Turning Away Business

Strange as it seems, we constantly turn away business.  It’s a fact of life – if you aren’t open 24 hours, 365 days a year in every country both online and offline, you are turning away some business.  Whether actively or passively, there’s customers that you are not serving.

The reason to turn away business is often quite simple – there’s either insufficient resources to manage the new business or the additional revenue is insufficient to cover the cost of the business.

Here’s a few common reasons we turn away business:

  • Drop By’s – we aren’t set-up to take orders at the warehouse easily.  Our Internet connection is spotty at best, so processing orders takes forever.  In addition, quite often we’re in the midst of packing & shipping orders and those have to take precedence.  If we can, we will but the vast majority of the time we don’t have the time to do this.  We just aren’t a brick & mortar store, though sometimes I wonder if we should be.
  • International Orders – while we do a large number of International Orders, we occasionally turn down orders due to concerns about fraud or special requests (e.g. requesting us to misdeclare the price).  The risk / return on this is not favorable for us, with the potential of having our contract revoked.
  • Price Matching – there’s a few issues involved here.  For one, it’s a matter of fairness – we feel everyone should pay the same.  We have systems set-up for repeat customers (our rewards program) so it’s not as if we aren’t rewarding loyalty to us.  There’s also our margins which we like to keep at the rates they are, to keep the business worth doing.  Lastly, there’s the additional cost of verifying that the prices are legitimate, the editing of the prices on our site for that specific order, the editing of the accounts, etc.  And often for only a few dollars a game.

I’m sure there’s a few other times I can think of, but those are the most often occurrences where we just have to say no.

    Shipping Methods & Differences

    One of the major differences between an online store and a brick & mortar retail store is how customers get their games.   In an online store, we generally ship the vast majority of our orders to customers, while customers in a brick & mortars business pick the games up directly.

    Online, there are numerous ways to charge shipping.  I’m going to discuss the shipping methods and their benefits and drawbacks from my view.

    Actual Cost

    Let’s start with the actual cost method where customers just pay the cost of shipping.  For a retailer, it’s the best option – there’s no discounts so no profits are loss.  On a customer end, they pay for exactly what is shipped – which can be a good thing for those customers who are close to the shipper.  It can also allow a company to put all potential gains into lowering the cost of the games themselves.

    Free Shipping

    There are 2 common Free Shipping options out there.  Firstly, there’s the complete Free Shipping option – i.e. buy a product, it ships free.  In these cases, the cost of shipping is generally rolled into the product cost already.  This is the most disadvantageous for customers who are purchasing more than 1 product and is not something you see with retailers who have more than a few SKUs.

    The second option, a Free Shipping Threshold is what we use.  Here, customers pay the actual shipping cost of an order till the Free Shipping threshold is reached.  At this point, customers then choose to ship their entire order for free.

    It’s a very popular shipping method for a variety of reasons.  For the merchant, the goal is to push customers to buy more products; so the shipping threshold  is set at a point that encourages consumers to add ‘just a little more’.  In addition, orders below the threshold – the majority – pay for themselves.

    Customers like this method too because they can get something for Free.  In addition, it rewards the customers who buy the most.

    Unfortunately, it does mean that the retailer must absorb the cost of the free shipping.  In addition, customers might alter their buying behavior to take advantage of the free shipping.

    Flat Rate Shipping

    This is a shipping method that is used by our competitors.  There’s certain advantages – it’s the simplest method to calculate and uses the least amount of resources on an IT side to set-up.  Since the vast majority of costs are similar by Province, the retailer should come out approximately even for small orders.  Larger orders will of course be higher cost, but will be subsidized.  It also lets customers know what their shipping costs are immediately.

    Flat Rate Shipping methods are a balanced approach – the retailer does not lose as much moneyby subsidizing a portion of their orders, while ensuring most of their shipping costs are met.

    Shipping methods & Margins

    So how do all these different methods effect the price of goods? Let’s assume that a retailer wants to hit a specific % margin for their gross profits i.e. after taking away cost of goods sold and their shipping costs.  Let’s say we’re looking at a product that has a cost of goods of $100.  The retailer wants to keep a 50% gross profit margin and shipping cost is $15.  As such, the revenue that must be generated from a customer is $165.

    Actual Cost

    In this case, the price of the game would be  $150. The customer pays the $15 immediately, so the retailer can just put the game price direct into the $150.

    Flat Rate

    Let’s assume tat the flat rate shipping is $10.  In such a case, the price of the game is $150 plus 5 = $155.

    Free Shipping

    With an option that is purely Free Shipping Threshold the retailer must then absorb the entire cost of the shipping.  In this case, he would then set the game price to be $165 since no shipping is charged.

    Now, if the Free Shipping Threshold is $175, the game would not meet shipping, so it  would be the same price as the Actual Cost method i.e. $150.

    Of course, things get complicated when more than 1 product is purchased.

    E.g. What if a customer decides to buy 2 games? In the case of the Free Shipping Threshold, you’d want the Price to be $157.50 (i.e. ($300 + $15)/ 2 )- slightly higher than a Flat Rate method, but certainly lower than a pure Free Shipping option.  In a Flat Rate scenario, it’s $152.50.

    Obviously then, the actual cost of the game in the Flat Rate or Free Shipping options needs to be calculated based on the buying patterns of your customers.  What are the size of your orders?  What are your margins now? What % in/decrease in price is required to hit your margin?

    Current Bestselling Board Games & Pre-Orders : May 2011

    The current best-selling board games for April are listed on the main site.

    As a comparison you can find March’s bestselling list.

    Dominion

    1. Dominion

    2. Mansions of Madness

    3. Settlers of Catan

    4. Dominant Species

    5. Dominion : Prosperity

    6. Innovation

    7. Pandemic

    8. Lord of the Rings LCG Core Set

    9. Power Grid

    10. Small World : Be Not Afraid

    Also here’s the list of our March Pre-Orders:

    Lord of the Rings LCG

    1. Lord of the Rings LCG Core Set

    2. Dominion : Cornucopia

    3. Alien Frontiers

    4. Catacombs

    5. Saboteur 2

    6. Troyes

    7. None But Heroes

    8. Dixit : Odyssey

    9. Red November

    10. Struggle for Catan

    May 2011 Newsletter

    Canada Post Strike

    Canada Post is going on strike May 25, 2011. Business will continue on as usual, and we are currently sourcing other methods of shipping. However, expect us to go down to shipping 2 to 3 times a week instead of daily during the strike period. We are hoping to keep the same pricing for shipping, but might have to adjust depending on eventual cost from our secondary shippers.

    Site Updates

    April was our best Anniversary Sale ever, with a ton of older board games moved. Thank you for all those who bought from us and help free up capital to bring in even more new games.

    We’ve added a link to our Facebook Fan Page on the homepage. If you can take the time to like it or our fan page, we’d be grateful.

    Read more on our blog

    Upcoming Games

    The reprint of Catacombs and the much delayed Dominion : Cornucopia should be releasing this month. Also, the expansions Dixit : Odysey and Twilight Imperium : Shards of the Throne have been announced as the new miniature board game Godzilla : Kaiju World Wars and a new expansion / stand-alone for Small World : Underworld.

    More Pre-orders

    Hansa Teutonica Game Review

    Hansa Teutonica is a medium-weight, route building Eurogame with nearly no luck involved. It is however unlike most Eurogames quite interactive with a lot of strategic blocking and multiple routes to victory.

    Appearance: Hansa Teutonica is a rather plain looking game – it uses medieval-inspired artwork for the game board and player boards and the perennial cubes. There’s nothing much to discuss in appearance – if you’ve seen one Eurogame, you’ve seen Hansa Teutonica.

    Rules / Ease of Learning: Hansa Teutonica is quite an easy game to teach. Each turn, players have 4 potential actions – place a piece down on a route, move pieces on the board, clear a completed route (and acquire the city or ability and the special actions if applicable) or take income (pieces) from the bank.

    How many actions a player has, the number of pieces they can take from their bank or move across the board, which offices in a city they can occupy or the number of points they will receive for their routes can all be ‘unlocked’ from their player board by completing set routes on the board. Unlocking these additional abilities provide players with additional pieces as well, so it’s quite an important aspect.

    When players place a piece on the board, they may ‘bump’ an existing player out of their spot by paying an additional piece(s). The player so bumped may, at the end of the current players turn, place the bumped piece an additional piece(s) on the board on an adjacent route. In addition, when a route is cleared to occupy the city or gain a special action, all the pieces on the route are removed from the board and are returned to the player’s bank (with a piece placed on an office space if that is the chosen action).

    The game ends when one of 3 events occur – a player reaches 20 victory points, 10 cities are completely filled or no additional special action tokens may be drawn.

    Gameplay: Hansa Teutonica is a pretty fun game. There are a ton of different strategies available, with players able to focus on getting the special action tiles, controlling cities to get victory points, developing routes and developing their game board for maximum points / abilities. Knowing when to switch tactics based on what other players are doing is very important, as is the placement of your pieces to slow down other places and to gain the additional ‘free’ token when they bump you out.

    I thoroughly enjoy the game even if I haven’t won a single game out of the 7 I’ve played now. There’s a lot of tactics and strategy involved, with almost no luck in the game (beyond what special action tokens are drawn) so it’s all a matter of adjusting to the play styles of the other players. So far, I haven’t seen an optimum strategy – even if you don’t get 3 actions immediately, you can use the time to develop routes or your board in other locations. It’s also quite easy to teach and games go faster as people play it more.

    Minuses include the fact that it can lead to Analysis Paralysis – there’s a lot of options and sometimes, trying to figure out what other players are going to do can cause certain players to take a very long time for their turns. In addition, if you start falling behind, it’s really hard to catch up. Lastly, some players can get a real boost depending on who they play after as certain play styles can greatly benefit each other. As an example, a player who focuses on clearing the Action Token track might make it really easy for the next player to get into that track as well.

    Conclusion: Overall, I’m a fan of Hansa Teutonica. It’s a medium-weight game that has most turns moving pretty fast, very little luck and quite a lot of strategy.

    Best Practices : Penny Pinching & Being Penny Wise, Pound Foolish(8)

    Money and cost cutting is a strange beast.  You can be too loose with your spending and too tight as well, and learning where the right level is just a matter of experience.

    Penny Wise

    It’s very important to cut costs in business.  It’s better to cut your cost by $1 rather than increase your revenue by $2 in most cases as a game store.   There’s also a lot of areas to cut – rent, insurance, salaries, your gateway fees, etc. to name a few.  Checking your costs every month and every year (depending on when your contracts come up for renewal) is very important.

    Depending on your personality and background, this can be  really easy or really hard.   Either way, the discipline required here is key to running a business.

    Penny Wise, Pound Foolish

    The other danger is one that I fall into all the time. I’m naturally quite careful with my money, and it was enhanced by our  lack of capital in the first few years.  As such, I had a tendency to not spend any funds at all – which caused a lot of trouble.  As an example, I refused to pay Canada Post to come by to pick-up our orders and instead dropped the orders off myself at the Post Office.  It saved me a whopping $15 a week – and meant I wasted an hour or so every day doing that.

    Return on Investment

    So how to avoid that trap? Here’s a new term for you – Return on Investment.   How much revenue will this activity / spending generate for me? Or, conversely, how much will it save me?

    If your advertising is expected to generate $1000 in new sales, it’s worth it if it only costs you $200.  If it only generates $500, then it might not be worth advertising.  Same with a new retail location.

    Or conversely, saving an hour a day at $10 an hour is worth $50 a week.  A definite improvement over not spending $15.

    In general, I use an ROI of 3 as a cut-off point.  That’ll vary depending on your business, your costs and  your comfort level, but I find it a good  rule of thumb.

    Regrets, I’ve had a few

    They always say learn from other’s mistakes, so I thought I’d mention a few regrets of mine:

    Capital

    Yeah,  I managed to mess this one up.  We definitely did not have enough money starting the company – we budgeted $15,000 total of start-up capital.  However, looking back we’d have been better if we had about $100,000.  We eventually ended up financing it to that level anyway, but if we had budgeted properly, we would have avoided a lot of issues.

     Lawyers & Incorporation

    Don’t get me wrong; there’s a time and place to use their services.  However, many of the basic filings required while incorporated is extremely simple and can be done by yourself.  Spend a couple of hours by yourself, read up and learn the necessary information and you’ll save yourself a few thousand dollars.  However, anything outside of the ‘run of the mill’ docs (e.g. our shareholder agreement was very specific) should be done through a lawyer.

    Not Doing the Books Immediately

    When we were first started, one of the major focuses was on getting the site up and running.  We didn’t get around to doing the books until after 4 months of operation (nearly 9 months after incorporation).  Let’s just say that it was a mess; we had to take a few short-cuts to sort the books out in time to file; and since then we’re still cleaning up the mess that resulted from it.  Talk to a good accountant / bookkeeper to help set-up your accounts first and then doing them consistently is very, very important.

    Starting Too Late

    When we first started talking about the company, it was late September 2006.  By the time we actually had the site up and selling, it was August 2007.  I really wish we had gotten the site up by April 2007 as  I had first planned for, giving us a much longer run-up to Christmas.  It would have made our finances for 2008 look a lot better.

    Not Planning for Growth

    We’ve wasted a lot of money not really planning for growth properly.  Space requirements in our storage location have made us move locations 4 times in less than 4 years.  That’s a lot of time and money wasted making those moves and finding new locations.  We’ve finally moved to a space that I expect to be in for at least another 2 years, but it’s taken me a while to learn this lesson.

    Setting & Agreeing on Standards

    This is more of an issue when you are working with others, but creating a set of documents that list and detail the minimum standards that are expected for any particular area of operation is important.  Whether it’s the books should be 2 months behind at most or all orders ship within 48 hours (or customers informed why); these standards should be set and agreed upon immediately.  A lot of our issues during 2008 for were due to the fact that we hadn’t set and agreed on these standards, and didn’t hold to them.  Now that they are fixed, it’s much less of a problem even when I hire 3rd parties to help.