“New” Used Games: August 29th, 2013

aBRIDGEd – Used (Grade A)
Boomtown – Used (Grade A)
Carcassonne Big Box 3 – Used (Grade A)
Cranium: Family Edition – Used (Grade A)
Deluxe Illuminati – Used (Grade B)
Gift Trap – Used (Grade A, Missing Items)
Hare and Tortoise – Used (Grade A)
Jurassic Jumble – Used (Grade A)
Master Labyrinth – Used (Grade A)
MindTrap – Used (Grade A)
MindTrap II – Used (Grade A)
Scotland Yard (20th Anniversary Edition) – Used (Grade A)
Scotland Yard (Milton Bradley Edition) – Used (Grade B)
Trivial Pursuit: 90’s Time Capsule Edition – Used (Grade A)

“New” Used Games: August 28th, 2013

Apples to Apples Party Box – Used (Grade A)
Axis and Allies: Europe – Used (Grade B, Missing items)
Bang! 4th Edition – Used (Grade A, Missing Item)
Betrayal at House on the Hill (1st Edition) – Used (Grade C, Missing Item)
Call of Cthulhu LCG: Core Set – Used (Opened)
The Fury of Dracula (1987 Edition) – Used (Grade A)
Hacker: Deluxe Edition – Used (Grade A)
Lost Cities – Used (Grade A)
Risk (2003 Parker Bros Edition) – Used (Grade A)
Shadows Over Camelot – Used (Grade A)
Star Wars: The Queen’s Gambit (2000 Avalon Hill) – Used (Opened)
Stratego (1986 Milton Bradley) – Used (Grade A)
Vampire: Prince of the City – Used (Grade A)

Growth vs Profitability

The larger you grow, the more profitable you become right? After all, that’s why companies decide to grow after all.  Unfortunately, real life isn’t as simple as Economics 101.  Real life is vastly more complicated and growing your company can actually reduce your profitability.

Staggered Costs

Costs, specifically how costs accrue in a staggered manner is one of the reasons for this.  Fixed costs are the perfect example of, and most commonly known; cause of this.  Let’s take rent – when you move from one rented building to another; your cost increases.  Since most commercial ‘professional’ leases come in multi-year formats, you have to rent with growth in mind.  As such, if you were renting for 3 years; you have to envision and plan for your companies size in 3 years.   If you expect to be doing double your business by year 3, you can’t rent a building that is suitable only for your size now.  Which means your profit (if you have any) in year 1 is going to be lower than those in year 3 just because you have to plan for growth in year 3.

Now, rent is a simple fixed cost example which most people can see and understand.  However, let’s take another example – cardboard recycling.  Having someone drop by to pick up our cardboard each month costs $40.  Obviously, as we grow and receive more products, we need to recycle more cardboard.  At a certain point, we have to do more than 1 pick-up a month. So that’s another increased cost, but it’s not gradiated at all.  A 2nd pickup might give us enough space to grow for another year, but the cost increase (the additional $20 for another pickup) is fixed.

Increased Complexity

Complexity increases with growth.  As you grow, the number of balls in the air increases and the ‘shape’ of those balls can change.  When you’re smaller, many of the problems are simple to manage.  As you grow though, what used to be a small problem increases in size as well and can become a major issue.

For example – refunds.  Refunds are simple right? A customer asks for a refund, you refund him.  Except; what if the customer asks for a refund on a card he longer uses? Normally, this is not something that would happen; but as your business size grows the number of exceptions/one-off cases increase too.  As these one-off cases are just that, one-off’s; you can’t even write processes or procedures to handle them.  You have to deal with them individually – and as such, the amount of time required to deal with them increases as well.  Get enough ‘one-off’ cases; and you can find yourself spending half a day doing nothing more than fixing unique problems.

If you’re doing that, you aren’t doing something else just as important – so you have to add more hours, which means more cost, which can mean lower profitability.   Again – things like this happen in ‘staggered’ formats; each addition coming after a certain cliff happens.

Changing Expectations

There’s also an issue of differing expectations – as you grow, you’ll find expectations for your company change too.  The type and kind of service expected from an organisation that is 1 person large compared to one that is staffed by 100 is very different.  More often than not, meeting those expectations require increased levels of management & bureaucracy, which results in increased cost.  We found this out when we went from 2 to 3 employees.  You’d think adding 1 more person wouldn’t be that much more complex; but to keep us as professional, we had to increase our bureaucracy levels significantly.

Economies of Scale

So what happened to economies of scale? Well, there is obviously some of that.  Renting a 5000 sq ft warehouse is cheaper per square foot than a 1000 sq ft warehouse.  When you finally reach optimum capacity, your margin will have improved.  However, its the interim period where things are expensive.  So remember, growth is not always the route to greater profit.

Musings: Crowdfunding and its purpose

This post comes courtesy of a mixed-up set of beliefs and a new card game: Audatia, a medieval swordfighting card game.  Let me be clear – this has nothing to do with the actual substance of the game/its playability or my feelings about the authors/etc.  This is more a general musings article trying to sort out some weird dissonances in my own mind.

The Kick-Off Point

I learnt about Audatia via mutual friends in the sword-fighting business.  I looked over the campaign, saw their breakdown on how they were going to spend the money, and my hackles raised.  I found it off-putting.  When I discussed this with Kaja, she pointed out I was being weird.

The issue that I brought up was the fact that a large portion of the funds raised (11,000 Euros) was being used for artwork, rulebook design and packaging.  Only a small portion of the actual funds (4,000 Euros) was being used to fund the actual printing.  That seemed high and just weird.

However, as Kaja pointed out, they are using crowd-funding for exactly what it is meant to do — raise funds for a limited-demand passion project.  They aren’t using it as a pre-order system as much, it really is to raise funds to do their passion project.

Still… it stuck in my craw.

Pre-Order or Crowdfunding

Don’t get me wrong – I understand the concept of crowd-funding for raising capital. In fact, I’ve supported a number of projects based on that – from video games (Wasteland 2) to movies (Veronica Mars) to small businesses (a random lady trying to buy a better machine stamp) and of course, a few board games and the obligatory comic book reprints.

In the vast majority of the cases, I knew I was throwing money at a project that I just wanted seen done.  In some cases, the chances of actual completion was low, but I thought it was something I should support.  Whether it was the online comic reprints for artists/stories I’ve been reading ‘free’ for ages or just to support a friend, how the money was going to be spent didn’t matter.

Yet, this project; it mattered.  I had, somehow, drawn a line in the sand in my head that said board games should be spending most of their money on printing/shipping cost.

Skin in the Game

Musing about it, I think it’s a matter of skin in the game.  As a business owner, I have a lot of skin in this business.   If we ever went out of business, I don’t even want to think about how much I would have lost – both in ‘real’ funds as well as opportunity/time cost.  I have a significant ‘skin’ in this game, which makes me eat/breathe/live this business.

Outside of actual game idea, rules and play-testing (which is in many ways a ‘hidden’ cost as some games obviously haven’t had enough play-testing), sinking funds into the artwork and design is a publisher’s skin in the game.  If a publisher isn’t willing to sink their own funds into a game, what right do I have to believe that they are committed to this?

Of course, skin can also manifest in other ways.  A dancer who has spent 10 – 15 years of their lives training has a lot of skin already when they ask for money to fund a production.  An online comic artist has sunk their time producing the strips, the developers in Wasteland 2 have their professional reputations at stake, etc.

Last Thoughts

I guess for me, board games crowd-funded should at least have their artwork paid for.  It’s obviously not the same minimum level – Guy Winsdor has a reputation to protect too (in the Western Martial Arts community) so it’s not as if he doesn’t have ‘skin’ in the game.  Yet, I guess I am holding them up to a different standard because they are doing board games, probably because I see so many games published with constant delays / etc.

Attrition Rate

One of my major concerns is the increasing rate of releases for board games in Canada.  It struck me one way to look at how often a ‘hit’ product might appear (or at least a decent product) would be to look at our release dates and what we kept in-stock.

The Methodology

I proceeded to pull from our database all the products that had a ‘Year’ indicated in its product information.  For the vast majority of products, this would indicate the year it was published (or re-published in a few cases).    I then figured out the total number of such products (No. of products added on the chart) and the number of those products still in-stock with us at the time of analysis (late-June 2013) as indicated by the bar graph (no. of products in-stock).

Now, note that the years used is the year the product was published / released generally (as drawn from BGG datasets).  So you’ll see items like 1935 and 1947 (Monopoly, etc) in there too – products that were released long before we ever existed.

Once the data was plotted, I also added a ‘Percentage still in-stock’ line graph which gave a % of items that were still in-stock compared to the number of items released in that year and plotted it all.  I’ve also added a second data line (the purple) for adjusting for ‘dead stock’. That is, items that are only in-stock because we couldn’t sell them off (or intend to get rid off once they do sell).

The Chart

Attrition Rate of Board Games Released


If you look at products that we ‘cherry picked’ from 2006 backwards, you’ll see that even though these products were in-demand when we launched in 2007; many have now been dropped from inventory. If you look only at 2007, the year when we started adding products based off what we guessed could sell, that’s 15% or so and likely to continue to drop as demand wanes.   Whether it’s because the product is no longer available or because the product no longer has demand, about 15 – 20% of products released a year manage to have any staying power.  Within that, probably only 2 or 3 products are consistently good sellers (selling more than 1 copy a year).

Secondly, my concerns about a spike in products seems justified.  There’s a huge spike in the amount of products added in the last 3 years (we are only 7 months in for 2013 with the slew of GenCon releases still to be added!).   From bringing in 521 products in 2010 in-total, we now have 476 products already in-stock for 2013 and more than 600 added for the year.  Just using 2012 numbers, that’s a 57% growth in products.  Now, mind you – we’ve added RPGs and miniatures to the site since then; but most miniatures don’t have a year (model years just don’t make sense to add) and our RPG selection while large was also backdated in some cases (e.g. Pathfinder modules that were released before we started adding the line).   It’s also worthwhile to note that these aren’t even all the products available – just the one’s we’ve picked to add to the site / bring-in / sell.

Thirdly, the ‘demand’ for products takes a steep fall within 1 year.  We drop 50% of products we bring in within 1 year, 60% in 2 years and within 3 75% of all products are dropped.  As a publisher, if you haven’t sold off a significant % of your products in a year, you should seriously be considering adjusting your price / having sales because by year 3, you’re not likely to be able to sell it at all.

Curiously, this is by % so in 2007 we have 32 SKUs we feel are wortwhile.  For 2008, we have 68 SKUs and 2009 we have 127.  If we expect that in 2 years time to see roughly the same number of SKUs being worthwhile, we’d see about a 75% drop in SKUs or us dropping over 90 items.

Limitations of the Data

Firstly and most importantly, while I’ve tried to clean the data; I have to admit I didn’t spend a whole lot of time doing it. I’d guess the % numbers used could be 2 – 3% higher / lower easily.

Secondly, the increasing number of SKUs added and sold can be attributed to:

  • our increasing number of RPGs & miniatures
  • the increasing size of the market
  • the increasing size of our business (i.e. our ability to bring in more stock)
  • the necessity to keep whole lines in-stock (e.g. LCG products, minis, etc)

Thirdly, this data is a snapshot in time. It’d be really useful to see the changes over-time which this cannot provide unfortunately. Perhaps next year, since I have the datasets saved now.

Lastly, some might want to draw conclusions that the ‘quality’ of product has gotten better since our % of items and raw count of items are higher than in previous years.  I’d be hesistant about drawing that conclusion – it’s too early to tell and moreover, this does not show turn rates; just whether we have an item in-stock.  In addition, we often keep products in-stock that might sell 1

Fraud in the Gaming Industry

We recently got hit by a series of fraudulent orders which we didn’t catch.  It wasn’t fun at all – our lost probably ends up in the $500 range when you add it all together.  Not fun, just a part of business though.

Fraud Online

Fraud is a part of business.  One strange aspect of being online is that while we get to ‘dodge’ the penny-ante issues like shoplifting and bogus returns; we open up ourselves to some much bigger frauds.  Specifically, intentional credit card rings.  The process is simple – a credit card number is stolen and then passed on.  In many cases, it’s a whole organisation in-play, where credit cards are distributed among a number of individuals.  Orders are placed online to multiple sites as fast as possible.  Once a site is known to accept these cards, they are often ‘hit’ multiple times.

Addresses are given to either a remailing location or sometimes, unknowingly, a series of ‘dupes’ are used. These individuals receive the products and remail them to another location(s), often completely in the dark that they are part of an illegal operation.  Once these products arrive at the new location, these products are resold – either through Craigslist, at pawn shops or the like.

Popularity & Safety

Most of the time, in the gaming industry, fraud has been a minor problem.  The few times we’ve seen it, it is often a one-off incident (most likely a close friend or relative stealing a card for illegal / unauthorised use).   This is / was due to the lack of popularity of our products.  The resale value of our items was low as was the demand – especially when compared to other industries like electronics or mobile phones.

Unfortunately, that veil of safety has now lifted it seems.   The growth in the industry, from Will Wheaton’s Tabletop to board games in Target & Wal-Mart have made our niche products no longer niche. We’re in the big leagues now.  So yay?



Public vs Private Companies – the Web Battle

You might know (or not) about the recent posting from Amazon on their Q2 results – a US$7 million loss on revenue of $15.7 billion.  You probably didn’t know of Geeknet’s (Thinkgeek’s parent company) loss of US$1.5 million on revenues of $22.0 million  Public companies – you got to love them.  They keep churning out losses and most people shrug their shoulders and figure that these are ‘growth’ companies, thus a few losses for a few years (or a decade or two) are fine.

The Data

Here’s a quick comparison taken from their Q2 financial releases.  Note, Geeknet rolls the entire cost of fulfilment & COGs (stated as Cost of doing business) into one number which is the number I used for the % provided.

Amazon Geeknet (Thinkgeek)
Revenue $15.7 billion $22 million
Loss $7 million $2.5 million
Growth 22.30% 24%
CoGs 71.40% 79.96%
Fulfilment 11.20%
Marketing 4.10% 8.72%

Amazing isn’t it?  In both cases, just paying for their goods and shipping costs approximately 80% of the revenue they take in.  That’s 20 cents on every dolllar dedicated to just making sure they have stock and can ship it to you.   Never mind the cost of acutally getting customers or the operating cost of running the site.

Let’s put it another way – you earn $40,000 a year (gross).  To generate enough money to just pay for your salary using the 80% metric, you’d need to generate $200,000 in sales a year.  Just to pay your salary.

Private Companies (us)

As you can guess, there is no way we could survive on margins like that.  Until recently, Amazon made losses year-in, year-out. Geeknet is still in that stage it seems.  Privately financed companies like us (i.e. small businesses) just do not have the level of capital required to sustain such a business model.

We have to build a business with a better margin from the get-go, which requires us to do things differently from the Amazons and ThinkGeeks of the world.  And in Canada, that means we have to have higher prices due to the lower number of customers available in total.

That’s not to say it’s not possible or viable for private companies to run losses – it’s obvious that we can and have.  However, we have a finite set of funds, while public companies often have a huge cash egg and have access to even more capital if the initial amount isn’t sufficient. Our investors (if we have any) are also often more demanding and have much shorter timeframes.

The Result

At Starlit Citadel, we actually charge the cost of shipping (unless you hit the Free Shipping threshold).  We provide discounts, but we keep our discounts at a level that provides a higher margin on COGs.  We have to basically run a business that is meant to make a profit – soon.  Not one that will make a profit in 5 or 10 years, but one that will do so in 2 or 3 years.

And once we do make profits, we often have to invest it back into the business…