A Bizarro Look at Running Your Business

1. Blow off Special Orders

Special orders require paying attention to something else while you’re furiously concentrating on ordering your new items. Those special orders don’t add up to all that much, and that guy might not even come back in to pick it up, leaving you stuck with a $40 game, book, or box of plastic. That’s just too much work for the reward. If you wanted to be a Sears catalog, it would say so on the sign.

2. Hire Rabid Fanboys

People respect the opinions of your employees, and a 3-hour lecture of the evils of D&D’s slavish class/level system is a valuable service they provide your customers. Taking out the trash, receiving inventory, straightening merchandise and all that crap isn’t really as important as it is in a big-box store, where hundreds of people see it every day.

3. Order What You Want

One of the perks of being a game store owner is buying games at cost. I mean, what’s the loss if you order an extra box of minis for yourself, or open up a few boosters for your personal collection. That stuff can’t cost more than $50 or $100 bucks a week. What difference does $5,200 a year make? That’s almost nothing.

4. Keep It on the Shelf. Forever.

Selling something for full price is better than getting half price. You can’t afford to take a loss on anything, not at the prices you pay. People still play Galactic Empires; one of those guys was just in here the other day looking for some Star Frontiers. Give it a little more time. Besides, you know the minute you sell it on eBay, somebody will walk in the store looking for it.

5. If You Build It, They Will Come

Advertising is too expensive. Your store is so awesome that word of mouth will continue to increase sales faster than customers leave the hobby. It worked for the other stores, like that one down the street that closed, and the one that used to be on the other side of town.

6. Just Sign the Stupid Lease and Get it Over With

The likelihood of those clauses concerning non-payment, building destruction, or whatever coming into play is almost zero. That stuff doesn’t matter. If I go out of business, it doesn’t matter how much I owe because they won’t come after me for it; if I’m out of business, they know I’m too poor to take action against. Besides, it’s not like commercial rent’s negotiable or anything, right?

7. My Accountant Handles the Taxes

That’s what I pay him for, right? I don’t need to get involved with that stuff. Nothing I do makes that big a difference, anyway.

8. Games Sell Themselves

If a game doesn’t sell itself, it doesn’t have any place on my shelf. If the manufacturer doesn’t think it’s important enough to spend money on it, then I don’t, either. That volunteer who comes in once a month or so, trash-talks other games, argues over rules, and barely talks to me is good enough for me if he’s good enough for them.

9. First-Come, First-Serve Service Providers

I made all those phone calls for my bank, insurance, and credit card vendors years ago. They’ve been fine all this time. No sense rocking the boat now. Besides, I’m sure everybody’s rates have raised over time.

10. I Have an Exit Strategy—Sell

A lot of my customers want my job. If I can find one with enough money to pay off my debt, I can skate out of here with no loss. What they don’t know won’t hurt me, right?

Margin, margin, margin—retailers talk about it a lot.

Yes, margin is extremely important. Without it, we wouldn’t be here. The difference between cost and sales price—that part we call the gross profit margin (margin, for short)— is what pays for the lights, and keeps the doors open and feeds us yummy Ramen noodles.

So I have a big surprise for some people: there’s more to life than margins.

Let’s be clear on what we’re talking about. Your margin is your profit (in dollars) divided by price, and usually expressed as a percentage. An item that costs you $6 and sells for $10 has a 40% profit margin. Price is inextricably linked to sales velocity, and vice versa. In general, a lower price creates more unit sales, and a higher price reduces the number of units sold.

The way we normally see this relationship expressed is when somebody, usually a nearby competitor, opens up a store with the thought that he can sell the same stuff for lower prices than you do and will therefore make more money. He thinks that he’ll make more money because he’ll sell more copies of his cheap stuff. He’s wrong, and it’s because he hasn’t done the math. Selling for 20% less than you do (assuming he pays the same cost) means that he has to sell about 50% more stuff than you to make the same amount of cash because his profit margin drops to almost nothing. That’s not feasible without additional advertising or some other way of letting customers know about that outstanding discount.

We’ve all heard that speech by now. We know that across-the-board discounting doesn’t work for the traditional game store business model. I’m not suggesting that you deliberately give up margins on items you’re already carrying in an attempt to increase sales.

Neither will I suggest that you don’t seek additional margin when it makes sense. If a new distributor offers you a better price than your old distributor on a product or a product line and it doesn’t come at a cost of service, ship time, or any other hidden cost, you should buy from that distributor.

What I am suggesting is that you look at the total package when deciding to carry a product, and that—under certain circumstances—carrying an item with a shorter margin isn’t a bad thing.

High Margins

When you test a theory, there’s no point testing it on close comparisons. I’m not going to discuss margin differences of 1-2%. Let’s test it at the extreme. If you listened to a publisher pitch a product that you think you’d sell once a year at a 95% margin, would you buy it? Hey, it’s a 95% margin. Of course you’d buy it.

Would you buy two?

Buying two would be stupid. If you’re only selling one a year, you’d never need two. You place a restock order at least once a week. The odds of missing out on a sale because you didn’t have one are low indeed. You’ll be happy spending your $10 to gain $90 at some point during the year. There’s no point in spending $20 when you can spend $10.

What if you could increase that sales rate by lowering that price? What if you could purchase it at $10, sell it for $60, and sell two per year instead of only one? Well, that’s “only” an 80% margin, but you’re netting $100/year in profit instead of $90. Clearly, the lesser margin is the better choice here.

What if you sold it for $50, spent $50 advertising it, and doubled your sales to 4 per year? You’d make $200 for a total investment of $90. That’s an annual gain of $110. Even better! More importantly, I think it makes a point. That “mere” 55% profit margin put more money in your pocket.

Low Margins

Now let’s look in the opposite direction.

Would you carry an item with a 5% margin? I’m sure you wouldn’t. Low margin is the antithesis of retailer wisdom. Nobody in his right mind would carry a product that offered a 5% margin.

What if you could sell 10,000 of them in a year at $4 each? Interested yet?

That’s about 30 whatevers a day. If you are on a two-day ship, you could order by the 100 and spend an initial outlay of $380. That’s right. Your total cash-flow goes down by only $380, and you put $500 in your pocket at the end of the year. Are you still saying “no” to carrying this item?

You might be saying “yes, but not at 5%.” Good for you. What if you raised the price by 10%? Sell them for $4.40 instead of the MSRP of $4. Your initial debt to your distributor is still only $380, but each 100 you sell earns you $440, or nearly a 14% profit margin. Sure, sales might drop. How much, you ask? How much you got, I ask?

How much would sales drop if you raised the price by 10%? 10%? Probably more. 20%? Maybe more. 30%? Maybe that. It depends on how well-informed your buyers are and how competitive the market was.

But sales would have to drop by 2/3—over 65%–before you lost money on your price hike. Lose 30% of those sales and double your profit—all at the exact same $380 initial investment. How does an extra $1,000 per year sound? Better? I like it better than $90/year on that 95% margin item.

Now, I’m willing to bet that most of you understand this concept intuitively, even better than you think you do. Do you carry or plan to carry Games Workshop in your store? Why? At “only” a 45% margin, it’s a weak product. For that matter, why do you carry new games at all? You can make 70-90% margins on used games.

Why stop there? You could buy only Magic commons that you can get in bulk for a price equivalent to $.005/card, sell them for a dime each and make that coveted 95% margin on every sale! Your store would be the best store ever! You’d make millions.

Or not.

A Bigger Picture

You don’t use this crazy business model because you understand two things. One, individual item margin doesn’t make or break your store. It’s your average margin you have to protect. A traditional game store doesn’t work on 5% margin because it doesn’t have the sales velocity for it. You’re not likely to sell 10,000 copies of every single item in your store.

The second thing you obviously understand is that it’s okay to sacrifice margin for sales volume under certain circumstances. You know you won’t pay your bills off of a 95% margin and $1,000 in sales. You can’t generate enough total dollars with the cheap stuff if you’re operating under a traditional game store model. You might sell some 75% margin used games, some 80% margin Magic singles, and some 70% margin hobby knives, but if you want to break $25,000 in sales, you need to add those middle-margin new card games, RPGs, and miniatures. You stock Warmachine at normal margins because it sells pretty well. You stock Games Workshop because you’re pretty sure their massive sales engine will bring customers to your door to the tune of $50,000 to $200,000 per year.

Which brings us to some further points about margins, like the ones you find in the real world, outside of spreadsheets.

The 10,000 widgets you sell at $4 could have a beneficial effect, even with the 5% margin. What if you sold each of those customers a $2.00 bumper sticker at 70% margin? You’d bank an additional $7,000. Using a more realistic upsell rate of 12.5%, or 1 in 8, you’d still make an additional $875 in profit. That almost doubles your total profit for the experiment.

How to Use that Low Margin

Here’s another option. What if you used that short-margin widget to bring people into your store? You pay premium rent to bring people into your store. You might have paid $5,000 for a fancy channel letter sign to bring people into your store. You might run TV commercials to bring people into your store. Where’s the sin in accepting a lower discount to bring people into your store if the result is new long-term customers? If you use your 10,000-widget sale to gain even 10 Warhammer 40k players, you might add $15,000 in downstream revenue to your bank account.

This is exactly the thinking behind a loss leader, or a popular item that you sell at less than cost in order to gain traffic count.

Of course, looking at the big picture brings problems. Nobody tells you in advance how many copies of something you’re going to sell. If you spend your $380 on your widgets, sell 6,000 and then the gravy train ends, you make less than you planned in total profit, add-on sales and in new customers. Part of predicting your price-setting (and consequently your margin goal) is being able to accurately project sales.

Cost

All of this discussion relies on manipulating one element of margin: your selling price. The other element of your margin is your cost. What happens when you mess with that?

Briefly, I mentioned buying goods from a distributor who offers them cheaper. In reality, that decision isn’t so easy. The cheaper distributor might have a higher minimum order, longer ship time, or make more mistakes. Or, you might not sell many copies of the item in question and find that switching your order over for the $.42 you’d save isn’t worthwhile.

There are other alternatives. You could buy directly from the manufacturer. You might save 10% or more that way, giving more weight to the value of price. A slower ship time might be acceptable for a $50 savings. However, will your discount go down as your volume goes down with that distributor? You don’t want to save $50 on one product line and pay an extra $400 across the board. That’s counterproductive.

How about quantity orders? We could be onto something here. While this is more common outside of the gaming industry, you might buy certain items which are cheaper in quantity. You might find your hobby supplies for example, are up to half as expensive if you buy in case quantities. How do you judge whether to buy a single box of hobby knives with a 40% discount or 20 boxes with a 70% discount? The difference is a cost of $20 vs. $288.

Let’s see what you can do with that higher discount.

You could buy the bulk deal at 70% off, keep what you intend to sell over the next 1-2 years, and trade the rest with another game retailer or a hobby supply store. That would give you the benefit of high margin without the liability of too much cash investment. However, it’s risky unless you arrange it first. Maybe nobody else wants any, or they all saw the same ad you did and made the same deal. Then you’re stuck with a closet full of product you won’t sell except at conventions.

What if you didn’t sell the hobby knives? I know it’s crazy talk. We’re retailers. We exist to sell things. But what if your main purpose isn’t to sell them but to drive sales of something else? Look at the rest of your miniatures supplies. What’s not selling? What if you offered a free $1.99 hobby knife with each purchase of any Hot Wire Foam Factory cutting tool? Well, that’s probably too much of a price difference. A free $2 item isn’t much incentive for a $40 item.

How about a tube of putty? Compared to that price, the $2 addition is a fairly significant bonus. Add the free knife to a $17.99 tube of putty, and your profit margin on the total purchase becomes 41.9%. That’s not bad. But what else did this do?

Well, for one, it increased your total profit by a factor of 5.4! Instead of the $1.40 profit you would have earned by selling the knife, you earned $7.50 profit on the combined sale. You might also have encouraged customers who never used putty before to start using it for the sake of the free knife, which means they’ll keep buying it after the promotion is gone.

Conclusion

So, any discussion on margin that just stops at “There’s no way I’m selling anything less than 45% margin in my store” is missing the point. You can’t have a discussion on margin without considering all the attendant factors. Neither a high margin nor a low margin is enough information on which to base a decision. It’s like saying there’s no way you’ll sell a game with a blue cover or a miniature with the weapon in its left hand. No way!

Margin is, after all, just a meter. It’s like a dollar-per-square-foot analysis or a turn rate. You don’t put a margin or a turn rate or a percentage in your bank. You put sales in your bank account, and you put profit in your pocket. Those are the numbers that matter. If you’re going to focus on a mathematically derived formula, focus on those.

Let People Know You’re Opening

Marketing includes more than just advertising. It includes everything you do strategically and tactically to gain and retain customers. That includes setting your pricing policies, how you’ll brand your company to create an impression in the customer’s mind, which products you’ll carry, which customers you’ll seek to reach with your greatest effort, etc.

You must make some decisions early in your planning, because what you plan to do and how you plan to implement it affects your business planning. Ideally, you’ve already made these major decisions:

Pricing

Adopt your pricing strategy before you open. Your pricing strategy affects your cost of goods, so you’ll need to consider this part of marketing before you run your financials. If you choose to discount all of your products 20% off retail, your gross profit margin will run about 25% instead of the healthier 40% or more you’ll attain with SRP pricing. If you choose to charge SRP for most items and a premium rate for certain items, you might attain a gross profit margin of 50%.

You don’t have to set the prices for every item you’ll carry this early in the planning. You do need to have some idea of your pricing strategy—discount, suggested retail price, premium pricing, a combination, or some other concept. You can do the fine-tuning when you install your point-of-sale system or start tagging things with a price gun.

Branding

Do you want to reach the hardcore multi-genre gamers, the family market, female gamers, card-playing teens and pre-teens, or what? Who you plan to reach helps determine how your store presentation and policies help you reach your customers. If you want to reach teenagers, for example, you’ll want to hire a younger staff, use contemporary teen language in your print ads, and plan your events around school hours and social activities. All of these choices help determine your brand.

It’s not an overstatement to say that all of your major business decisions flow from your branding choice—which itself is a marketing decision.

Product Selection

Do you want to establish a reputation for having everything, all the time? It’ll cost you a heavy inventory. Maybe you’re content just to have the best RPG section or the best CCG selection in your area. Choosing product categories was part of initial planning, but you also have to consider how deeply you’ll carry that category and what part it plays in the big scheme. A store that offers 10 board games presents an entirely different impression than one that offers 200 board games. Which one best fits your company’s needs?

Advertising

How will you set your advertising budget? Will it be a flat fee or a percentage of sales? Will it vary by season or month? Will you experiment with a variety of media or concentrate on one channel? How will you measure your advertising success? How will you create urgency in your advertising so that customers respond to it in a reasonable amount of time? Which customer sub-section, if any, will you concentrate on?

Add More Detail

As you approach the opening deadline, make some detail decisions on the broader decisions you’ve already reached. Having made the broad decisions will help you fine-tune these decisions as you approach opening day.

Some Specific Decisions

• Design your uniforms or establish a dress code policy.
• Decide how you and your employees will answer the phone, respond to common questions, and greet customers at the door.
• Where will you display price tags so that customers can price items on the sales floor?
• What products, if any, will you support with events? What events will you run? How often?
• Will you have a website? If so, what type of impression will your graphic design choice create? How interactive will it be? Will you have your own domain name or just create a MySpace page?
• How will you compete locally? Will you bill yourself as having the largest game room, the best prices, the most convenient location, the best staff, or something else entirely? What will you do to make sure your store is the best shopping choice for the customers you’ve chosen to target?
• Choose your store’s graphic design, including a paint color or scheme, an overall theme, and lighting.
• Design a logo or commission a design from a professional.

Separate articles will address the previous concepts in greater detail. For right now, this representative list is designed to encourage you to plan ahead on the details. You should be able to devise a much more comprehensive list on your own.

Countdown Marketing Suggestions

Your options before you open are limited by your lack of a storefront. It’s difficult to make a television ad if you don’t have a place to showcase in the ad. On the plus side, your alternative options are usually low in cost.

Maintain a Blog

If you’re in a market hungry for a new game store (and if you’re not, you shouldn’t be opening), potential customers will watch this blog closely after they encounter it. Keep readers informed about changes to your opening date, share your horrible contractor stories, and get them excited about how awesome the place is going to be.

Manufacturer Message Boards

Most game manufacturers offer message boards for the discussion of their products. Brief, informative and non-spammy messages in an appropriate place on a message board are fine. Substantive, interactive discussion with forum users is better.

Local Conventions

Whether you run a “teaser table”, run games, or just take out an ad, visibility at conventions will create awareness about your store. Local conventions cater to the leadership among your potential customer base. Get their interest, and others will follow.

Other Game Stores

If they’re willing to help you get started, you might run demo games at their stores. It’s a good deal for both of you. You encourage sales in their store, get some sales practice, and meet some potential customers. Talk to the game store owner and do this with his permission and under his guidelines. Don’t be the jerk who comes into a store on the sly to steal customers. The further away you plan to open, the more likely other stores are to help.
You might have a better relationship with stores with overlapping business rather than direct competitors: a comic book store, a bookstore, or a LAN center. Any of these businesses might see a referral to you as a service to their customers. You’ll have more bartering power if you offer the same favor in return.

Signs

A sign in front of the location can attract interest while your build-out is underway. You might buy a freestanding sign, a magnetic sign for your car, or install your shopping center sign ahead of time. A normal billboard might be prohibitively expensive, but a daily billboard might be affordable for a week or two immediately prior to opening.

Radio Ads

Normally, I advise against radio ads for most store purposes because of their high cost. Sometimes cost-effectiveness isn’t your main focus. Your opening might be one of those times. A carefully-plotted radio ad program shortly before you open could increase your early sales, jump-starting your cash flow and improving your chances of long-term success.
Establishing a relationship with the radio station might also give you a better rate on the remote you might want to do for your grand opening. You might even get time in the studio to promote your grand opening on the air.

T-shirts

Make up a batch of t-shirts and hand them out. You can hand them out in front of your shopping mall or arrange for a local radio station to give them to the first 100 callers or so. You might want some available for your grand opening, so order enough to spare.
Your t-shirts don’t have to be t-shirts. You can use any premium item for this: mouse pads, baseball caps, buttons, or whatever you like. T-shirts are popular because they’re seen by many people, not just the owner.

Flyers

Announce the opening through low-budget flyers and distribute them within your primary draw radius. Place them on windshields, ask to leave them on counters at restaurants, and post them on college or military bulletin boards. Flyers are cheap enough that you can use them in addition to almost anything else you do, no matter how expensive your major effort.

Newspaper Article

Your newspaper might be interested in the opening of a new business. In a small town, this might be front-page material, and even in a larger city, the business section might devote a paragraph or two to it, especially if it offers a unique business plan or interesting hook. A game store presented as a warehouse club might be different enough to deserve a column. Call or write to your local paper and find out if they’re interested.

Should You or Shouldn’t You?

The question of whether or not a store should have a game room is highly contentious. Fortunately, both camps are on good terms and no one is likely to persecute you for your decision. In fact, you might develop a serious case of “green grass syndrome” at some point during your store ownership as you consider all of the pros and cons of each side.

Advantages

Adding game space has one primary advantage and several corollaries descending from that advantage. The advantage is marketing opportunities. It does no good, however, if you don’t actively take advantage of it. That’s another article, though, so on with the advantages.

Branding

The game room allows you to present your store as the place to play games, not just the place to buy games. You can use this to shape the image you present to your local market. Market your store as a social gathering place to encourage people to visit and increase the time they spend there.

Competitive Edge

If you’re the only store in your market with a game room, you have a competitive edge against the other store. If you have the largest game room, you have an edge. If you have the best tables, the coolest design, or the most people showing up for your tournaments, each of these is a reason for players to go to your store instead of the competition.

Manufacturer Opportunities

Some manufacturers require a game room for opening a direct account, or for other preferential treatment. Having a game room can entitle you to better discounts on certain product, better availability, or certain direct-to-retailer incentives.

Organized Play

You can leverage the game space to host game leagues and tournaments. Offer prizes from your own inventory or take advantage of game manufacturer-sponsored events. These events often bring new players to your store, increase the amount these players spend, and encourage players to visit more often. Each of these factors increases sales.

Regular events can create very large sales increases, especially if the owner is involved. The owner’s personal interest is a weighty endorsement. Regular play encourages new purchases. Combine the two and you might see sales of a single product line increase by $1,000 a week.

Disadvantages

The disadvantages are numerous and range from problem behaviors to purely financial reasons. They range from minor to serious in their value, and individual store owners apply different weight to each of these issues. If you plan to have a game room regardless of these problems, you should be prepared to handle them before you open.

Pollution of the Player Pool

Once gamers start getting together, they share information. Some of that information is good. One Warhammer 40k player shows up for the game with his army laid out in Army Builder format, and his opponent compares the nice clean printout with his scribbles on spiral-bound notebook paper. Before the day is over, you’ve sold yet another copy of Army Builder.

Some of that information-sharing is bad. The CCG crowd is particularly notorious for this—they share the concept of buying their cards from online discounters, and your box sales begin to decrease with each new set. Some players advise others to download books from file-sharing sites instead of buying them from your shelf 12 feet away. Players from a competitor’s store might encourage the new players you created at great investment of time to go play elsewhere.

Gamers might also get together to form a club. It sounds exciting and fun, but the club’s first organized action is often asking for a discount. They feel if there’s no benefit to joining the club, that nobody will join. Do you give the discount and reduce how much money your biggest spenders spend, or do you risk alienating the club members?

Mess

Drinks, food, loose cards, CCG wrappers, miniature sprues, spilled paint, glue—if you sell it intact in your store, you can probably find pieces of it in your game room at the end of the day. Over the course of the day, cleaning up after this mess or hounding the gamers to do it themselves can take a heavy investment in your time (or the time of the people you’re paying an hourly wage).

Theft

You know people will steal from you at some point during your career. You might not have thought that they would steal from each other. Do you kick somebody out when you suspect he’s stealing? What if you’re wrong? No matter what you do, you’ll lose customers over it.

Similar to theft is the concept of “trade rape.” You know the crowd. These are the competitive players of CCGs (or now CMGs) who trade their commons or uncommons for “money rares” from the new or younger players. I’ve heard a player cheer “I just made $70 off that guy!” moments after the new player left the store. At some point, those players wise up and you have a customer who probably won’t return and might tell his horror story to his friends.

Cheating

If you run tournaments, you’ll encounter a variety of cheating methods that will make you cringe. Players not marking off damage to their ‘mechs in Battletech. The Magic player the others call “Howling Mine” because he keeps drawing extra cards when he thinks he can get away with it. Mis-marked or loaded dice. Marked sleeves. The cheater chases off other players and leaves people with a bad impression of your store.

Liability

How much insurance do you have? Care to find out the hard way? Wait until a player in the game room leans back on a chair and falls, or somebody has a bad problem with a hobby knife, or a fight breaks out over a tournament ruling. If these people were playing at home, the problem might still have happened, but at least you wouldn’t be on the hook for it.

Cost

The game room costs money. You pay rent for your space, and whatever space you devote to your game room costs a certain amount. If you pay a total of $15 per square foot per year (after adding your rent, CAM and any other charges) for your 2,000 square feet, and you devote half of that to your game room, you spend $15,000 so that gamers can have the privilege of playing games in your store.

The game room also has hidden costs. Who’s running those events? If it’s you, then you presumably pay somebody to run the counter. If it’s an employee, you pay his wage. If you’re giving customers a discount, it still costs money. You can get volunteers to run some events, but volunteers can’t do all of it.

Better Alternatives

This thought is the main point of contention with the game room. What else could you do with the $15,000+ it costs to maintain that game room each year? If you think you can make it more productive with an aggressive TV commercial campaign, then you should rent a smaller location and spend that $15,000 in advertising.

A more common approach is to spend that money on inventory to fill that other 1,000 square feet. Another $15,000 in inventory could earn $45,000 in annual sales over and over again without all the hassles that come with the game room. New product lines or deeper stocking of current product lines can earn be as much of a competitive edge as the game room.

This list doesn’t include all the points on either side, but it does represent the major arguments. At least one list has identified about 30 complaints against, for example, most of them falling under the broad category of “unwelcome behavior.” Comments and questions are always welcome in the forum.

Where to Buy the Goods You’ll Sell

Your primary sources of products will be game distributors and the game manufacturers themselves. Choosing which sources to use and why varies with your priorities and the details of your business model. These are some of the basics procedures of ordering and the factors that affect your supply decisions.

The Distribution Tier

Distributors buy goods from manufacturers and resell them to retailers. This consolidation of resources is a key reason to buy from them. Other reasons include product information, free or reduced shipping costs, and information on sales trends or hot products.

What they Offer

Typically, your distributors call you on Monday (or another day pre-established as your regular order day) and solicits an order. The usual phone calls cover your pre-orders that have just arrived, other new items that have arrived since your last order, and then your restock orders. The distributor should have information on each item, such as price, who makes it, what product line it’s for, and a brief bit about why you should carry it. In general, this information is manufacturer provided, so it’s entirely biased.

A good sales rep will know more about the products, hopefully from having seen them, played them, or tested them. If you have a good relationship with your distributor, he might be able to point out a group of your regular customers who might be interested. “You sell a lot of L5R. This is an Asian-setting RPG that those players might like.”

After an initial period of paying COD or by credit card, distributors often offer options for payment on terms, which can be as much as 30 days. This option allows you greater control over your cash flow. In general, payment terms are growing shorter these days, and your distributor might only offer 1-2 weeks.

Distributors can tell you about promotions offered by manufacturers, such as free signage, shelving, or co-op options. Large distributors sometimes initiate their own promotions, too, often in conjunction with a manufacturer. Often, when a publisher initiates a program like this, they institute it through the distribution tier rather than handling it themselves.

Ideally, your distributor will have a good website that allows you to browse and pre-order upcoming releases. It should allow you to place an order through the site, at your own pace, if you prefer that method over talking to your sales rep on the phone. The site should have real-time inventory so that you can check availability when a customer wants to place a special order in your store.

Why use Distributors

Convenience is the primary reason. You make fewer phone calls, make fewer payments, and have easier return or exchange options in case of an error.

You also build up a relationship that can be helpful in many ways. A distributor who knows you can suggest products to order or avoid. You might be able to return products that don’t do well for you, although policies vary on this issue.

Disadvantages/Cautions

Unless your store is very focused, no single distributor carries all of the products you offer. Most likely, you’ll use a second distributor for filling orders when your primary is out or for buying products lines your primary distributor doesn’t carry. With any decent sales volume, you might end up ordering from 3-4 distributors each week, maybe even making a second order mid-week.

Beware of imaginary discounts when choosing your distributor. At least one major distributor offers a good discount, with seemingly minor exceptions. However, the list of exceptions is now several pages long and includes the dozen or so manufacturers whose products make up 90% of your game sales. If they offer you 47% off retail, but a tally of your invoice reveals that you actually pay closer to 42% regularly, you can bet you’re hitting all of the names on that “short discount” list. It might pay to look for a distributor with a seemingly lesser discount who doesn’t have such a long list of exceptions.

Factors in Making a Decision

Selection. The more products you can buy from a single source, the less time you have to spend managing multiple orders. Splitting your orders also means paying more shipping costs. It also might mean that you’re paying more than you expected for your products because your low-cost primary distributor doesn’t carry that particular line.

Costs. Start with the standard discount, but don’t stop there. Look at shipping costs, minimums for free shipping (if any), short discount items, COD fees, payment terms, and payment forms. If a distributor allows you to pay by credit card, for example, you might be able to get away from those COD fees and still defer your payments up to 30 days.

Ship Time. The magic number is two days. If you can get a restock in two days, you can order Monday for delivery Wednesday and then get in a second order on Wednesday for the weekend. Obviously, one day ship time would be better, but you’re not likely to take much advantage of that. It might help if you’re in a competitive market where that one day means you get product sooner than your competitor, but you’re not likely to order 5 days a week in the current environment of high product minimums and shipping costs.

Fill Rates. Even the best discount is worthless if your distributor is constantly out of stock. The same is true for an expansive selection. If you’re trying to reach a free shipping minimum, a poor fill rate will leave you banging your head on the wall.

Ordering Direct

Manufacturers already have some infrastructure for delivery. They handle a certain amount of consumer orders, they arrange for shipment to game distribution and might have sales channels elsewhere, as well. It’s a fairly simple thing for a manufacturer to accommodate retailer orders as well.

Why Order Direct

Ordering direct offers two main advantages. By ordering direct from companies represented in the distribution tier, you might be able to save some money, depending on the company’s terms. In some cases, you can save up to 20% of the retail price by ordering directly from the manufacturer, although a 10% difference is a more common savings.

The second benefit is that you can buy product not available through distribution. If you only carried products available through distribution, you’ll have a few disadvantages. First, your store’s selection won’t be unique, making it harder to establish a distinct brand. Second, it’s easier for local competition to capitalize on your success. If you pick up War Gods and do well with it, they can buy into the line, too, making money off of the hard work you spent in creating a customer base. If you succeed with a product not in distribution, your competitors will have to hunt the manufacturer down and seek them out to establish an account and place an order.

As a minor and ephemeral benefit, the manufacturers often have product available when distributors are out of it. Sometimes, distributors themselves have to jump through hoops to place orders with manufacturers, and your distributor might not place a restock for game x if they still have game y in stock. A direct order might allow you access to a product that is sold out through multiple distributors.

Disadvantages/Cautions

Time. If you spent 5 minutes per week with each manufacturer you carry in your store, you could easily spend 35 hours per week. There are more important things in the store for you to micromanage. If you do plan to order direct, you might want to assign a regular re-order schedule to each of your direct accounts.

Shipping Costs. You might order $1,000 or more per week from your main distributor, but you’re not likely to spend more than a couple of hundred dollars with a manufacturer, especially for restocks. When ordering from manufacturers, you pay shipping costs more often, both because of ordering policies and smaller orders that fail to reach a free shipping threshold.

Hidden Costs. By diverting ordering from your distributor, you might end up paying more for your products you buy from that distributor. If your discount is based on your sales volume, and you start buying a large amount of product from another source, you could end up paying more for all of your products, while paying less for a single product line.

Longer Delivery Time. Distributors have a full-time staff who do nothing but receive product and deliver product. Manufacturers are in the business of designing games. Their “warehouse staff” might be the junior game designer’s duties after 3 PM. Instead of shipping your order the same day, which is a service you can expect from your distributor if you get the order in early enough, it might take up to a week—longer, in some cases—before your order leaves the manufacturer.

Factors in Making a Decision

I’m not a big fan of ordering direct to save money on products that are available in distribution. From my experience, the extra time spent, the shipping costs, the delay in receiving, the harm done to your distributor relationship, etc. all combine to make any savings of less than 15-20% negligible. For a particularly large order, (say, a $1,000 or more), a lesser percentage might be worth seeking.

I do recommend seeking out direct orders to gain a competitive edge. Going to conventions and the GAMA Trade Show, checking your mail for offers, and listening to your customers might very well reveal an exciting product that your competitors don’t have. Order direct for something that will bring customers into your store, price the product to make money, and then have your well-trained sales staff upsell them on accessories. Make them new customers if you can; if you can’t, send them back to their regular store broke.

Recommended Direct Orders

Games Workshop. Games Workshop’s prices through distribution are pathetic (though their direct prices are poor, too). Improvements in their customer service and internal policies make ordering from them manageable. Because your sales volume of their products is likely to be very high, then difference in margin is considerable. Ten percent of $50,000 per year is a good number to add to your bank account.

Crystal Caste. I totally admit that this recommendation isn’t for the financial reasons I explained above. I just loved working with Mark Alexander. However, Crystal Caste also has a 100% exchangeability policy. If you end up with a display case full of orange and yellow dice, you can send them back for colors that sell.

Wizards of the Coast. Some stores do and some don’t. They require certain criteria for setting up an account, like having a game room, and they don’t accept all stores. Many retailers feel that ordering directly from WotC is not worth the harm done to your distributor relationship. Personally, I used to order initial shipments from WotC and restocks from my regular distributor until I found a distributor who offered a better price on WotC products. That distributor got all my WotC orders, new and restock.

Used Games

If you plan to sell used games, you might want to buy an initial stock from a convention, eBay or a local used bookstore. Expect to pay more than normal from these sources. Once you’ve “seeded” your local market, you should be able to find all you need from your own customer base.

Put up signs in the store, hand out flyers, take out ads in local convention programs, and tag your existing advertising with “We buy games”, and you should have plenty or product available to you.