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Fear & Loathing Online

June 30th, 2012 Posted in business
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As an online game store, it sometimes feels like the entire industry is out to shut you down.  We’re the evil demon in the mists, the boogieman destroying the fabric of the gaming universe.  We are the bad guys.

The Loathing

We’ve had publishers refuse to sell to us, restrict sales of certain items, issue pricing dictates and offer Brick & Mortar (B&M) stores additional retailer incentives. We’ve had distributors refuse to do business with us, or attempt to dictate how we run our business if they do sell to us, or selectively refuse promotions to us because we are an online store.

Other retailers have attempted to get us discredited, refused to talk/work with us in their industry forums and been actively hostile in person.  We’ve even had some predatory marketing practices targeted directly at us.  And the purchasing public can be just as hostile (if not more so) than any of the above.

The Hypocrisy

What gets me is the hypocrisy often shown by the above.  Many of these publishers will sell online & direct themselves and/or sell to big box stores.  They’ll go to Kickstarter (another online sales method) and provide incentives to customers but not provide them to retailers, cutting directly into a retailer’s customer base.  Yet they’ll state in their very next breath that they are all about supporting ‘the gaming industry’.

The public will complain about online retailers, but then refuse to pay more than MSRP or for the space they use to try out games and socialize in B&M stores.  They’ll buy from Amazon, yet continue to talk about ‘supporting local businesses’.  Retailers complain about online stores but then use eBay to get rid of their additional stock or run online stores themselves.

Distributors at least are mostly up-front about their motivations – they just want your money; and often would sell to you if they could.

If There’s One Thing…

Can’t we all just get along? There’s a lot to love in this business, but this aspect of it is just frustrating and disheartening.  Some days, I really do just want to go evil. Then I take a deep breath, tell myself it’s just business and get on with being the best damn game store we can be.

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  1. 7 Responses to “Fear & Loathing Online”

  2. By CS Hearns on Jul 12, 2012

    I have to admit. My priority is always towards the game designers. I find they don’t get paid enough, so when I can buy directly from them, even though that’s usually the most expensive route, that’s the one I take.

    However, barring that, which is the most frequent case, I just want to pay as little as possible, so I will gladly purchase online if those are the best prices. Let’s face it, I live in Montreal. My options are to either go to shops that are hostile to women or the one shop that isn’t, but that has ripped me off twice so far (quite intentionally).

    All my dealings with online shops have been smooth and mutually beneficial.

  3. By Tao on Jul 12, 2012

    Sorry to hear about your experiences in Montreal but glad we’re doing a good job 🙂

  4. By Nicholas Vitek on Jul 12, 2012

    Speaking as a publisher, Living Worlds Games, it is impossible to compete with online retailers such as your store. Publishers absolutely must sell their game at MSRP. So for a $25 dollar game, I must sell it at $25. If a publisher sells their game below MSRP, that is a straight admission that the game isn’t worth MSRP and should have been priced lower, which in turn annoys online and B&M stores.
    Meanwhile, online retailers can sell it for $16.50 and then bundle it with free shipping.

    In order to keep sales, since I can’t match price, I need to find ways to make my own game attractive to the people who want it but can get it for 9 dollars cheaper elsewhere.

    There are others, but some of the main ways a publisher can operate:
    a) Add value to the purchase
    b) Restrict access to the product
    c) Standardize product offering/price

    If I try to add value to the purchase to attract customers, online and B&M stores start to complain. If I offer it to B&M stores since they generally sell almost at MSRP, then the online stores want the same treatment but then I lose even more money because now I’m paying extra for content that doesn’t meet its original goal.

    If I restrict access to the product to only my store, I have now planted my feet in the ground that I will not have a wide audience without a massive popularity drive online or a grass roots style movement. There is no visibility of the game. If I allow B&M stores to carry it (since, again, they sell at ~MSRP), then online retailers complain and stomp their feet.

    Likewise if a publisher attempts to standardize the offering (Price fixing!!!), etc.

    In the end, as a publisher, I basically have to watch the majority of the profits generated by a game be taken by others while being content with such a small fraction, you might as well do it for the love of the hobby and not the game.

    Online retailers, with their marking of games 40-50% off make it impossible for a publisher to offer the game at full MSRP and to see any real sales at that price. Thus, we have make do with selling to distributors for 35-45% of MSRP. If online retailers were not pricing publishers out of the direct sales market, mainly by slashing prices to the point of nearly cutting their own business throats due to the sliver of profit they decide to make, then there could be a more symbiotic or mutually beneficial relationship.

    I want to support my local gaming stores. We are working on projects to support them now.

    I would love to work closely with online gaming stores. However, until such time as online retailers stop deep discounting product causing local gaming stores to be absolutely destroyed, it seems hypocritical to me to do that. If I support online retailers heavily, I have to accept that the local gaming stores will die out over time.

    (Off-the-cuff counter-discussion)

  5. By Tao on Jul 12, 2012

    As I understand it, by offering to sell to distributors / retailers you look to trade margin for volume. That’s what getting the product out to the various stores should do. Whether you sell a product to an online store or a B&M store, because it is going through the distributor channel your ‘profit’ is the same.

    As such, what seems to be assumed (and do feel free to correct me if I’m wrong) is that:
    – online stores ‘steal’ sales from B&M stores
    – that all Internet sales would come to your (the publisher’s) site if MSRP was kept

    I can’t speak to the 1st; because I don’t have any numbers. I don’t think anyone does. If someone has any stats on that, I’d love to see it – or hell, on any stats between the difference in sales for a product that was sold only on a publisher site, publisher & B&M and everywhere.

    As for the second, there’s a secondary assumption that online stores don’t generate demand like B&M stores. As such, any sales that were going to be made online would be ‘yours’ by right. Considering at least 50% of our customer base are return customers, I’d say that assumption is very wrong. We do provide a service, over and above lower prices which brings those customers back.

  6. By Nicholas Vitek on Jul 13, 2012

    This is true, margin for volume is the trade off. However, in my view, by reducing the price to 60%, the online retailer reduces the visibility of the product due to B&M not being able to compete and thus not stocking the game. So, in effect, instead of trading margin for volume, I’m trading margin for slightly more volume while alienating B&M stores.

    I do feel that online stores that slash prices down to bare bones are driving sales away from B&M stores and thus reducing visibility and growth of the hobby.

    I do not feel, and definitely don’t agree, that all Internet sales would come to the publisher’s site if MSRP was kept. Some would, but definitely not all. There is definitely something to be said about one stop shopping for product that is appealing to an online retailer due to combined shipping and the need to not have to deal with 50 different accounts.

    Online retailers and B&M store both provide the service of the one-stop shop.

    However, online retailers are the only ones who can offer razor thin markups thus they have a direct advantage over the B&M stores and it is this that I believe harms B&M stores and the ability to grow the hobby. In the end, my issue is with the unbeatable price reductions due to minimized overhead. In the short run, it is great for consumers, but I believe in the long run it harms everyone.

    (Note: I also believe that B&M stores have work to do in order to drive more sales for themselves, the first being to clean up the store and not plaster their window front down with posters so that it looks unprofessional).

  7. By Tao on Jul 13, 2012

    Ah, thanks for clarifying. Do you have any numbers from your experience to show the drop in sales from your above scenario?

    Price is certainly one factor in a customer’s purchasing decision tree, but it certainly isn’t the only one. Customer service, convenience, selection and events are a few others.

  8. By DoctorJ on Jul 13, 2012

    I read people waxing eloquent on the virtues of the B&M stores, but I’d love to see evidence that they actually do grow the hobby. Maybe there is some, but I don’t see it. The vast majority of the B&M game stores I’ve been to are dingy, geeky places and not particularly welcoming to newbies. I remember the first time I took my (non gamer) wife to one: she looked at me like I’d taken her to another planet. I’ve also found people whom I’ve converted to gaming to experience huge sticker shock at B&M stores, especially when their only experience with game prices comes from Toys R Us or Wal-Mart. But if I can show them that the game that’s $50 at a B&M store can be had from an on-line retailer for $35, they’ll make the plunge. I usually steer my boardgame recruits to on-line stores or offer to let them piggy-back on one of my orders so they can get free shipping. I guess I’m skeptical that there’s a lot of newbie walk-in traffic at most “real” games stores. Maybe I’m wrong, but I’d love to see actual evidence of that.

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