparison, other stores have opened, also. The local market is even more crowded than this comparison indicates. I’ve opined that the Jacksonville market could handle up to 10 game stores, and we’re over that in number and they’re more crowded than in the geography I envisioned. It’s a lot of stores right now. Of the ones listed here, I know one will be closing soon, and at least one more has unsustainable sales, so I expect the market will correct itself somewhat in the next year or so.

The comparison groups the elements into three categories: service, merchandise, and a physical comparison. I’ll explain some of the line items. Open the PDF linked below to follow along.

Services

Loyalty plan: It can be a simple punchcard, a feature of your POS, or a flexible 3rd-party system. The best comparison would be to describe each store’s plan in some way.

D&D Campaign Badges: My store made buttons that the crew were supposed to give to DMs who completed a D&D adventure, like campaign badges soldiers could earn for completing a tour of duty. It never really caught on, but I still think it’s a solid idea. A better implementation would be selling a set of 4 buttons or giving them away as an incentive for making the adventure purchase.

Magic Singles Kiosk. The kiosk is a customer convenience and a requirement for Wizards Premium (which should be a line item on the comparison in its own right).

GM Incentives. This program was later integrated into our regular loyalty plan, but it’s based on the need to recruit DMs for RPGs in the store. You can have 100 players, but if you have no DMs, you have no games. We made regular efforts to encourage players to take up the DM’s seat in the store, from offering bonus points to DM workshops.

FNM. I would  have thought everyone did this, but apparently not.

Introductory D&D games. With D&D at a peak in popularity, people call the store regularly asking about intro games. It’s an easy way to welcome new players into the store.

Café. Some game stores focus on the café model, and it really affects the overall atmosphere in the store.

Free open play. If one store in the local market charges to play, it makes every store that doesn’t seem more attractive.

Lockers. When I sold my first store, the employee who bought it made lockers for the store. He sized them around monster boxes for the card gamers (each locker was as wide as a monster box, plus a pair of hands). They were always full. These custom-made lockers generated more dollars per square foot than any other space in the store, and they have a psychological side effect. Many gamers play at multiple stores. But if one store has their stuff, that’s where they’re going to spend most of their time.

Total Open Hours. This figure is important, but the total is just one factor. Whichever store opens earliest has certain advantages for big product launches and people with busy weekends. Opening late allows role-players to bring their game there. Game stores that close at 7 or 8 pm leave  no opportunity for a role-playing game after work.  In my notes, I recorded the exact hours of each store.

TCGPlayer store. Does the store have enough singles activity to support a tcgplayer store? And do they use that sales channel? This sometimes goes along with the kiosk (and should be moved to be adjacent to that heading now that I think about it), although they’re not the same thing.

Merchandise

With most of these categories, a brief narrative would be better than a checkmark. One store might “carry” D&D, by which they mean one copy each of the core books and the newest adventure. Another store might have every single Wizards book, plus the most popular 3rd-party books. That’s a big difference in customer experience. Obviously by pointing out all of the used categories I was showing off my store’s superior selection. Nobody else in town carried used D&D, while I had (at one point), a 4’ slatwall section for *each edition* of D&D, with room for 16 titles face-out and well over 100 spine out. Nobody else carried used minis or used board games.

Properly identified, comics should be broken out to include new and back issues and graphic novels, but since I stopped carrying comics around 2017, I wanted that section simplified.

Physical Comparison

Size. It matters. The bigger the store, the more merchandise you can fit, and the more gamers you can fit for events. Naturally, the bigger the store, the more it costs in most places, but customers don’t care about that. They want to be impressed.

Maximum seating. This figure can be deceiving. Packing card gamers in like sardines doesn’t necessarily create the best gamer experience. On the other hand, miniatures tables take a lot of room for only 2-4 gamers per table. If your store focuses on Games Workshop, you’ll necessarily need more game space than the store that lives off of its Magic community.

Exterior signage. As you can see from my notes, this isn’t a checklist; it’s a description. Channel letters are the most expensive option and are considered “the best”, but box signs allow for more customization. Wooden signs look cheap in most circumstances.

Not included: it’s a good idea to also compare fixtures: slatwall, gridwall, pegboard, etc. Do they match in color? Do the chairs match? Are they comfortable for a 4-hour gaming session? I did not include restrooms—number and location.

How does your store stack up? Do gamers have a reason to choose your store instead of another store to which they are already loyal?

Small Business Community Impact

What do we mean to the community?

I want to assess my company’s value to the local community: how much of my revenue is spent locally, and can I do anything to improve it?

Rent

Obviously, all our employees live in town. You can’t do brick and mortar retail remotely. That’s about 11% of our expenses. Also, wages are reinvested in the community. None of my employees are billionaires. People who earn normal, people-level amounts of money spend all of it. None of it is removed from the economy through hoarding. These salaries are spent on local rents, local utilities, local car purchases, clothes, medicine, and other vendors.

I’m at 100% here. I can’t improve this figure.

Rent

The owner of our shopping center lives in town and occasionally visits the store. The property manager lives in town. The property is not part of a major chain. All the properties they represent are in Jacksonville.

Rent is about 12% of our expenses.

I can’t improve this figure.

Service and Maintenance

Our HVAC person is a local independent technician.

I’ve had to shop around for plumbers, because I haven’t been happy with any of them. Sometimes I use a chain.

My light guy is a local independent.

I could improve this figure by a small amount if I could find a plumber who a) fixes plumbing, and b) doesn’t charge 3 times as much as other plumbers. I’m astonished and dismayed at how hard that is.

Merchandise

Our largest supplier has multiple warehouses, but they are based in Florida, and we order from their Florida warehouse. One of our secondaries has a Jacksonville location, but they are not based in Jacksonville. Of course, we have multiples sources of merchandise to get stuff that’s out of stock at our primary or exclusive to that vendor (like Games Workshop). We also stock nearly any game-related products we can source locally.

We have a display of locally designed games that I gathered from their sorted-by-category placement throughout the rest of the store and now merchandise below a sign displaying their local status. It’s intended to be a focal point for customers who are eager to support the community and an enticement to any local game or game accessory producers who haven’t already reached out to us.

Our Jacksonville-based merchandise purchases are only about 1% of our expenses, but if we extend our definition of local by about 100 miles, I can add another 35%. Peach State Hobby is our primary distributor, providing us with all of our role-playing games, Magic, the Nolzur’s miniatures line, almost all of our non-GW hobby supplies, and a large minority of our board games.

I am working on creating more merchandise so that we can improve this figure.

Utilities

Electricity is a local expense, and—this being Florida—it’s a lot of money. It’s not cheap to cool a 5,100-square foot building filled with gamers. Phone and internet expense goes to the necessary giant mega-corporations. Insurance is underwritten by a large corporation through an agent in our shopping center.

At one point, Jacksonville was the insurance capital of the world. During the 90s, a lot of those companies moved their corporate headquarters out of town. Back then, I could have claimed my liability insurance premium stayed local, but that’s not the case anymore.  

I don’t think I have any Jacksonville-based options for insurance carriers or Internet carriers that have a reputation I trust. I tried a local phone carrier once, and it caused my business almost terminal damage.

The local portion of our utility expense is about 3.5%.

I can’t do anything to improve this figure.

Taxes

I pay the Florida sale tax, of course, on monies collected in the store. Without providing detail to give, let’s just say that it’s…enough. I owe various small fees to the city of Jacksonville and the state of Florida. Payroll taxes are federal, so that’s a zero.

When I talk about sales, I always talk about net sales (and so should you). That’s the amount of sales you conduct not counting sales tax. I ever make a statement here about seeing $10,000 in sales, that figure doesn’t include the $750 I collected and turned over to the state of Florida. However, the aggregated smaller, fixed figures fees might be another .5% (it’s not, but I’m rounding it up because my running total isn’t even, and I want it to be).

Summary

If we include our nearby inventory purchases, 63% of our expenses stay in the community or the state. That’s a larger impact than I expected, and it demonstrates how important small business are to a community’s financial health.

Compare that to an Amazon purchase, in which 0% of the money goes to the community. Buying local matters.

Planning for Wizards Premium

One of the key questions you must ask yourself when you plan your store is the question of whether to build for the Premium store designation from Wizards of the Coast.

I recommend pursuing the Premium status for (nearly) every store owner. The requirements run parallel to your larger goals of building a great store, while the benefits increase sales for one of your largest game categories. It’s a no-brainer for 99% of stores.

Wizards provides a checklist for pursuing premium status at https://media.wizards.com/2019/wpn/new_wpn/premium_quality_checklist.pdf. It’s broken into several categories: design, housekeeping, accessibility, and information all fall under the larger header of aesthetics. The sister category, customer service, includes staff, customer interaction, play experience, and amenities.

Let’s look at a couple of representative items from each category.

Design

The design standards require a visible, permanent sign. Isn’t that the kind of sign you’d want if you want to attract customers? At no point outside of the shoestring model (which I don’t recommend) would I ever suggest having an invisible or temporary sign.

Signs are your most cost-effective method of advertisement: their number of impressions divided by their cost is good, but when you stretch out the number of impressions over the sign’s lifetime, you reach an impressive efficiency. A good sign pays for itself.

Merchandising standards state that your departments should be clearly defined. That’s a good idea in retail anyway. I recommend identifying each department with internal signage and further recommend that you brand each unique department with its own color scheme or graphic design. Customers should know if they’re in the board game section or the role-playing section.

Lighting should be “excellent overall,” which is good advice. There’s a mathematical formula in retail that can be broken down to “lighting equals sales.” The better the lighting in your store, the more sales you’ll have. Replace blown bulbs immediately. Add spot lighting where necessary to highlight key displays.

Tables and chairs should match. Tip: Advantage Church Chairs offers fantastic, long-lasting, attractive chairs at a great price. I no longer recommend Lifetime chairs after many attempts to exercise their warranty have been denied.

Likewise, you could go down the rest of their list, and all of their requirements are simply good retail decisions. Still, familiarize yourself with the checklist before you plan and build your store, and it’s easier to meet those metrics when you apply.

Housekeeping

The next section on the Premium checklist regards what they call “housekeeping.”

At the top of this list is a general “clean environment.” By that, they mean that the store in general should be free of clutter and trash. The area behind the counter, which is a common work station, should be uncluttered. Ideally, as much work as possible is done away from this station and out of the public view. If it must be done there, it should be minimally obtrusive and put away when it’s done.  

Likewise, the windows, shelves, game tables, floor—anything the public can see—should be neat and clean. Have a schedule for cleaning each place on this list and an oversight system to ensure it’s being done.

Your restrooms should be clean and supplied. Well…yes. They should. Making sure that restrooms available to the public are clean and stocked should be a priority for anyone who welcomes the public into his or her business.

Accessibility

The checklist has a section ensuring accessibility. You can use the Americans with Disabilities Act  as a guideline for the retail section of the store, but you must also take into consideration traffic flow in the game play area and the ability to reach the store.

Information

Policies and information should be posted where customers can see it. This information includes things like return policies, a code of conduct for using the game room, prizes given for events, and anything customers are likely to need to know. Posted signs should be printed (not hand-written), multi-colored, branded, framed and affixed to the walls or in freestanding acrylic signs on the tables.

You must have a posted event calendar with upcoming events posted.

Staff

Staff should have a “positive and professional manner.” That’s not exactly a discrete and measurable metric, but it’s like the judge famously said—“I know it when I see it.” Common courtesy is a good starting point, but policies regarding suitable subjects for dialogue and topics to avoid keep employees on the right path.

For example, at FLGS, employees are not allowed to discuss politics or religion, and they are not allowed to malign any customers, employees, other stores, or any of our business partners (including manufacturers and distributors).

Staff should be wearing company-branded materials: uniforms, lanyards, or however you distinguish your crew to customers. FLGS uses polos or t-shirts, plus branded badges. Each badge has the employee’s name and two to three areas of expertise about which they bring extensive knowledge.

Customer Interaction

All customers should be welcomed. Employees should not be dismissive of anyone for age, gender identity, ethnicity, or whatever personal issues they might have. If they walk in the door, they should feel welcome.

Customers should be greeted upon entry. At the risk of sounding like a broken record, this should be your policy anyway. Crew should be greeted at entry, approached a second time to offer to help, and thanked as they leave.

Wizards requires a high-quality online sales platform. Using any of the standard sites like tcgplayer or Amazon meets this metric. They don’t have standards regarding how much merchandise you need on these sites, so don’t worry if you only have a few hundred dollars’ worth listed; they want to make sure the presentation is professional.

Play Experience

Professionalism and consistency are the keywords for running a great event. Run events on time, every time. If people show up late and you’ve already started, they’ll be on time next week. That one player you wait for is inconveniencing ten or 20 or 50 others. It’s not worth it. Start on time, even if you only have 3 players.

The checklist asks you to have pre-registration available. A perfect medium already exists for that—the Magic Companion app. You don’t have to do any work. Just have the link available in store and on social media. Having pre-registration helps your operations tremendously; it lets you staff appropriately, and it alleviates the mad rush at event start time.

Amenities

Wizards wants you to have food and drink available. I don’t believe they require you to sell it, but you should anyway in nearly all circumstances. Again, they’re asking you to make decisions that benefit the business.

One requirement you might not have considered is having a tablet or desktop available for customer use. It allows customers to sign up for an account or whatever else they might need for the event. It can double as your sales kiosk.

Having a screen or TV for event management is a top-tier idea. During events you can displaying pairings and standings.  When you’re not running events, it can rotate among different demos, promotions, and other customer messages.

Good Ideas Are Good Ideas

I told you the requirements are things you want to do anyway. If you’re still planning out your store, integrate this checklist into your plans and you’ll have the hardest part of the job done when you turn the keys and start letting people in.

Domino’s Pizza and FLGS

I’ve told the story before of how Domino’s prepared me for my own business. Let me provide a little more detail.

Background

When I joined the company in 1987, Domino’s Pizza was opening a thousand stores a year. The company was growing insanely. I saw a survey that pointed out that their mascot, the Noid, was the second-most recognized figure in pop culture—right below Santa Clause, and above Jesus Christ. They were exploding. With this growth came a giant push from the company to train managers for all those stores. We didn’t have assistant managers or shift managers. We had MITs (managers-in-training). If you didn’t promote, they pushed you out of the training program.

Each manager-in-training was equipped with a workbook, a heavy work schedule to train through immersion (and earn pay), a regimen of in-person training courses, and regular job performance reviews—all with the goal of taking an employee from filling out a job application to learning how to run a $500,000/year business within six months.

I learned more in those few months in a corporate environment than I did in almost two decades of working for franchisees. Managers I met years later couldn’t tell me what was in the dough, much less do the advanced math. Not that they were necessarily bad managers—they just weren’t trained business owners.

For example, Domino’s divided their fiscal year into 13 4-week periods. This gave us several advantages—one of which was that when we compared sales to last year (which we did daily, weekly, and periodically), we were comparing the same day of the week for a more accurate comparison. Our paperwork each period included

Week 1—a profit projection for the period

Week 2—a “mid-month”, which was short for “mid-month profit projection”

Week 4—a profit and loss statement, using actual figures for rent and utilities sent us by corporate

This was before stores had computers, so we learned how to calculate these things by hand. I could turn over a sheet of paper, figure my contribution margin, and scratch out a break-even analysis (and therefore a profit calculation) by hand. Thirty-nine times a year—more if your trainer insisted you do the work more than once, which mine did.

Part of the motivation behind this intense training was the idea that each of these corporate managers might one day buy their own store or stores. They weren’t just training potential managers; they were training future franchisees. It was an intense training program designed to create business owners (and, incidentally, the managers were incentivized with profit-based bonuses so that the most successful could buy or open their own store).

John and Mike

While I worked for a couple of different managers during that period, I had two primary trainers. The first, John, trained at least 6 people up to their own store. He had a reputation throughout the market for being a strong trainer. People wanted his MITs in their stores. He later went to Subway, where he owned and operated one store and was partial owner of a second. He ran a highly profitable store, made even more impressive by the fact that he always had rookies running the place, and he paid them well. While working for John, I was the highest-paid trainee in the area (wages were standardized, but I got the hours I wanted). Other managers discovered that they could pay me the mandatory overtime required when working for a store other than your own, and their labor costs would still be lower than normal because of how tight I ran a shift. In addition to Domino’s-specific stuff that isn’t the point of this discussion, John taught me the fundamentals of employee management, the benefits of ongoing training, and how to best use my time during a shift or a week.

The second trainer, Mike, had the reputation of running outstanding numbers. He turned a giant profit for the company while ensuring that he earned as much as the system allowed. For example, he discovered an exploit in the system where he and another manager could get paid an additional day by working at each other’s stores one day a week, which gave him and his friend a 20% increase in income for the same number of hours worked.

Later, when he was promoted to area supervisor, Mike’s tasked profit goal for his first period was $14,000. He was disappointed with himself when he “only” reported $56,000 profit, because his personal goal was to quintuple his assigned goal. Under Mike, I learned how to scrutinize costs, maximize the value of labor, and leverage assets for maximum benefit. I really learned how to appreciate the profit benefit of add-on sales.

Interestingly, neither one of these managers was a great salesperson. Neither ran the highest-volume store in the market—but they were always 1st and 2nd in profits (or first and first when John moved to an adjacent market). When John, Mike, and I ran stores simultaneously, our market led the region in profitability, and our region led the company. None of us ran the highest-volume stores in our markets.

The System

The company system taught me the value of standardized training. When I started FLGS, I didn’t need an operations manual. My partner and I did everything ourselves. We didn’t hire anyone for about 6 months. But I had a table of contents and an outline before we even opened. We had the kernels of our content almost immediately—daily checklists for opening and closing tasks. Then I added things like uniform standards as we added employees.

Now it’s a 56-page document available in print for quick reference at the counter or PDF for latest reference and searching ability. It includes intense detail regarding every operation that happens in the store, from opening the front door on entry to sales, receiving, online sales, pricing policies, and closing up at night. If we ever encountered anything not in there, we added it.

The corporate background also prepared me for operating multiple stores. While my 3 stores were in different markets and had some specific differences because they were bought (as opposed to opened from scratch), my plan for the next year was to homogenize methods 100% so that crew and management were wholly interchangeable. That’s a big help with covering shifts, promoting managers as needed, and improving the customer experience overall.

Differences

Obviously, we don’t make pizzas at FLGS. There are other differences. For one, I don’t have to worry about delivery (I thought about it as an option, but I did not pursue it for reasons I don’t need to go into right now). But less obviously, the number of SKUs I restock on a regular basis is enormously different. Domino’s had 10 toppings when I started, two sizes of dough patties, one sauce, two sizes of boxes…the entire list fit on a single page and could be counted in 15 minutes.

Another obvious is that I had to do all this work myself instead of having it done for me. On the other hand, having read the procedures and training manuals at Domino’s gave me a broad template that I could repurpose for my own use.

Clearly, a fully-stocked game store with a broad inventory base needs hours of counting. With practice and refinement of methods, I could count my major general restocks in less than 2 hours, but that still leaves lists of less efficiency for several more hours of counting.

Staffing is much simpler in a game store. In almost all cases, I have one person on duty to cover the counter. For high-traffic times, we double up. Shift transfers take a few minutes. In case of a call-out (which was very rare for the first 20 years, very common in the last 2 years), the salaried manager arranges coverage or works the shift himself. If nobody else does it, I do it.

Customers can steal from a game store. In a delivery-based restaurant, there’s almost no theft. Theft on a delivery was a big deal because it was almost always armed robbery. Theft in the store was all done by employees, and the systems in place made that easy to do but difficult to do undetected. I implemented systems to prevent or detect theft.

Recap

The methods and systems I learned from the management training program at Domino’s absolutely gave me the background I needed to own my own business. Where the skills didn’t transfer, they gave me a comparison that I could adapt to my needs. The opportunity is lost with the changes in Domino’s over the past several decades, but undoubtedly other situations similar to that are out there now. Maybe you’re in one and haven’t assessed it from this point of view.

A New Experiment

From before we launched our brick-and-mortar operations in 2013, the plan for Friendly Local Game Store has been the dual development of multiple retail stores supported by our own game and game accessory design. As the retail operations grew in scale and scope, there never seemed to be enough time to devote to the second half of that plan.

Part of this goal came from personal desire, while part of it came about from observations in the industry. Many good gaming products don’t succeed financially because they don’t get game store presence. Having guaranteed presence gives our games an edge. Having energetic store support gives them a big edge. Organized play, premier positioning, social media presence, and the ability to stock the products effortless all promise to give those games a boost.

The store wins by having exclusive or hard-to-find product for its customers. It gives that store a competitive edge against stores that don’t carry that product. If you’re the only store in town with a certain product, that’s where people go for that product. Designing your own games is a win for both sides.

In November, Friendly Local Game Store merged with Coliseum of Comics. Coliseum of Comics took over retail operations for the Friendly Local Game Store locations in Jacksonville and Orlando, plus Gamesville Tabletop in Gainesville. I became head of a new division we are creating for game design. If the cost of seeing this goal come to be is a name change, that’s a cost I’m willing to pay. Having more stores means the games will be more successful, and growing from 3 stores to 12+ stores in one fell swoop gives that division a big step forward.

The sales and cash flow projection for this operation shows that at the end of two years, the bank account should exceed $90,000, assets on hand exceeds $100,000 (representing games to be sold in the future), and our digital catalog will be growing. We have some promising product lines planned that should make for some interesting analysis afterward.  

Because of the cost associated with collectible card games, we are very unlikely to produce a CCG. Otherwise, we have a variety of board & card games, miniatures, miniatures games, role-playing games, and gaming accessories slated for the next couple of years, including licensing some games already on the market but unavailable in North America. All these products fill a need for the stores. Sometimes it’s just margin. Sometimes it’s exclusivity. Sometimes it’s new customer acquisition. We’ll focus on product lines that produce the most return for the least investment in time and cash.

EDDM Marketing

EDDM Marketing

The EDDM (Every Door Direct Mail) program is an offer from the post office that allows you to send low-cost marketing pieces to a very specific part of the map. I want to talk about why you should use such a thing and how you could use it.

The What

EDDM is a new-ish program that allows you to send direct mail for a very low cost. It’s easy to use for them because there’s less sorting. They hand the package off to the carrier and he takes one to each address on his route.

  • You don’t need to know addresses. You choose specific postal routes, most of which are around 400 addresses.
  • You don’t have to deal with a huge minimum; you can do as few as 200 per mailing, or as much as 5,000 per day.
  • You can choose commercial, residential, or both.

The cost: 14.5 cents per piece. With first class postage at $.45 and bulk rates no lower than $.20 per piece, you can see what a deal this is.

The post office site that describes it all in full detail is here.

The Why

Game retailers like to think of their stores as magnet stores that draw people from halfway across the state. They brag about how Bob stops by faithfully every time he’s in town, even though he lives 3 hours away. They point out Dave, who drives an hour once a week to play Warhammer 40k. They haven’t collected the data that shows that most of their customers live within about 5 miles of their store.

Sure, gamers are loyal. But this kind of thinking is an easy trap to fall into. You look at the most visible customers and ignore the 90% of them who, combined, pay your bills.

This area—the map circle from which you get more than half your customers—is called your primary draw. That’s the richest area for you to target with any traditional media (or online media, if you can target that precisely). For most of us, it’s about five miles. For those in more rural areas, it might be larger. For highly-populated metropolitan areas, it could be less. Knowing what this area is can be vital to your advertising, but most store owners don’t spend the time and effort to calculate it.

The How

  1. Sign up. Go to that USPS url above and sign up for an account.
  2. Choose your message. What do you want to promote? A new store opening? Adding Games Workshop? Magic tournaments?
  3. Design your ad. That’s a huge topic and gets a couple of paragraphs in a bit.
  4. Order your printing. Printing prices vary, but I’ve seen as low as $475 for 10,000 full-color UV coated pieces, including design work. Check out Mainstream Marketing.
  5. Choose your target. Start anywhere within your primary draw. Target routes that are “downstream” from you first. That is, customers who pass by you on the way home from work (you are on the right side of the road for that, right?).
  6. Take your materials to the post office. Take your pieces, your instructions, your customer ID number that they gave you when you signed up, and cash or a debit card. They don’t take credit cards.

Ad design is everything. I am not a designer. I’m like the anti-designer, apparently. My ad design attempts generate laughter from my designer friends. Therefore, I will not attempt to advise you on ad design except in the most basic of suggestions that even I can’t get wrong.

Include a call to action. A call to action encourages some type of response from the customer. What do you want them to do? Go to your website? Visit the store? Call? In most cases, you want them to go to the store. Use unambiguous language like “Come by the store.”

Include a deadline. That’s the real reason coupons have expiration dates. Make it soon enough so that the customer won’t forget about it, but give enough time for them to plan. Two weeks is fine. A month is probably too long.

Because EDDM is not very common, your local postmaster might not be familiar with it. Plan on taking extra time at the post office the first time. One of the documents that you print when you do the paperwork has complete instructions for the post office employees.

The Math

Here.
is a spreadsheet I created showing some yummy, delicious math.

The first column is the rate of return. I’ve included figures from 1/100 to 10/100, which would be ridiculously high. Given the factors that favor ads of this type (direct mail, large, colorful pieces, mailed near the store, etc.), you can expect to use figures of 2-3/100. This assumes that your ad doesn’t suck. If your ad design is weak, just don’t bother with the math, because your ad will suck money out of your pocket and you will die poor and miserable.

The second column is the number of pieces. I used 10,000 for each case because that’s the buying unit that gets you the best price. Do not send out all 10,000 at once! What happens if you do get 100 customers coming into the store looking for something that you normally stock 5 deep? You anger your potential customers and have done more harm than good. Meter your mailouts according to your ability to handle the expected return, both in terms of inventory on hand and people at the counter.

The third column is the cost. Because I kept the number of pieces the same in each situation, the cost is the same. If you want to experiment with the figures on a smaller scale, say with 5,000 pieces (and an attendant higher per-unit cost), go ahead.

Next is the average sale. This figure is important. They all are, really, but I need to stress this one because it relies on one of your key abilities to translate bodies into sales in the store. If you have poor salespeople working your counter, this figure will be low. If you have great salespeople working your counter, this figure will be higher. Thus, it’s a key variable in this particular table.

Let’s say that you’re advertising that you’re now carrying Games Workshop, and you want to support this merchandising decision by offering a $30 box for $25. If you upsell nothing with your purchases and just sell the offer on the ad, your average ticket should be exactly $25.

If you sell a couple of paints and brushes with the purchase and boost the discounted sale with some full-priced sales, your average ticket might be $40. It really should be much higher, but I’m using very conservative sales figures for the purpose of this discussion. The last part of the table shows a $50 average ticket for comparison.

The last columns are easy. They multiply out the total earnings from the sales your ad achieved, the gross profit after deducting the cost of goods, and then subtract the cost of the ad campaign for a net effectiveness for the campaign. You’ll notice that I used a 43% gross margin for the CoGS instead of the more common figures of 47% to 50% you can get from distribution. I’m assuming that you offered a discounted rate of up to 20% to encourage a response.

Of course, a full ad campaign would also include your social networking, in-store marketing, possibly manufacturer support, etc. This discussion is just measuring the effectiveness of the EDDM.

As you can see, only in the worst-case scenarios are you losing money on the campaign. In reality, many of these customers will be new customers, and their lifetime expenses will be much higher than the figures generated here (over $2,000 for Magic customers, $1,500 for Games Workshop customers, $2,500 for D&D players, etc.).

After-Action Report: RapierCon

Introducing FLGS

I’ve learned a lot about game retail since I bought my store. I’ve considered re-entering that arena several times under different circumstances, and I’ve recently come up with a situation that allows me the best of all worlds. I can keep doing what I’m doing and still be a retailer. I’ve started a company called FLGS. If you’re not already familiar with the acronym, it stands for Friendly Local Game Store.

The company includes two partners—me and a friend I’ve known since ’97 or ’98. Phase I of the plan calls for the two of us to work conventions only until we bulk up to a certain amount of inventory on hand. Working only at conventions gives us a few critical advantages. It allows us to work around other obligations. There’s no rent. We don’t need to commit to a $100,000 commercial lease. We have no employees to pay. I’ll share more details about the exact figures later, but let’s just say it’s way cheaper than most of the plans I get paid to write.

The Convention

RapierCon has a decent history—8 years or so. It’s a small con, with between 200 and 300 attendees. The convention sees fairly low turnover. It’s the same faces every year for the most part. The core attendees are members of a miniatures-based game club that sponsors the con. They play Games Workshop games, but historicals are their forte. Old white guys are the norm.

As it turns out, that’s my old customer base. I knew I’d run into a lot of faces I knew. I could even place most of the names. I was not wrong.

I figured it would be small enough and casual enough to make a great shake-down cruise.

The Good

Knowing a lot of the attendees by name (and army in many cases) helped. Many people came over just to say hello. They might not have made a special trip to the table otherwise.

For the opening cash, I opened up my wallet and broke into a change jar. Between the two I had $150, which I figured would be plenty. Most transactions would be electronic, through Square. Of the cash, some would be exact change, some would be with small bills that would provide change for future transactions, and some would be large bills that needed change. A trip to the bank turned it into the denominations I wanted. Now that’s fixed and that money stays with the cash box for re-use. Easy peasy.

The Bad

We set up late at the convention. That was my fault. I made an assumption about what time the event was due to start based on previous events, and I was wrong. So we missed out on a few hours of sales. As it turns out, the convention hall was nearly empty during that time. We probably didn’t miss out on much sales. After all, those people were still around later, and there were no other vendors with our product mix.

We weren’t able to hang our signs. We didn’t have double-sided tape. We had some duct tape, but it was apparently very old. The adhesive simply didn’t hold. The sign fell down several times, and then we gave up. In retrospect, we should have been able to secure them to the front of the tables, but I just thought about that.

We didn’t get as much merchandise as I wanted and so didn’t get the fixtures I wanted to display them the way I had planned. More inventory would have generated more sales. Better display would have generated more sales.

I’d hoped to add some surplus D&D Miniatures from my own collection, but I didn’t find time to sort them before the convention. I have a LOT of minis. I had a decent collection already, and then I bought out the personal collection from the guy who bought my old game store. I think he claimed it was over 2,000 figures. I have many figs set aside now. They fill a medium-sized box. I’m guessing I have 500 or more figs in there for sale. I’ll keep culling my collection for another week or so.

The Lessons

The con kit needs double-sided tape for hanging the sign. And scissors.

My neighbors with the awesome dice game are graphic designers by trade. They had beautiful banner signs that they purchased for cheap. They were full-color and cheaper than our one-color vinyl crap. I’m going to learn where they had those made and improve our image.

We had planned to have extra people available if sales required it. It went smoothly. We did not need them.

We need a price gun and tags. Or dots and a pen.

I intend to run a game next time, if possible. I’ll let players keep the D&D miniatures that I provide for their characters and coupons for free dice with a t-shirt purchase.

Our t-shirt prices were variable based on size. We’re going to average them out (in our favor, of course) and charge a flat fee. I don’t like the idea of charging big people more for their clothes. There’s no point in making them feel self-conscious about their size like that.

The convention host said he preferred cash for the table fees. Not “required” cash. Next time, I plan to offer a mix of product for prizes and some cash. That could save anywhere from $15 to $75.

The Numbers

Our sales goal was an ambitious $1,000. I say ambitious because the convention was going to have 300 people or fewer. Anything more than $1/head is a good convention, and setting a goal of over $3/head would be high for many people. Personally, I was unhappy with anything less than $1,000 after several years at my store before, but this situation was going to face several disadvantages versus that one. For one, we had much less inventory to choose from.

We spent more than I would have liked on books, but it was on short notice and the main point was to bulk up to a “critical mass” of inventory. We spent $600 on the books and $185 on 3 booster boxes of Magic. We had some dice on hand and purchased some dice bags for $200 (it was a bulk buy). The main edge we had was a consignment deal to sell t-shirts from a humorous t-shirt vendor with an established local presence.

We also bought some goods, as we had planned. We bought some Games Workshop and Magic at the convention. Some of the bulk books we picked up had some collector value. We pulled those aside before the con to sell later on eBay.

Fixed Expenses
Fictitious Name Registration: $75
Incorporation: $75
Sign: $45
RPG titles: $600
Dice/bags: $400
Magic boosters: $185
Purchases at the event: $55
Cash box: $0
Opening cash: $150
Total: $1585

Event-specific Expenses
Table fees: $130
CoGS: $465
Travel: $0
Food: $0
Parking: $0
Total: $595

Income
Convention sales $800
eBay sales afterward: $425

Total Income: $1225
Total Expenses this con: $595
Positive cash flow this con: $630

So after one event, we’ve recouped nearly half of our total investment and still have plenty of merchandise to sell. In fact, we’ll have more than we started with, because the entire plan revolves around reinvesting our gains into inventory after paying for our fixed costs. That $630 is going to buy more games. We’ll also have those D&D minis I mentioned.

Our next event is coming up in a month. The convention has a completely different flavor. There will be girls there. There will be young people there. Many of them will be cosplayers. There won’t be a bunch of old grognards. However, there will be more people—around 900 attendees, based on recent trends. We’re counting on less sales per person because of the different flavor. Fortunately, it’s also local, so we won’t have any travel expenses.

Our sales goal is $2,000 for this one. I don’t plan to do a report after each event, but I’ll be glad to let you know how it goes in the forum if anybody’s interested.

Vertical Integration

Don’t stop at one tier of the industry.

It’s important to have vision for how you want your company to develop beyond the opening stages. One goal for later stage growth is vertical integration.

Vertical integration means adding elements from other tiers to your operations. For retailers, that means distribution and game production. Each of these steps involves creating a new business model—and you know how hard that can be. It’s not something to be taken lightly.

Several companies have splashed this concept. Eden Studios, Reaper Miniatures, and Guild of Blades operate retail stores. Many manufacturers operate online stores selling products other than their own. I’ve written very viable plans for others manufacturers who wish to expand into retail.

At least two major distributors have operated chains of retail stores. Games Workshop actively engages in all three tiers. They’re certainly a strong model for any expansion along these lines.

Vertical integration is the secret of the indescribably wealthy. Carnegie, Rockefeller, and others became explosively wealthy by controlling every step of their industries, from pulling raw goods out of the ground to putting them in the customer’s hands. Modern large retailers do this in the form of generic products. Publix, Sam’s Club, and Toys R Us all have extensive production capabilities.

Retail

You’re already doing this part, right?

If you’re a manufacturer or distributor and want to consider adding retail stores to your company, okay. Let’s talk.

Obviously, you gain increased profit by collecting the retail share as well. In fact, if you’re managing all three tiers, you’ll collect everything but the production cost. For $40 retail book that cost you $8 to make, you’ll collect $32. Retailers see the largest share of a product’s sales dollar, so you can see more sales per item sold.

Manufacturer to Retail

Adding physical stores to a manufacturer allows opportunities to promote your products to new customers—something most small publishers need. Small publishers tend to market their products to existing gamers. The storefront allows you a chance to make new gamers out of people who walk in out of curiosity.

Having this second tier provides manufacturers with some even cash flow. You know that cash flow is an awful thing. You pay for all of the development and production costs associated with a product weeks or even months before you start collecting for sales. Having a retail store smooths your cash flow. Games sell every day. Money comes in every day. Cash flow is less awful.

Distributor to Retail

If you’re a distributor wanting to get into retail, you have the advantage of having secure supply lines and a ready inventory already in stock, reducing the amount of capital you need to raise to open the store. That might cut 2/3 of the opening cost for you (or at least defer most of it, since you’ll have to restock those goods to continue selling them). Some distributors have found themselves getting into retail by taking over stores that found themselves deeply in debt. If you have stores in that situation and are thinking about going into retail, forgiving debt in exchange for a transfer of ownership could be an easy in.

Distribution

Buying from publishers at the distribution discount and selling at retail offers a significant improvement in profit margin per item. However, the amount you’d have to buy to get those terms is much higher than you’ll ever see in a single store. Therefore, if you want to buy on those terms, you’ll have to find other customers to whom you can tell.

Retail rent and warehouse rent are very different in cost. You aren’t likely to be able to run even a small warehouse out of your store. You’ll need to find another location, get manufacturer accounts, get retailer accounts, and staff your new operation.

I’d do this part last if I were pursuing all three tiers. By its nature, you can’t dabble. Distribution takes the largest up-front investment. Also, you’ll upset your current distributors once you become their competitor. It might not be worthwhile even if you were to grow very large.

Estimates for the cost of starting a distribution center vary with who you ask. I’ll risk making a declarative statement by estimating the startup cost at $250,000 with a capital reserve of $40,000 to $60,000, exclusive of owner salary. That assumes a pretty cherry-picked selection; you could easily spend ten times that much trying to provide a broader SKU offering.

Production

You don’t have to produce and expensive board game or a collectible card game. You could produce role-playing game adventures, or non-collectible card games, either of which is far less expensive. You could also produce a dizzying array of accessories like generic map packs, cardboard cutouts for use as miniatures, dice, painting stations, t-shirts, or other thematically-related items.

You won’t support a manufacturing division out of the sales potential for a single store, except on a very small scale. Production can be an excellent addition if you have sales channels outside of your store, like an aggressive convention schedule or a big online presence.

Production can be relatively inexpensive. As I mentioned in Link The 1k Company Revisited, you can start a gaming company for cheap. Better yet, you can remove some duplication if you already have a storefront. Putting out some accessories can cost as little as a couple of hundred dollars. Creating a board game based on the Avengers movie might cost up to a million dollars with licensing fees. Here’s a tip: because you’re already faced with a limited customer base, look for something with repeat sales potential.

If you’re a distributor, you have a couple of other options for getting involved with game production. If a game does well for you, but not for other distributors, maybe it wasn’t a failing of the game, but on their promotion. You might make the publisher an offer for rights to the game (exclusive or otherwise). A publisher who goes out of business might be interested in recovering a part of his loss by selling off rights along with remaining inventory. If the game is worthwhile, you might even be able to hire the publisher full-time, to continue developing the lines that interested you and roll out new products for your newly vertically-integrated company.

A New Buying Offer

Buy out your competition with their money.

In December I attended a trade show in another industry. The atmosphere was very positive overall. One speaker mentioned one account who had been with him for 10 years—at the rate of $22 million a year. Another one had bought out 60 competitors. While that person was interesting, I was far more interested in the person I met at a round table discussion. I will call him…Buck. Buck had bought out 7 competitors in the past five years or so. Five of them work for him now. Best of all, he had done it without spending a dime. I want to share how Buck structured his purchases.

The Offer

It’s simple. Offer a percentage of the sales their store generates for a period of time. If your offer is 15% for 3 years, and their store does $200,000 a year, they get $30,000 a year. At the end of 3 years, they’ll have $90,000.

Your Benefits

Your benefit is obvious: you’re not out any cash. You don’t have to worry about your credit rating, applying for a loan, or how you’ll handle the repayments.

You can buy a business of any size this way. If you’re doing $115,000 per year with your Magic-and-Pathfinder shop, you can buy out a full-service retailer down the road who’s doing $400,000 a year. If it’s cash-positive, you can take on anything.

This cash-forward situation allows you to grow at an unlimited pace. As long as you can close the deals, you can buy the stores.

If the business you buy out decreases in productivity, your cost decreases likewise. This reduces your risk if the business slows or tanks. If you had a conventional bank note to pay back and sales dropped by 50%, you’d be in trouble. In this scenario, you reduce your expenses at the same time as you reduce your income.

You still have the benefits of growth by more traditional means: you enjoy the efficiency and purchasing power of increased volume. Because each store naturally has a different sales mix, you can diversify your sales to reduce the risk of manufacturer failure. Most importantly, you should be able to afford a greater personal salary.

Their Benefits

The seller has a passive income that he can rely on. Because your offer doesn’t pinch your cash flow, you’re very likely to be able to make the payments.

The seller can choose to take the income and rest from working. He can go to school for a year or two while you pay his bills. Or, he can continue to work elsewhere and push himself up into a higher tax rate.

The seller can see a greater total sale price with this offer than with a conventional buyout. Also, he stands to benefit if sales increase. If you’re growing through acquisitions, it’s likely that you’re doing something right. You should see sales increases. If you extend an offer of employment, the seller can work to increase sales, thereby directly increasing his personal earnings. I’ve seen somebody ask for $95,000 for the sale of his business and end up earning over $120,000.

Flexibility

Between adjusting the rate and the term of the buyout you can make an offer that works for both of you. Variations include

  • offering an additional percentage if the seller works for you managing his former store
  • offering a nominal percentage of ownership in your company as an incentive along with the sale
  • offering an advance—an up-front payment taken from the expected percentage payment

If the seller insists on getting money up front as a condition of the sale, offer a advance against future payments. If the payments are structured at 10% of gross sales, and gross sales for the first months are expected to be $12,000 each, then you have about $3,600 to play with. Offer $3,000 down, to be deducted at $1,000 a month from the first 3 months. You pay the seller $200/month for those three months, then resume paying him about about $1,200/month—the exact figure dependent on those sales, of course.

You can remove some of the seller’s perceived need for up-front payments by negotiating to take on his debts. If he owes $5,000 to distributors, offer to buy that debt. Pay what you can to the distributors and catch them up as you can. You might be able to pay them an extra amount per statement or per month.

Example

Let’s say that you have a store with decent sales and want to buy a smallish store, expand it into the suite next door and add in-store gaming. Small Game Store is doing $100,000 in annual sales. You’re doing $350,000 at your current store.

Everything goes well and the seller agrees to 12% of his gross sales for 3 years, transfers all of his debt to you, and agrees to manage the store for you (thus being directly responsible for his own future income from the sale). You spend cash on the build out, merchandise, and marketing. Don’t spend it on your purchase.

Bob, your new store manager, gets a salary while working for you, and he also earns 12% of what improves to $200,000 in short order with your improvements. After accounting for the growth period, Bob might earn $62,000 for a store you might have paid $10,000 for if you’d paid cash. You also gain a motivated manager to run your store for you. He earns money when you succeed. Your company’s sales volume increases more than it would if you had looted the store and left the empty shell behind.