Posted by: gschloesser | February 11, 2012

The future of game and book stores

NOTE:   This is an interesting discussion members of the East Tennessee Gamers recently enjoyed on the future of game and book stores.  This was prompted by news of the closing of Nord’s, a local game store located in a prominent Knoxville shopping mall.  Please feel free to add your comments.

Rhonda Bender:  While I don’t think the recent economic woes in any way help, I think the trouble for both book and game stores has a lot to do with other factors, and both were suffering and closing during the big boom that preceded our current bust.

In the past, a lot of game profits were driven by a small number of products. In the 70s and 80s, game stores relied on Dungeons and Dragons for the bulk of sales and to bring people into the store. Then in the 90s came Magic: The Gathering and other collectible card (and later miniature) games, and there were crazes for these games. People lined up and spent big money. A lot of stores got used to that kind of cash influx. Or they opened on the back of that revenue model. And a resurgence of popularity for D&D and other role-playing games in the late 90s and early 2000s was also very good for stores. But while M:TG has continued to be reasonably popular, the overall collectible model has died. The RPG market has dwindled a little, also. So if you aren’t the local store where people go to play in M:TG tournaments, you have no regular, reliable source of revenue.

In some ways, you can say that board gaming is the current hot gaming trend. Board game sales have improved or held steady for several years, even during the economic downturn. This doesn’t really help game stores, for two reasons. One, there’s not just one or ten or even fifty hot board games that you can keep in stock and sell and make regular money. There are a handful of evergreen titles like Catan, Ticket to Ride and Carcassonne. (And Munchkin and Killer Bunnies and a few others that people avidly play and probably lead into FFG games.) And once the players in your area have those, then what? Well they could want any one of thousands of new, old or upcoming titles depending on which theme or mechanic tickles their fancy. You, the store owner, have no way to guess which of those thousands to get.

Sure, a store can take special orders to meet the niche demands of the board gamers who want something beyond Catan and the RPGers who want more than D&D. But then we come to the problem of the changing marketplace. Why would you, the gamer, place that special order with your physical store? You’re going to have to wait at least a few days, and you’re still going to pay full price (or close to) and tax, and you’re going to have to drag your butt back to the store to pick it up. Why bother? Why not just hop on your computer and order what you want direct from the company or from Amazon or from any number of discount online retailers?

Which, I would venture to say, is exactly what the majority of people in the ETG do. There are a handful of us who occasionally buy something in the store because we’re impatient or they’re running a sale, but I bet most of the ETGers haven’t even been inside a local game store in a year or three. You don’t have to spend too long reading threads on Board Game Geek to see that board gamers expect at MINIMUM a 30% discount on games, which is not viable for stores who have to pay for the costs of having a brick and mortar outlet. There are lots of people who boycott Mayfair and the few other companies who have said online retailers can’t discount their products by more than 15% (or whatever the threshold Mayfair set, which was done in part as an attempt to support physical stores.) Big spender Magic players also order online for discounted prices, though stores that hold tournaments can make at least some money off of them in booster and preview tournaments and events since they have to buy product at the store to participate.

Not all of that applies to Nords, which was run with more business savvy and a much larger inventory than your average game store. It does apply to the Round Table (opened and closed twice), the Barony (opened and closed twice) and a couple of others in the area that have closed in just the 10 years I’ve been living here.

Bookstores have some similar issues. They can carry a much wider selection of products, and at less risk due to deals with publishers to send back unsold inventory. But they also have a consumer base who is well aware that better deals are at the tip of their keyboards. They face an additional challenge in that the market has changed. All the people buying Kindles and iPads and Nooks are very much still buying books, but electronic ones. I’ll admit, even though I was resistant to it at first, I have switched over a lot of book buying to electronic. Or audio book via an online service. They take up less of the very limited space in my house, and fit into my current lifestyle more easily. Bookstores also face competition from consumers who want to buy from stores like McKays. (Which essentially ‘steals’ sales from the publishers and authors, so they might be more motivated to try to make digital and audio publishing models work for them than to keep on with the traditional book model.)

Or to wrap up that very long-winded thought into a much shorter one – people are very much still reading and playing games for entertainment. They are just doing so without supporting a local physical retailer devoted to those hobbies.

David Williams:  Buying off-the-shelf games has become more problematic for me as I become a more discriminating gamer. I am likely to try things at cons and decide what I want before I buy, rather than go into a store and browse from available selection. Nord’s has been hurt by this because they couldn’t afford to stock the large number of new release board games while waiting to see which one would sell.

I am sorry to see Nord’s go. Its predecessor, Gameboard, got me into board gaming when I became intrigued by the Ticket to Ride: Europe box displayed in the window beside JCPenney. It is due to Nord’s/Gameboard that I got into the hobby and am a member of ETG today.

Terry Bailey:  Years ago I talked to these guys when they had a store in Pigeon Forge. I told them to be successful in a game store you needed a place for people to play. They said that’s nonsense. When you said that if you are the store where magic players play that made me think of that.

You need to promote interest in the hobby if you are going to be a hobby store. Let that be a lesson boys and girls. That said I still hate to see game stores close.

Charlie Davis:  Rhonda, that was a well written statement. I am also sad that they are closing, but I am one of those that has only been in the store 2 times in the last year and I did not buy anything either time.

A brick and mortar store has to develop a clientele of repeat customers. You can do that through MTG, Comics, miniatures (and paints), trains (and accessories), RPG, etc. Those things have a built in hobby/collection thing that causes repeat customers. Of these kind of things Boardgames don’t have a collection goal, and thus most people don’t buy a new game every month. The only solution I see is to diversify and try to bring in people from all walks and get them interested in a new hobby through allowing customers to play at the
store. The Kingsport game store, the ones in WV that I went to, and even the MTG store in Greeneville allow people to hang out at the store, play games, bring their buddies, and then spend some money.

Rhonda Bender:  Three of the game stores I mentioned opening and closing (and in two cases opening and closing again) provided play space. It works for some M:tG stores IF they are active enough in the tournament scene, because some tournament formats and pre-release events require players to buy product at the store to participate in the events. (And if there isn’t too much local competition. The most recent open-close victim was primarily a Magic store, but either had other business problems or M:tG players were maxed out playing at Sci Fi City and Organized Play.)

I’m sure that providing play space does help drive sales. Organized Play has been pretty savvy about it in that they stock a bunch of snacks and drinks, so even if you don’t buy game stuff they can make some money from that. But even with a play area, a lot of people are going to try stuff at your store and go home and buy it for a discount online. So you are indeed promoting interest in the hobby as a whole, but you may not be making enough revenue for your store to survive. I remember once while I was working at Gameboard that a woman came in, told me she’d ordered a game online, and then asked me to show her the game and explain how it worked. (Which was probably the only time I was at all rude to a customer, as I refused to do it since it was of no value to the store.)

Nords/Gameboard made up for the money lost by not providing play space by virtue of being located in the mall. Nords’ location allowed it to sell things to ‘regular’ people – it sold good numbers of mass market games and puzzles at Christmas, and a smaller number of those things throughout the rest of the year. The people who bought those things aren’t going to look for a game store when Nord’s is gone, they’re going to go to Walmart or Target. (So Nords actually is a bigger victim of the economy than the average game store, since those ‘regular’ people are buying less. It’s also a victim of the decline of the indoor mall as a shopping destination. That decline is probably the only reason Sci Fi City can afford the kind of space that allows for a play area.)

Mark Smith:  Sorry to hear about Nord’s.  I still knock around that store a bit when I’m at the mall.  My daughters and wife will usually buy me a gift from there at Christmas and on my birthday…and I just bought TTR: India/Switzerland and Automobile there over the last couple weeks as their sale has progressed from 20% off to 30% off.  Their predecessor, Gameboard, helped get me into the hobby (I bought my first imports – Tigris and Euphrates and Settlers of Catan – at their long-gone Oak Ridge store sometime in the mid- to late-90’s).  I do order occasionally from online retailers (the savings can’t be ignored), but have tried to support the local brick-and-mortar stores also where I could, knowing it’s an uphill battle for them.

Mike Randolph:   Everyone wants a discount (including me), but if everyone gets one, is it really a discount? I thought MSRP was largely a shell game even before the Internet came along.  Market price is really what matters. If all I want is a game, it is hard for a FLGS to be competitive.

I think some of the desire to help a FLGS is that gamers can relate to the owners. There is likely there is a part of us that wishes we could run one (or wishes we could be profitable doing that).  I think Rhonda did a great job spelling out why it is really, really hard to do.

Trip Godel:   I see the failure of the Nord’s store very differently.

When my interest in board gaming skyrocketed and I was out of work, a lot of people asked me why I didn’t just start a board game business myself.  The answer is that it is very difficult to turn a profit. The brick-and-mortar stores have huge leases to maintain, and they’re competing with teenagers selling games out of their parents’ basements(on the internet no less).

The publishers pour $20K to $150K+ of capital into each of several high-stakes wagers every year.  The bet?  That they can get between 500 and 5,000 people to buy their output FAST.  There are less than 10 designers who live off of board gaming and probably less than five get a cut of the gross.  I don’t think that any art directors live off of board gaming.

It’s like any other form of entertainment (such as movies or music), except that the tiny volumes mean that the cost per unit is astonishing.  Could you imagine selling handmade typewriters?

Like any other form of entertainment, board gaming relies on the new and different.  And that’s where I saw Nord’s stumble.  There are game boxes in that store that have been there since I first moved to Knoxville over three years ago.  Not the title, mind you, but the PHYSICAL BOX.  That’s death for a retail store.

Retail earns profit a few dollars at a time, each time a box on the shelf is sold and the slot is filled with a new one.  Simply put, if a box is clogging up your shelf and preventing you from earning future profits, you’ve got to get rid of it, at almost any price!  It’s no longer about how much it cost you, but how much it will cost you in the future–by blocking your shelf.

Nord’s was filled with stagnant, deadly inventory that prevented purchases–and bored repeat visitors.  Courtisans of Versailles (1988), anyone?  It’s still at Nord’s, if you want it.

I believe that the Nord’s pricing strategy was inappropriate for a community mall.  To recap, they had essentially uncompetitive prices most of the year, and then steep discounts at predictable intervals. So ordinary passers-by learned that they couldn’t afford gaming, and veterans like us waited to swoop in for the kill.  Ouch.

Instead, they could have marked down each title by 10% for every 3 months that it sat on the shelf.  After a year, there would be a spectrum of price points, so that anyone could walk away with an interesting title in their price range.  And, like clockwork, the old inventory would clear itself out, making room for new titles and freeing up cash for Nord’s to buy them with.

But if Nord’s didn’t do this early on, it would find itself in a liquidity trap.  There wouldn’t be enough cash to take hits on the duds.  A common management response in that situation is to prop the prices up and hope that imaginary buyers will buy the inventory anyway.  With multiple local choices and dozens of choices online, they won’t, and they didn’t.

Although I think that the credit crunch caused some predictable consolidation in the industry (think Z-Man -> Filosofia), and the last two years has produced an unsustainable flood of titles and some saturation of the market (think Atari 2600 cartridges), I’m not sure that either of those specific issues led to the demise of Nord’s.  I also think that play areas might have been helped but they wouldn’t have addressed the pricing issues.

Nord’s simply looks like a painfully plain case study in inventory management and cash flow.  It isn’t a  statement on our society or our hobby, except a reminder that our hobby is a fragile and expensive one.  It is a product of unique moment in time, where a Renaissance of art and thought have met a collapse in production costs and easy access to capital.  It cannot last forever.

We should be grateful it has been given to us, and we are.  That’s just how I see it.

Rhonda Bender:   I’m not going to quibble with you over business management questions, Trip. I’m pretty sure you know a lot more about that subject than I do! :->

Certainly you aren’t the first person to wonder why Nords/Gameboard didn’t mark down inventory that wasn’t moving. And I definitely agree that their semi-annual sale strategy ‘trained’ a lot of customers to wait for sales. Though with this I am thinking less of the current 30% off sales, and more of the previous sales, which were buy one, get one free. 40-50% off is enough of an incentive that people will wait a few months for stuff they want.

What I am going to dispute is the idea that board gamers, the hard core type that make up the ETG and active Board Game Geek members, are a market that any game store can successfully court. How many of us actually buy stuff from Hobby Town or Organized Play? The former regularly brings in new games and marks down old ones. The latter is new enough to hardly have any old stock. How many of us have even been in to look through those stores?

I would wager that Nords/Gameboard/Sci Fi City are virtually unique among game stores for the breadth and volume of their offerings. I have certainly never been in another store that had anywhere near that kind of inventory. Back when I worked there, inventory value was at least $600,000. Who has that kind of capital and decides to open a game store? They were able to do that because Gameboard was originally a game distributor. They had all that stuff locally at a warehouse anyway, why not open a store and offer it there for a higher profit margin? If they needed something for another client, we shipped it back to the warehouse.

Back when I worked in the store it brought in pretty much every new Rio Grande, Z-Man and Mayfair title as they were published, and a fair selection from some of the other publishers. Rio Grande alone was hundreds of new titles every year, even 7 years ago. The vast majority (apart from the ones I would put aside for myself, as this was the heyday of our collecting), didn’t sell. There were a handful of big game collectors in town (hey Charles and Ray) who might buy some of it, but that was it.

The arrival and growth of the ETG did very little to change that. Greg gets games free for review, Trip trades for a lot of them, Kevin and Jim M. buy a lot at conventions. And no one else needs to bother buying many games at all because the avid collectors have enough for everyone to play. Those that do buy games aren’t going to bother to schlep down to a store when a few clicks at the computer will have Thoughthammer or Funagain dropping those games at your door for 30% off or more.

Regular people don’t look twice at our kind of games. I mean that literally. While I worked at the store, it was very rare for someone to even pick up and look at one of our games. The pricing level is just way too high. The pricing level during buy one, get one sales was too high. Regular people think games are for kids or parties, and should cost between $10-20. The only two games that broke that mould (outside of holiday purchases or collectors’ Monopoly versions) were Blokus and Tsuro, and there were people who wanted but wouldn’t buy either because they cost more than $20.

And note that these sales conditions occurred while the store had an extremely knowledgeable board gamer on staff. I could and did spend a lot of time with people trying to sell them quality games. Most would walk out with Monopoly or something else with a title or license they knew. It was a very rare day when I sold one of ‘our’ type of games, and it usually happened with people who had come in knowing at least a little something about them already.

Most of the board game sales in the store went to a middle group. Particularly avid gamers among regular shoppers. Role-players who liked to play a board game now and then. The Steve Jackson and Twilight Creation games we sneer at sold pretty well while I was there, and I’m guessing they still do. We had to up the minimum stock level of Munchkin after I sold out of the three boxes we carried at a time within a couple of hours one Saturday night. Ameritrash stuff like FFG games, particularly licensed ones, sell decently.

So if Gameboard/Nords/SFC couldn’t keep us happy with their vast inventory selection, what is a more typical game store like Organized Play supposed to do? If they can only afford to bring in 5-10% of the titles coming out each year, how do they decide which ones? So far as I can see, it’s a losing proposition to even try to market to our fickle tastes and Internet comparison shopping savvy. Far better to focus on that middle market of board gamers, and the role-players, and Magic player and miniature gamers and so on that bring in more regular money.

PS.  When Gameboard closed the distributor end of the business, they tried to sell out as much of the warehouse stock as possible through the stores over the course of a month or so. The sale started at 10%, and eventually dropped to 80%. Courtesans of Versailles did not sell at 80% off. The Euro game titles in general were poorer sellers than most of the other stuff in the store at any of the sale levels.

There are also games that the store bought in large quantities that didn’t sell well and that they have marked down significantly, and still don’t sell much.

Trip Godel:  Rhonda, I think we’re saying the same things.  Our hobby is expensive enough to deter ordinary people, and the Nord’s pricing model doesn’t work in a community mall where you pay a huge lease to get exposure to thousands of… ordinary people.

You have successfully persuaded me that a fan base on a steady diet of Magic cards, role-playing, and miniatures can keep cash flowing through a retail establishment.  I’m sold on the play area concept if you can get the square footage for cheap.

It seems like every FLGS has a trick that just barely keeps it in business, but it wouldn’t be profitable without it.  Nord’s used to be a distributor, so it inherited a starting inventory (and then kept a lot of it for a long time).

Sci-Fi City is in a mall with an entire wing that is mostly vacant, so its lease is super cheap.  It also appears to rotate inventory with other Sci-Fi stores in other cities, to keep things fresher.

Morgan runs Organized Play with the informal assistance of a network of volunteers who contain his labor costs.  I asked Morgan how he manages to stay profitable and he said, “I’m not worried about turning a profit.”

Hobbytown USA has the owner’s whole family working in a proven franchise, and they also contain their labor costs.  However, Hobbytown USA might be the most sustainable of those stores, thanks to their wild diversification (trains/planes/toys/miniatures/games), small footprint, and location in the spendy Turkey Creek district.  A single high-margin airplane can cost-justify a single shelf of exotic board games.

All of which raises the question, how many game stores can the Knoxville economy support?  Not three or four.  I’m not sure there are four game stores in Atlanta.

Maybe Courtisans of Versailles (1988) is the answer to the question. As a businessperson, I have no question in my mind that if an item won’t sell at 80% off, it should be thrown out.  Like a brown apple, it is unsalable inventory that is blocking the profits of future merchandise.

But if Nord’s was created to liquidate $600K of inventory, and managed to pick up a few sales along the way, then it might have succeeded at that purpose.  Maybe it wasn’t a store that closed at West Town Mall, but rather a warehouse with a storefront—never intended to stay open forever.  Maybe the owners did just fine with their investment, and we should feel good about that.  I hope so.

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Responses

  1. I really enjoyed this thread guys… And I’m sad to hear about Nords. :(

    For what it’s worth, nearly all the games we own we bought in brick and mortar stores here in knoxville. I confess to buying the higher priced ones during discount periods at Nords, however.

  2. Great commentary on the local gaming stores in the Knoxville, TN area. I got my first taste of gaming in this area from Game board in West Town Mall.

  3. This article had me thinking more about our local gaming stores:

    Gameboard in West Town mall. They also had a store in Oak Ridge and East Town Mall (or Knoxville Center). Closed in all locations

    Collector’s Choice on Cumberland Avenue near the bottom of the strip close to Pilot. Closed at that location but I think it opened up somewhere else.

    Yankee Peddler. First located in the front of Century Plaza out west, now in the back of Century Plaza.

    Collector’s World. Located in the front part of Century Plaza out west. Closed.

    Adventure’s Inn. First located in Downtown West shopping center, then on a house on Sutherland Avenue and then in a store close by on Sutherland Avenue. Closed in all locations.

    Round Table. First located on Sutherland Avenue. After closing at that location, I think it moved to Merchants Drive and was called Up All Night Games before it closed too.

    Barony. In Oak Ridge. Closed.

    Nord’s. In West Town mall. Near the food court. Closed.

    Sci-fi City. In East Town mall (or Knoxville Center). Currently my main gaming haunt.


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