The Dumping of Archenemy: Nicol Bolas 2017

I promise that this is my last post about Filthy Discounters for a while and that I will return to my regular semi-useful entries soon.

The new Archenemy: Nicol Bolas is a great product. It’s a boxed multiplayer Magic experience where you’re playing Magic: The Gathering, rather than a crappy board game with the MTG assets pasted on. It’s thoughtfully designed and by all reports a blast to play. It should have been great for a casual-focused store like mine.

It wasn’t.

Customers tipped me off early that the value of this product was being shredded before it had even been released. “Are you guys going to carry the new Archenemy box? Are you going to match the online price? Why are you making that face?”

Sure enough, I found that Massdrop had this product on presale at a price that would give a 16% margin over the direct price before fees. Unlike many Massdrop campaigns that have low limits on the total amount of product being dumped, this campaign offered 900 units, which soon became 1200 units as they realized that they were going to sell out.

16% margin doesn’t leave enough money to be able to afford the correct product image.

I immediately cut my preorder number from sixteen to four, and then to two. The sales response that I got after release totally justifies the first cut, though I will probably end up ordering another copy or two.

1,200 units is a lot of units. I had to know where this product was coming from, so I and an out-of-state friend both ordered from the Massdrop campaign on different days. The packages that we received both had Massdrop’s administrative return address and no other information, but the tracking told us that both of our packages departed from Rockford, Illinois.

Of course, it’s possible that there were multiple sources for this campaign, but the posts about increasing the limit from 900 to 1,200 referred to a singular “vendor” that had secured more product. If there were multiple vendors and the Rockford, IL location that sent packages to both me and my friend sent out a modest 50 units, then the odds of both of us drawing the same vendor are 0.17%, or about 1.7 in a thousand.

I really did expect to find a distribution warehouse behind all of this given the volume involved, but as far as I know there aren’t any of those in Rockford. I reached out this morning to the stores in the area that seemed likely to deal in this product.

Black Dog Hobby and Game answered when asked if they were the ones who shipped the product for this campaign: “No, it wasn’t. We don’t deal with Massdrop at all and don’t​ do much with MtG either.” The person on the other end of the chat gave me some great information about the area and the stores that serve it. Thank you!

Cataclysm Games would neither confirm nor deny: “Hi Paul, we sell through many outlets, but we generally do not share specific information regarding products we sell through 3rd party outlets; we always direct people to our web site, I’m sorry, but it’s a policy of ours to not discuss our sales outlets other than our website or physical location.”

The Gaming Goat, which quite honestly I suspected to be the source, flatly denied it: “Wasn’t us! Sorry!”

Hobbytown USA told me that they “do not deal with any magic the gathering products.”

Top Cut Comics: “We are not a seller on Massdrop, however we do have the Nicol Bolas Archenemy in stock.”

You can draw your own conclusions, but it’s always possible that there’s some other business with a shipping/receiving center in Rockford, rather than one of these stores being the culprit. I bet distribution knows. It’s hard to forget a 1200-unit order.

I wanted to get this information out, but other than the full force of my professional contempt being directed at the source of this dumping of a good product, none of this is really actionable, because it’s all within the rules. Wizards of the Coast allows distribution to dump immense amounts of products onto sellers who will happily destroy the market value of an otherwise solid product. Short-term, it’s a big win for WOTC and the distributor, both of whom will get their money whether the margin is 16% or 45%.

Long-term, this behavior eventually leads to a brand full of products that are either ultra-hot, ultra-limited unobtainium, or flogged-to-death racehorse corpses that lurch out of the opening gate and then immediately plow into the mud. It leads to fewer profitable game stores, which means that the stores which remain will be under-capitalized garbage hobby stores, where “hobby” is a descriptor of how seriously the operation of the business is taken rather than a designation of the store’s primary product type. The players who don’t abandon organized play altogether will have to endure the extreme temperatures, mystery fluids, and rodent hazards of their filthy clubhouse stores, owned by suckers who don’t know or don’t care that they’re throwing away the most useful years of their lives.

(The above paragraph is my entry in the Most Vitriolic Blog Post Paragraph Competition, which is a thing that should totally exist.)

There are alternatives. Asmodee recently made a splash by taking steps to more strictly control the flow of their product, and splitting majority-online businesses into their own (crappier) pricing tier. They’ve also implemented a maximum discount policy that protects their products from truly egregious dumping. I never would have predicted this move even a couple of years ago. Frankly, it’s the first glimmer of optimism I’ve had about tabletop games as an industry in a very long time.

The way that margins on many non-Asmodee products in this industry are being driven down is a natural consequence of information and marketplaces becoming more efficient. I would infer from WOTC’s statements about the importance of organized play that protecting these useful intermediaries from destruction would be part of their strategy for keeping their competitive card game profitable.

But if Wizards doesn’t want professionally-operated organized play locations, then they needn’t worry about value protection. They can totally just keep doing what they’re doing.

My Week as a Filthy Discounter, Part II: Early Warning Systems

In Part I of this series I discussed the things I’d learned from slashing prices to match online dumpers in an attempt to recoup some of my investment. Today I’m going to talk about some ways that smaller stores can avoid getting into that situation in the first place. How do you know when a product is going to be something you want to order sparingly?

Accept that, for most retailers, supply is no longer a problem. For a long time, my default position was just to order the maximum allocation from WOTC Direct for any new product. As recently as a year ago I was regularly buying all the product I thought I would need for a set’s lifecycle at the start of the set. I had bad memories of Return to Ravnica shortages, and that had turned me into a hoarder. No more. From now on we order enough to get us through two to three weeks, and then reassess.

Beware distributors bearing gifts. In the run-up to Modern Masters 2017, I received solicitations from my distributors to order boatloads of product. I was getting calls from distributors I hadn’t ordered from in years. We’re a tiny store, and the MTG segment of our business is small in comparison to those of my readers. WOTC employees were telling me that this product was going to be hot. Other retailers were telling me that I wasn’t going to be able to order enough to meet demand. I’m the tiniest of tiny clients to my distributors, so why were they all offering me the moon? If you’ve got a special relationship with your distribution rep and they are hooking you up on a hot product, that’s wonderful, but don’t ever be fooled into the pronoia of thinking that you’re the only retailer getting generous allocation from multiple parties. It is not their job to look out for you. You have to look out for you.

Keep your ear to the ground. Here’s a short list of sources you could check regularly. Most of them are either deep discounters or people living under a popular fantasy that speculating on playing cards is a profitable use of time. In the case of the latter, you’re not checking them out because they’re good advisers. They’re giving incredibly bad advice. But they’re useful in that they and their communities will seek out dumping and deep-discounters so that you can find them more easily. (Thanks to Michael for helping me compile this short list.)

  • Massdrop. Massdrop says they partner with retailers to bring you deals on Magic product, but I suspect that there’s a distribution link in there, too. In the past they’ve stuck to products already determined to be stinkers, but they’ve started doing preorders, too. As I type this there’s a 1200-unit Archenemy preorder: $37.99 on a $60.00 MSRP product that hasn’t even been released. Feel free to take a look at your direct pricing on this product and weep. We’re cutting our order from 16 units to 4. Being on the Massdrop mailing list is tremendously helpful when determining what product is being dumped.
  • The mtgfinance subreddit. Most of the discussion here will be on singles speculation, but this community also tends to upvote “great deals” on sealed product. I find it helpful to skim the headlines every day or two.
  • Longer-format pundits: If you can wade through all the content that isn’t relevant to your dump-spotting goal, Rudy and Saffron Olive occasionally will tip off their audience to an impending deep-discount opportunity on sealed product. I haven’t personally found that it’s worth my time. As in real-world not-silly finance, remember that commentators frequently have a personal financial position in the matters they discuss, and unlike the real world, MTG Finance folks don’t have anyone insisting that they disclose those conflicts of interest. Presumably both the guys I’ve linked would give you the same advice.
  • The #mtgfinance twitter tag is worth glancing over.
  • You probably have a couple of regular customers who have said things like, “I invest in Magic cards as a hobby!” Find these people and befriend them. Don’t trust them, because they’re wasting their time and probably making poor financial decisions, but be there to listen to their excitement about the latest thing. “Hey Jeremy, you do the Magic Finance Thing, right? How’s the new box set looking? Where’s the cheapest place online to get it?” In exchange you can be there for these people when they realize that the game was supposed to be fun all along.

Know that missing a hot product is inevitable. Unless you’re ordering more than you can possibly sell at a healthy margin, there will inevitably be a product that will be in greater demand than your supply. On a long enough timetable, it’s inevitable. If it makes you feel any better, make a list of the last 20 product releases, write down how much you bought, and make some notes about what it took to sell through it. Would missing on one or two of them have been cheaper than over-buying the rest?

More than anything, stop being a speculator. You almost certainly do not have enough information to decide to buy a sealed Magic product and stick in your store’s closet for five years. You almost certainly do not have the cash to invest in that kind of endeavor, and if you do, you’d be better served paying off your house or maxing out your tax-free investment account contributions. You are a retailer. The difference between speculating on Magic releases and buying lottery tickets is that you can probably convince your spouse that speculating on Magic releases is part of your job. It’s not. Why are you hurting your retail business with poor practices in order to speculate on things you’re so frequently wrong about it? Stop it. Your family will thank you.


My Week as a Filthy Discounter, Part I: Lessons Learned

Just over a month ago, I realized that I was doing the right thing by protecting the value of Magic: The Gathering products in my store and being consistently punished for it. I resolved to blow a bunch of this stuff out at market price and change my ordering behavior going forward to better reflect the new reality.

I embraced the salt for my advertising campaign. It was a lot of fun.

Lessons learned:

  • Even at below-market prices, demand is not infinite. We put a bunch of stuff out on the table, but the centerpiece was 20 of my 30 remaining Modern Masters 2017 booster boxes, marked at $175 plus tax. In a week and a half, with lots of paid advertising, we sold 11 of the 20 boxes.
  • Bad transactions drive away good transactions. A customer came in looking to buy two non-discounted Standard booster boxes and a Bundle (Fat Pack) but decided to buy one of our discounted Modern Masters boxes instead. Several days after the sale ended, a customer came in looking to buy two of the discounted MM17 booster boxes, but finding that they were no longer on sale, chose instead to spend $400 on singles. Which transactions would YOU rather encourage?
  • They’ll always want just a little bit more. Several customers became quite grumpy that we wouldn’t, for example, sell them four booster boxes at $150 each. Everyone gets this sort of negative customer interaction once in a while, but we had more of them during this sale than we’d had in months prior.
  • Opportunists will seek ways to take advantage. A couple of our purchases involved a customer buying a box, sitting down to bust the packs, bringing all the rares to the counter to trade them in, and becoming dismayed that we’d dramatically dropped the trade value on the set’s singles in anticipation of this sort of behavior. More negative customer interactions. More disappointment. Some retailers will throw around the #notmycustomer hashtag, but it remains that my relationship got worse with people whose money I’d like to have in the future, and the blame lies with me for sending inconsistent messages about our value proposition.
  • The performance of the product was irreparably harmed after the sale. We’ve sold zero MM17 booster boxes since the end of the sale, and last month’s sales of MM17 booster packs dropped by 70%. If the product was a poor performer before the sale, it’s a total dog now.

We still have about 18 booster boxes of Modern Masters 2017. At this rate, we should run out in early 2019. To think: I could have had 100+ more boxes! The publisher and my distributors would have gleefully enabled my bankruptcy. It’s not their jobs to look after retailers, and we must remember that.

In Part II, I’ll talk about the way to move forward. The obvious answer seems to be, “Don’t order as much stuff.” There’s a little more to it, and some helpful resources that will help you know when to tread cautiously.

Self-Deception and Breakfast in Your Bathrooms

This weekend I heard through a friend-of-a-friend chain of messages about a non-retailer who was travelling and stopped in to see a highly-recommended local game store. The visiting gamer had one primary takeaway from the experience: The bathrooms were gross. Of all the things that could have been memorable about this store, which is somebody’s livelihood, the thing that will be remembered by this customer is that the floor was nasty and the place smelled like pee. I wasn’t told which store was visited, but I’m assured that I would know the name.

“Clean your bathrooms” is so basic and often-repeated that it’s a cliche. Wizards of the Coast actually includes it in their literature about how to run a great Magic tournament. Why do so many stores fail to meet this very basic standard?

Cleaning bathrooms is not fun. It’s unglamorous and it sucks up time we’d rather be spending doing almost anything else. And if you think that cleaning bathrooms is gross, you’ll REALLY hate the mess you make learning how to manage people so that your bathrooms get cleaned regularly by employees.

Because it’s a crappy task and we don’t want to do it, our brains will convince themselves either that our bathrooms are not that bad, or that having really clean bathrooms is not important. But I think we can all agree on the following three premises: Having clean bathrooms IS important. Our bathrooms ARE that bad. Finally, something other than our own willpower and discipline is necessary, because so far our willpower and discipline have not been enough.

Almost nobody will do this, but the ones who do will have clean bathrooms: Next week, pick a random morning to come in early. You want to get this done early enough that your employees won’t find you doing this, because they’ll think you’re a crazy person. Treat yourself, and pick up something nice for breakfast on your way to your business. Let yourself into your store and lock the door behind you. Make sure once again that nobody is in the store.

Choose a bathroom. The worse or more frequently-used one is the correct choice. I think you know in your heart which one you need to choose. Don’t take the easy, more comfortable choice. That’s how you got here in the first place, remember? Take your breakfast into the bathroom and have a seat. Not on the toilet, you animal. On the floor.

Don’t bring headphones, read a magazine, or play on your phone. Chew your breakfast thoughtfully and contemplate your bathroom. Look in the corners. Look at the base of toilets and at the undersides of the bowl. Look at the disordered supply storage and the empty towel dispenser. You pay the same rent per square foot in this room as you do for your best-selling merchandise display area or your cash wrap. Many of your walk-in customers will spend as much time in this room as they will anywhere else in your store. Your regular customers and employees will visit this room five to ten times per week. Why are you here? How did you let it get this far?

You will not be able to deceive yourself about the state of your bathroom when you’re having breakfast on the bathroom floor.

I made a table for myself out of a box of drum liners. I’m not some kind of savage.

If you have employees, and you have a nightly bathroom cleaning checklist, and they learn that the boss occasionally has breakfast on the bathroom floor, they will clean your bathrooms. If you’re a one-person shop, you may need to put this on your calendar monthly or quarterly and commit to doing it on a regular basis. Doing so will ensure that clean bathrooms are something that stay on your mind.

Today was the first time I’ve done this, but our bathrooms are clean. Nobody has used this bathroom since my employees cleaned it last night before close. It was mopped with the whole store yesterday morning, and someone hit it again with a wet-Swiffer in the evening. A clean bathroom meant that this was a pleasant, though unconventional morning, instead of a gross time of self-shame.

You may scoff or laugh at me, but if your bathrooms are in need of more attention than they’re getting, this post is deadly serious. What is it that you do for a living? Why aren’t you doing the things that are required to make your store a great place for your customers? Do you want a successful business that improves your life and the lives of your employees, or are you farting around in your clubhouse until the money runs out?

Yes, eating a Spicy Chicken Biscuit on the floor of your game store bathroom is ridiculous, but it’s not as ridiculous as being the owner of a gross public bathroom.