Asmodee to acquire F2Z Entertainment

The Great AcquirerSo it looks like F2Z Entertainment is about to be purchased by Asmodee.   For those of you who don’t know, F2Z owns Z-Man Games & Plaid Hat Games, which means they own the IP for Pandemic, Mice and Mystics and Dead of Winter.  In addition, they have the rights for Carcassonne in English & French and the french Catan as well as distributing a ton of Asmodee games in Canada as well a a bunch of other things.

As many of you know, I’ve written about the exclusive arrangement with F2Z that came into play a few years ago. Let’s be clear, distribution in Canada in general is significantly more expensive than the US. Our costs of FFG games from Lion Rampant is at least 15 – 20% higher than it was when we purchased from the US directly so it’s not just a case of F2Z. It’s a systemic problem.

With the acquisition, I don’t know if it will improve.  There are a few scenarios that are likely to play out, in order of short to long-term:

  • Once the acquisition is completed, I don’t expect any major changes for a few months.
  • At some point in the 6 months after the acquisition, I expect there to be a MAP program to be put into place just like the FFG program.
  • I also expect a number of new reprints of good selling games will begin production, so expect there to be a significant increase in-stock for these items in 6 – 9 months.
  • Distribution via F2Z might actually shut down in the next few years as contracts expire and Asmodee moves to using distributors completely, reducing their repetitive cost of managing both a distribution and retail arm at the same time.  This might bring actually have the advantage of providing more funds/ need for opening a 2nd warehouse in the West which would lower our costs.

Outside of that, I expect everything else to be business as usual.  It’s unlikely Asmodee will try to undertake the same kinds of policies that they’ve taken in the US (i.e. restricting sales of products to only a few online retailers) due to our differing laws, but you never know.

Overall, I’m actually cautiously optimistic that this might be good for us in Canada.  In the long, long term there’s some concern that Asmodee will use it’s new leadership position to drive margins even further down, but I do not expect that to happen anytime soon.


Fair Value – What is it?

Flash-SaleWe are running a flash sale on our clearance / used games right now, attempting to discard some extra stock that we really don’t need clogging up our warehouse space.  Once more, it’s gotten me thinking about ‘value’ and how we all perceive it differently.  As a store, we discount our games regularly.  Generally between 20-30% off the normal retail price, sometimes a bit more.  So, most games are already sold as a discount and that’s a ‘good’ or ‘fair’ value for most of our customers.  However, not all games will be sold at that price.  Eventually, games that aren’t sold at our ‘normal’ price end up in our clearance section.  Those get discount further by another 20%, bringing most items close to our cost of bringing them in.  Quite often, we see more of those games sold when they end up on clearance.

However, there’s always games that aren’t sold even at that discount.  We come to our flash sales then or our other regular sales.  Games during those period start going down by another 40-50%, meaning that we are selling at below cost often when that happens (at least in the Clearance section).   Yet, we have games that have been discounted to 20-25% of their MSRP (or half of their cost!) and we still haven’t sold them.

At each stage, a customer could potentially buy a game.  If he bought a game at full price, and then the game drops in price, is that fair? Did he get a good value?

I don’t know.

The problem / answer of course is that it’s up to the individual.  A transaction / purchase isn’t just made up of the price but everything that happens around the transaction – from customer service (or lack of it) to shipping to the general appearance of the store. Everyone values things differently which what makes life so interesting.  I A box can be dinged and I’m perfectly fine with it because the game contents / gameplay is what I value.  Yet, for others that’s a major issue.  A transaction at the counter that takes 30 minutes to purchase a single gamebox can be very frustrating.  Or maybe it’s not because you spent the 30 minutes chatting with the bored clerk about the latest Star Wars movie.

It’s a reason why some people proclaim the death of B&M stores and others point out that those stores are the linchpin of gaming.  Each store and the items they sell provide different value where price is just one portion of the equation.  It’s true that you ‘remove’ a certain number of people who would never purchase a game at full price, but at the same time, there’s others whom price is of little or low value.  At the end of the day, the value of an item is what people choose to assign it, but it’s ‘value’ changes from person to person and for the same person, by time and circumstance.  As retailers, all we can do is try to meet those values when it makes sense for us.

Business Misconceptions

This is a more random post than normal, just a few business misconceptions I’ve come across recently.

Revenue = Profit / Make it up in volume!

This is probably one of my favourite one’s. When a customer sees that they have paid you $200, they figure you just ‘made’ $200. The add-on idea to that is that the more you sell then, the better off you are.  That’s not entirely true of course, as revenue does not equal profit.  Profit is what you have after you take away all your expenses including the cost of the goods you just sold, your payroll, rent, taxes, etc.

So, yes, I’m not going to sell this product to you at (or below!) my cost of acquisition (COGs). I am not making a profit from this, I’m just making a loss and making my revenue numbers look pretty.

Taxes are Profit

I really don’t know how many people believe this, but I’ve come across this one more than once.  Customers are somehow angry / upset that we charge tax (especially at conventions), somehow believing we are making money from the taxes.  Taxes are actually a cost.   If I take your payment in credit card, I’m actually being charged a % of the taxes in credit card fees but the government want their full amount.  So I end up ponying up a little extra.  Never mind the added cost of doing the paperwork and making the payments.  Taxes aren’t a profit center for us, they are a cost.

Why won’t X store sell Y item to me at a discount / more of a discount

There are a few reasons, here’s some:

  • Opportunity Cost. Most stores only have limited amounts of products and  have anywhere between 2 days to 2 weeks (or more!) before they can restock, especially depending on the product.  If they sell a product to you for $10 and can’t restock it for 2 weeks, they might easily have sold same said product a day later to someone else for their full $40.  Why risk it on a good moving product? (If it’s a slow moving product, theoretically it should be on the clearance shelf already).
  • Differing pricing structures.  Stores get different pricing structures depending on how much they buy.  So for one store, an $80 MSRP game might actually cost them $44, not $40 like another store might get.

All Businesses are the Same

This is another assumption where customers feel that each business should be ‘equal’ and be exactly the same as another business. We get this from customers who wonder why we don’t get games as fast as some of our East Coast competitors (games arriving in the East first before they get all the way to the West!) or why we don’t have policies like Amazon or why, as an online business, we aren’t open the hours of a retail store.