Diversification and Margins

One of the major themes for us in the past few years have been diversification.   We’ve worked on broadening our revenue streams, not just in terms of new product lines like clothing and figurines but in miniatures too such as bringing in over 400+ new Bones mininatures.   We even briefly tried to bring in Guildball.  In terms of revenue streams, we have the Fortress Geek website, we sell on other channels than the site itself and we have our Kickstarter Fulfillment operation.

We diversify to reduce risk, the same way financial experts tell you not to purchase just a single stock.  Sure, you can make a lot of money doing so and if you are lucky enough to catch the ride horse / buy the right product line / stock,  you should ride it out as long as you can, but at the same time, not diversifying / taking your profits is dangerous.  When the bubble pop’s, it pop’s.

I’m thinking a lot about this recently due to the increasing restrictions we see in the board game trade for online stores as well as the lower than expected sales for Aether Revolt.   As I understand it, a lot of companies are desperate to dump their stock at cost just to recoup their capital.  Even before this though, every summer I used to wonder what we could / should do.  Our sales have always slowed during Summer, both because of release schedules and our customers propensity to enjoy the outdoors.   I always wondered if we should (and occasionally took a look at) more summer oriented items (disc golf was something we considered); but we always came back to keeping it relatively ‘geeky’.

It’s important not just to be diversified but for it to stay to a theme.  We could try to sell sports equipment out of Starlit Citadel, but it wouldn’t make much sense.  And the amount of effort required to build a new website is significant, so much so that the time taken to do so is probably not worth the potential returns.  It’s easier and more efficient to stay to the geeky theme for us while diversifying to different customers rather than trying to attract entirely new customers.  Having sports goods and books and board games all on the same website is something only someone like Amazon or Wal-Mart can do with their marketing dollars and capitalisation.

Product diversification isn’t necessarily easy though.  It takes time to find the right product, money to purchase it and more money and time to acquire new customers.  That means you need to start as soon as you can.  It does help though to have multiple sales channels.  It’s surprising what sells on one channel and which won’t sell on another – the product sales between Fortress Geek and Starlit Citadel are completely different.  Having multiple channels at the same time lets you diversify your risk and potentially speed up your rate of adoption of a new line.