Used Games – A Business Perspective

We started selling used games over a year and a half ago now, back in August 2012.  It’s been a interesting experiment, one that we got into due to demand from our customers and a view to making our business somewhat differentiated.  As far as I know, we’re the only Canadian online store that does take used board games.  It’s actually created a few significant challenges, which I thought I’d write about.

The Quote

One of the hardest parts of setting this up was figuring out what the quote / how much we were going to pay.  We had two options – have a general guideline and ‘wing’ it or have a more formalised quoting procedure.  Within that, we also had to decide on the discount we provided for demand (i.e. how fast it’d sell) and damages.

When we first started, we had damage grades up to D.  Grade D is still on the site as a guide, but we no longer take such games as experience has shown that customers just don’t buy Grade D damaged items.  Another question was the demand ratio – at what discount were we going to place on products that sold slowly.  It’s interesting to note that some products have ‘sat’ for ages, while others like any bestseller flies off the shelf.

The trickiest part right now is our Out of Print items and one that I think we’ll be revising very soon.  Certain long out of print items are easy enough to price – there’s a decently stable OOP market (e.g. Heroclix).  On the other hand, newer out of print items see a lot more fluctuation and can be priced at an extremely high level.  It’s something we have to adjust I think as we find ourselves with some great OOP items, which are for one reason or the other, extremely highly priced.

The Inspection

Outside of quoting, inspecting games has been the biggest headache.  Used game counting is low on the general priority list of tasks that need to be done by the staff in-house.  There’s always something else to do – from cleaning to shipping to adding new products to the site.  So Used Games get shoved to the back of the pile, with the result being that we often get a huge backlog. It doesn’t help that we often have ‘dumps’ from customers – we’ve had as much as 50 games come in from 1 customer before.

The actual inspection process took a few revisions before we got it right.  Initially we didn’t have an inspection fee, but after a bit of work we realised we were deathly afraid of GMT and FFG games.   Too many counters, too many chits.  With GMT in particular, finding an actual counter count was often difficult – we have had to look up counter sheet images to get an idea of quantity.  Since then, we’ve instituted a processing fee which kicks in when a game is taking up a significant amount of our time.

Unfortunately, the inspection process is necessary.  While 90% of all games received are complete, the 10% of missing components can be difficult.  Sometimes, the missing parts are significant enough that we can’t sell the game.

The Payout

One of the most interesting / tough parts of doing used games is how they are paid out.  It’s a matter of cashflow really – 99% of our gift cards we pay out are used within a week.  I’d say at least 80% are used within 48 hours.  Games however can take longer to sell – anywhere from a few weeks to a few months.  While the gift card isn’t cash – we still have to replace the products bought, which is a cashflow hit.

It’s one factor we have to take into account on how we price and/or quote our used games at.  We obviously want to get as much money as possible, which means pricing these products higher but we also want to ensure that we do not have too significant a delay between payout and sale.  Like any of our other product lines, we want a decent turn rate from this area.  In addition, we need to generate a higher overall profit margin than with our normal games due to the cost of quoting, receiving, inspection and customer service.  It’s significantly more work to sell our used games than to sell a new game which has to reflect in our overall profit.

Building Capacity

A conversation Randy and I had a few months ago while I was down came to mind recently while a nasty flu bug hit the office.  We were down 3 people and the office was chugging along, slowly but surely.  Everything that needed to get done – the shipping & customer service, purchasing & receiving was happening.

It’s something I was talking to a prospective entrepreneur up here about too in his business plan.  When you develop your plan, your pricing model and plans; you have to build capacity in the system.

When Things Go Wrong

Extra capacity is required when things go wrong – if there’s no slack in your system, you could find yourself struggling to catch up.    Let’s say you work 12 hours a day yourself – now, if you have to take a day off, to catch up you need to do another 12 hours.  If you can only add 2 hours a day to your regular day, it’d take another 6 days to catch up.

Obviously, that’s not always true – not everything needs to happen immediately.  Projects can be pushed off, nice-to-have things are set aside, pre-orders left till later.  Yet, theoretically all that work you did in the 12 hours has to be done sometime – so what now?

Sickness isn’t the only thing that can throw you off. Unexpected problems like a server migration going bad, a shipment being delayed or damaged or just a bad traffic jam could all push you behind schedule.  Building a little slack in the system is a good idea in many cases.

When Opportunity Knocks

It’s not just things going bad though that you need extra capacity but for opportunity.  If you can handle 12 orders a day, 16 at a push once in a while; what happens when you are suddenly doing 16 orders everyday? It’s great but suddenly all that slack is gone and that 16 was a push anyway.  What if all that great publicity pushes it to 20 orders a day? How do you handle that?

Or you have the chance to hit a convention on the weekend at a really good rate – but you just don’t have the people to handle it.

Extra capacity means you have the time and space to jump on opportunities when they come calling.  It’s not just about planning for the worst, but for making sure you can take the opportunities that come calling.  Planning for capacity is really planning for success in that sense.

The Plan

So, what do I mean by capacity? It means having a little bit of slack during your workday, not working a 100% all the time you are there.  It means having a backup plan for when things go wrong – people or processes that fill in when needed.  Here’s a few things we do:

  • Cross-training employees so that there’s no single point of failure
  • Part-time employees – having a few part-time employees who can increase their hours as necessary to deal with short-term bumps in work
  • Flexible processes – knowing which areas of a process (e.g. shipping) where we can cut corners if necessary
  • and lastly; an understanding significant other!

I’m not joking about the last one.  If you have an SO of any form, you need them to be understanding if/when you suddenly have to work 16 hour days.  Of all the employees available, you are the one who can throw in the most additional work at the shortest notice, often at the highest level of efficiency.  Which means your free time can often be the slack in the system.  So making sure you nurture that relationship so that when you need to kick it up a notch, you can.

Bugs, Bugs, Bugs

I thought I’d quickly write a little explanation of what happens when a customer (or we) find a bug in the website.   Most of the time, the process goes through the following stages:

  1. Awareness
  2. Logging
  3. Replication
  4. Triage
  5. Coding Fixes
  6. Testing
  7. Deployment

Let’s discuss them in more detail:

Awareness

Pretty self-explanatory, a customer or one of us comes across a bug.  We get told about it.

Logging

Once a bug comes to our attention, we log the bug information (or what is mentioned to us as a bug).  In some cases, the ‘bug’ is not a bug but a feature or a core funcitonality – e.g. we don’t store credit cards or allow customers to edit orders themselves once an order is placed.

Replication

Time to see if we can replicate the bug.  A good 20 – 30% of all bugs reported to us are not replicable.  Whether it’s due to different browsers or operating systems, specific extensions on browsers creating conflicts or even the server / network the customer is on; we are not able to replicate the exact environment that caused the bug.

If we are not able to replicate a bug, we can’t fix it.   Thus the log – we keep a log on this issue, see if it (or something close to it) happens again.  If enough people manage to replicate this, quite often we are able to acquire sufficient information from the various individuals to finally replicate the bug. Then it’s on to the next step…

Triage

How big an issue is this bug? Bugs are assessed on a variety of factors:

  • number of individuals affected
  • where in the checkout process this is happening (a checkout bug is much more important than one in the article pages)
  • number of functions it affects
  • other bugs that have not been fixed
  • complexity of problem (if it’s something I could fix compared to a professional developer)

Once the assessment is done, we slot it into our ticketing system with our developers

Coding Fixes

Next up is the fixes and coding.  Dependingo n the complexity of the problem, either I or our developers will work on the problem.  If it’s an issue which our developers are able to solve, we normally have to wait due to their workload.  This can often cause long delays.  Unfortunately, finding competent developers whom we can trust is difficult.

Testing

Once a fix has been made, we have to test it.  Obviously the developers have tested it, but to ensure the site does not break we generally do testing ourselves as well.  This often can bring up new problems, so off we go back to coding fixes till the fix passes.

Deployment

Finally, we deploy the fixes.  At this point, we do one last test to make sure the bug is fixed and nothing else breaks.  Once that happens, we are good to go.  We keep an eye on the problem, just in case it crops up again, but generally it should be fixed and we’re good to go fix another bug.

Working on the Business

One of the hardest aspects of running a business is that you often have to work in the business as well as work on the business.  Finding the right balance, especially when you’ve grown significantly can be extremely difficult.  I’m using by the way, terms found in the E-Myth.

Working In The Business

When you work in the business, you do the work that is needed to keep the business running on a daily basis.  In our case that means shipping out orders, answering customer e-mails, doing marketing and the like.  Quite often, the work that you do ‘in the business’ is the same from day-to-day.  If no one does this, you don’t have a business.

Working On The Business

Working on the business often means developing processes, but can also mean developing the vision and strategy for the business in the future.   It means putting in writing all the things you are doing, and then looking at those things to figure out a better or more efficient way of doing it.  Sometimes, it’s less efficient but more thorough – like our shipping process.  We’ve progressed from a single shipper doing a single check to multiple shippers doing multiple checks at different points in the shipping process.  It’s driven our shipping error rate down from 2 to 3% per shipment to around 1% at worst.

The Issue

The biggest problem though is finding the time.  It’s really, really hard to do this because you are often so busy working on the business that finding the time and mental energy requires creating space.  That space often means a decline in profit (or personal time) because someone still needs to work in the business.

It’s even worst when you realize that often, the people you hired aren’t going to be as good as you.  Or as dedicated.  I can still often do more work, more efficiently than most of my staff – the general numbers are anywhere between a 10 – 20% decline in efficiency.  This can grate.  In fact, it does grate on your nerves as you wonder why you are paying these people your hard earned money to do less.

Except if you keep thinking like that, you end up burnt out, doing everything and wondering why you can never keep up.  Why as you grow larger, things just get harder and harder.  Quality suffers, you burn out and somehow there’s just never enough time.  Learning to build better processes and work on the business is a hard, hard thing to do – but if you don’t, the business and eventually your customers suffer.

The Caveat

As I’ve mentioned before, there is a choice to grow or stay small.  Some companies, some individuals decide to stay small.  And a lot of these concepts of ‘working in the business’ or ‘on the business’ is something that only really matters if you want to grow (or have hit a certain size).  Sometimes, staying small is the right choice.

Chaos & Order

I’ve noticed there are 2 types of people – those who thrive on Chaos and those on Order.

Chaos

I’m Chaos – I work well under periods of stress and high-volume information flow.  Most entrepreneurs are like me too from my experience – because the very act of starting a business requires you to be able to handle that level of chaos.  I don’t necessarily work very well with structure and bureaucracy.

On the other hand, as an entrepreneur you need to be able to create (or at least understand) Order in your business.  Not everybody is Okay with changing how you do things 3 times in 2 days.  Or learning a whole new set of skills every 3 months as you grow.

Order

Which is where, luckily, Kaja seems to come in for us.  She’s more of an Order bringer; which is great since I hand off a lot of the routine work to her.  She helps write all the procedures and files them away in a nice manual.  I might tell her to ‘track Shipping costs and postal codes’; but she’s the one who has to do it every day and add it into the daily routine.

The ability to take Chaos and make Order out of it is is extremely important.  It’s not as much fun as riding the edge of crisis everyday; but it does mean that things run more smoothly for everyone.

At the same time, bureaucracy can be the death of a business – especially small businesses. Since we only have a small base of customers, each customer is important and the bureaucracy of processes can kill customer loyalty.

The Christmas Rush – Reflections on Procedures

All through the year, we have been building up processes, dealing with the increase in sales and figuring out how to reduce errors and create processes to make the business run more smoothly.  Christmas is now happening, and all these procedures and processes are put to the ultimate test. Some have failed, some need to be adapted to deal with the Christmas rush and some have worked marvelously.

The Successes:

  • The 2 person ship procedure where one person pulls, another packs.  The process is slightly slower; but definitely more accurate than our previous 1-person shipping procedures.
  • Pre-Orders & the New Board Games pages.  They’re great at reducing customer questions on upcoming products; though we do still get these questions.

The Adaptations:

  • Out-of-stock contacts. We generally contact customers immediately when a game is out-of-stock; but since XMas is here and our orders have passed through faster than normal; we have adapted the procedure to only contact customers who have a product that is only going to arrive after XMas.  This way, we reduce questions and save a bit of time – especially when delays are generally only a day long.

The Failures:

  • Our order procedures for stock.  This is an interesting failure, and the fact that it’s been so complete is quite outstanding.  We generally keep a low level of stock, and while we’ve increased our pick-ups to twice a week; we’re still seeing stock-outs at an outstanding pace (for us).  A lot of this is due to an increase in sales that we just weren’t expecting; but some of the blame has to lie with how we deal with re-ordering product.   I’ll have to review our stats and figure out if there’s something we can do to ensure that we don’t stock out as much after XMas is over; though the puzzle of ‘guessing’ what our sales on new board games are remains.  Frankly, I’m not sure there is a solution to that one.

 

Hiring & Business

It’s amazing the sheer amount of work that goes into hiring someone. Never having had to run the entire process from start to finish, I never really realised how tiring it is and why it becomes so important to reduce your hire rates if at all possible.

I thought I’d list out the individual steps we have to deal with here.

  • Defining the Job
  • Defining chain of commands and management
  • The Job Post
  • Short-listing candidates
  • The Interview Process
  • The Offer Letter
  • Calculating Salary & Withholding’s
  • CRA & the WCB
  • Training (and prior to that, documenting processes for training)
  • Internal Evaluations
  • Job Confirmation

Once that’s all done, you’ve got an employee.  Now it’s the everyday day-to-day management.