Distributor List

Occasionally I get asked about distributors.  So, here’s a (non-exhaustive) list of distributors in both Canada and the US:

 

Canada

Lion Rampant

Filosofia

Mindsports

Grosnor

Everest Distribution

Universal Distribution

 

US

Alliance

ACD DistributionGTS DistributionSouthern Hobby DistributorsPHD GamesI’m sure I’m missing some, so feel free to chime in on comments.

 

Inventory Management – Top to Bottom

Speaking with Claus over e-mail, he had a question in inventory management.  Basically, how do you manage inventory? There are quite a few tools that you can use, and I’ve covered them in bits, bobs, drabs and other pieces before in this blog.

So, here’s how to break it down:

– Total $ amount is based off turn rate for desired revenue level

For B&M you can shoot for a turn rate of 4, online I’d say it’s between 5 to 6.  A lot of that though depends on how often you get stock – if you only restock once every month, you have to keep a higher level of stock overall than if you restocked every 2 to 3 days.  Also, if you are growing a new section (e.g. like we did for RPGs) your turn rates for that section will suck in the initial period but slowly get better once you (a) hit a minimum stock amount and (b) customers get used to you having that kind of product.  Then you can start trimming we find.

– Open to Buy methodology keeps track of your inventory dollars spent on a high level basis

Think of Open to Buy as a high level methodology – keeping an eye on total $ spent; not specific products.  So, it’s a good way to keep an eye on how much money you are putting into the business in terms of inventory and ensuring you  have money to buy new stock though I’d point out that you also need at least $5  – 10k for overages during crazy release season like now.

You can even push open-to-buy down to category level sections.  Deciding how much of a % you want your RPGs, Miniatures, etc to be part of your revenue / product quantities.

– Minimum Stock Levels keeps track of stock for individual products

On a specific product level, we generally pre-order 1 copy and add more depending on the publisher and theme.  So we know for example FFG products we can sell 2 to 3 each for most of their products, so we start at a 2 or 3 qty level.  Then we adjust according to theme – e.g. if it’s a popular IP; we add more, if it’s less popular or boring sounding, we drop by 1 or 2.

We also adjust based off buzz and pre-orders.  Our rough guide is we get twice the number of pre-orders brought in.  So if we have 3 pre-orders, we ask for 6.  Generally, we sell another 1 or 2 copies in the week of release.

The minimum stock level we use is basically sales for 1 1/2 weeks rounded up.  For popular products (e.g. Settlers of Catan) we add a +2.  It’s 1 1/2 weeks since we restock once a week; so technically we should be at or close to 0 when our restock comes in.  For really popular products, we might get 2 weeks worth of restock.  So if we sell 3 copies of Settlers a week, we’d normally stock 6 copies in-house (3 + 1.5 + 2) at any one time.  For a product that sells once every 3 months (i.e. turn rate of 4); we’d still stock 1 copy.  Those with turn rates lower than 4; we’d selectively cull depending on game and whether it’s an expansion, new game or classic or minimum requirement (e.g. monopoly).

– Stock levels are then further adjusted based on product level turn rates

Once a product passes a certain timeframe (generally for us about 3 months); we start reviewing it for sales.  Anything that hasn’t sold in that timeframe starts getting shifted into the ‘sale’ pile for further trimming to free up our inventory (see Open to Buy again).

And that’s how we manage inventory.  Kind of messy, but it works for us so far.

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

Analysis

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?

 

 

Outside our Power

As a retailer, we have certain advantages over publishers.  For one, we generally aren’t reliant on any one product or even a single company for our existence.  Sure, some companies are more important than others (it’d suck if FFG went out of business tomorrow) but overall, we can spread our risk around a lot more.

In addition, we are the end-seller; the last business entity before the product enters the hand of the customer, which sometimes gives us a very good view of demand in the market compared to publishers or distributors.

Out of Control

Unfortunately, that also means that there’s more than a few things that are out of our control.  Stock, and stock shortage is the major one.  This year in particular has been particularly bad – it seems like 50% at least of FFG’s product line is out of stock, Pandemic and it’s expansion was out of print for a while this year, King of Tokyo and Smash Up the same.  Almost all the hot games that have been released in the last year and a half or so seem to have gone in and out of stock.  It’s incredibly frustrating and bad for business.

Worst are the constant delays in production – slipped deadlines, bad information, price increases or stock shortages.  Luckily, most customers don’t blame us for this – but it does happen.

Planning for Others

They say no plan survives contact with the enemy. Well, in business, no plan survives reality.  Like in the army, the only thing you can really do is build flexibility in  your plan and your business and keep a reserve for when things don’t go right.

Oh, and have a little Luck on your side.

Professionalism & the Gaming Hobby

Gaming as an industry is filled with enthusiastic amateurs.  Colloquially there are quite a few different ways to define the difference between professionals and amateurs including:

  • professionals get paid
  • expert levels of specialised knowledge or skill
  • high standard of ethics, behaviour and work activities

As an industry that’s us.  Very few designers, publishers or retailers get paid.  Certainly not for the amount of work that is put in.   Yet, what I’d like to discuss in particular is the last point.  The standard of behavior and work that we see way too often in this industry makes me think of amateurs.  Some of the behavior we see include:

  • slow, sporadic or non-existent communication
  • missed deadlines
  • lack of basic planning
  • placement of personal obligations over professional

It’s frustrating because quite often, all these results in lost sales for us and the publishers.  If it takes 5 e-mails and multiple phone calls to just get 1 simple ‘is this in-stock’ query answered, we’re much less likely to do business with you the next time.  If a distributor closes during the busiest times of the year, we can’t make purchases from them; resulting in loss sales for us as we run out of stock.

Why is this so prevalent? I can make a few guesses:

  • Passion driven involvement – a lot of people get into this business because they love the games, not the business side of things.
  • Low cost of entry – when you don’t have a lot to lose, it’s not as important to do it right
  • Low potential profits – unless you have a stellar hit / grow multiple retail stores; the chances are you aren’t ever going to make a lot of money.  So what’s the difference between losing 1 sale here or there if you aren’t going to make the money anyway?
  • Status quo – everyone else is like this, so why not?

There’s not much we can do about this, beyond blog about it and ‘punish’ the publishers / distributors /etc who aren’t that professional by taking away our business.  Still, some days it drives me nuts.

Note that I don’t discuss ethics – there’s very few people we’ve run into who we’d say are ethically unsound.  Good intentions are everywhere, it just doesn’t necessarily make up for the lack of professionalism.

Z-Man Games : 2 Months After

It’s been 2 months since the biggest publisher since Days of Wonder (i.e. Z-Man Games) has gone exclusive on us.  It’s been a rough couple of months in keeping stock for the games; as I’m sure it has been for Filosofia.

The Recap

Z-Man Games announced that they were going exclusive with Alliance in America 2 months ago.  However; they were then barred from selling to Canadian retailers like us forcing us to buy from either Filosofia (Z-Man’s new owner) or a Canadian distributors.

The Effects

As many of you know, we don’t buy from Canadian distributors.  The cost is significantly higher than purchasing from the US and there’s a lot less breadth and width among the Canadian distributors.  That means quite often we’re buying direct from Filosofia.

Here’s a few things that we noticed:

  • a higher cost per game of 3 – 5% due to shipping
  • increasing our minimum stock quantities by about 30% (roughly $1,300 dollars) for Z-Man Games
  • More out-of-stocks for longer periods due to much slower ship times

The biggest issue is the increased costs and the out-of-stocks.  It’s actually hurting our sales and I don’t see this changing.  It’ll be particularly interesting when we come to the new releases for Z-Man since we aren’t likely to be able to restock those games as fast either.  And while I understand this change is probably not something that matters to the publisher since we just aren’t that large a part of the pie; it’s still frustrating for us to not have stock of board games in Canada.

 

Shipping : An Evolution

Over the years, we’ve evolved how we shipped orders from the store.  I thought it might be amusing to some to see the evolution and changes:

In the Beginning

It was kind of simple in the beginning with one person doing it all.  The order system was pretty simple and all handled by 1 person:

  • Print order out
  • Pull products (which we had only about 400 SKUs or so then!)
  • Pack order
  • Drop off at Canada Post outlet

3rd Party Logistics Company

When that became too much work for 1 part-time person; we looked into and moved to a 3rd party logistics company.  They would store all our products, do all our receiving and then ship them out for us.   Things got complicated then as we would:

  • Receive an order
  • Process order into 3rd Party’s software (essentially creating a 2nd order on their system)

The 3rd party company would then:

  • Print out packing list
  • Pull products from list
  • Package the order
  • Have Canada Post pick-up orders

In-house Shipping Again (1 person)

Unfortunately, we just weren’t big enough to handle the kind of costs the logistics company was charging us.  On an average order; we were getting charged an additional $4.00.  So we brought everything back in-house; with one small change.  We started getting Canada Post to come by to pick-up the orders instead of manually dropping them off.  This 1-person procedure would last for a few years till we had our first full-time hire.

The first 2 person ship procedure

Finally, when we hired someone we started splitting the process a bit; making it a tad more streamlined.  We split the Processing of the Order from the physical Packing, having 2 different personnel working on this.  This gave us a tad more flexibility; which was a nice addition.

However, what we noticed was that our error rate was slowly creeping up.  This came from a few things:

  • less experienced packers
  • much larger stock – SKUs of over 1,500
  • higher volume of orders

All this resulted in us re-thinking what we were doing and bringing in a new process.

Double verification

Instead of having one person just do all the physical shipping, we started splitting the procedure up further.  This resulted in:

Person A:

  • Processes Order
  • Pulls Products for Order

Person B:

  • Double-Checks Pull
  • Packs Order
  • Ships Order

With the actual products being double-checked, we started seeing a slow drop in error rates.  It’s still not perfect yet, since humans do err but more errors are caught in-house than going out.

Next Steps

So what’s next? More automation.  The ideal would be the addition of barcode scanners to the entire process.  Each order that we ship would have a barcode on it; with each product a barcode associated.  We’d then scan the products as we pack, ensuring that the right product (and the right number of products!) went into each order.    That’s a while away though – that will require a huge amount of work including scanning all our products and having a program to do all the above or finding one that does it.  For now, our little 2-person procedure is working out.