Where to Buy the Goods You’ll Sell
Your primary sources of products will be game distributors and the game manufacturers themselves. Choosing which sources to use and why varies with your priorities and the details of your business model. These are some of the basics procedures of ordering and the factors that affect your supply decisions.
The Distribution Tier
Distributors buy goods from manufacturers and resell them to retailers. This consolidation of resources is a key reason to buy from them. Other reasons include product information, free or reduced shipping costs, and information on sales trends or hot products.
What they Offer
Typically, your distributors call you on Monday (or another day pre-established as your regular order day) and solicits an order. The usual phone calls cover your pre-orders that have just arrived, other new items that have arrived since your last order, and then your restock orders. The distributor should have information on each item, such as price, who makes it, what product line it’s for, and a brief bit about why you should carry it. In general, this information is manufacturer provided, so it’s entirely biased.
A good sales rep will know more about the products, hopefully from having seen them, played them, or tested them. If you have a good relationship with your distributor, he might be able to point out a group of your regular customers who might be interested. “You sell a lot of L5R. This is an Asian-setting RPG that those players might like.”
After an initial period of paying COD or by credit card, distributors often offer options for payment on terms, which can be as much as 30 days. This option allows you greater control over your cash flow. In general, payment terms are growing shorter these days, and your distributor might only offer 1-2 weeks.
Distributors can tell you about promotions offered by manufacturers, such as free signage, shelving, or co-op options. Large distributors sometimes initiate their own promotions, too, often in conjunction with a manufacturer. Often, when a publisher initiates a program like this, they institute it through the distribution tier rather than handling it themselves.
Ideally, your distributor will have a good website that allows you to browse and pre-order upcoming releases. It should allow you to place an order through the site, at your own pace, if you prefer that method over talking to your sales rep on the phone. The site should have real-time inventory so that you can check availability when a customer wants to place a special order in your store.
Why use Distributors
Convenience is the primary reason. You make fewer phone calls, make fewer payments, and have easier return or exchange options in case of an error.
You also build up a relationship that can be helpful in many ways. A distributor who knows you can suggest products to order or avoid. You might be able to return products that don’t do well for you, although policies vary on this issue.
Disadvantages/Cautions
Unless your store is very focused, no single distributor carries all of the products you offer. Most likely, you’ll use a second distributor for filling orders when your primary is out or for buying products lines your primary distributor doesn’t carry. With any decent sales volume, you might end up ordering from 3-4 distributors each week, maybe even making a second order mid-week.
Beware of imaginary discounts when choosing your distributor. At least one major distributor offers a good discount, with seemingly minor exceptions. However, the list of exceptions is now several pages long and includes the dozen or so manufacturers whose products make up 90% of your game sales. If they offer you 47% off retail, but a tally of your invoice reveals that you actually pay closer to 42% regularly, you can bet you’re hitting all of the names on that “short discount” list. It might pay to look for a distributor with a seemingly lesser discount who doesn’t have such a long list of exceptions.
Factors in Making a Decision
Selection. The more products you can buy from a single source, the less time you have to spend managing multiple orders. Splitting your orders also means paying more shipping costs. It also might mean that you’re paying more than you expected for your products because your low-cost primary distributor doesn’t carry that particular line.
Costs. Start with the standard discount, but don’t stop there. Look at shipping costs, minimums for free shipping (if any), short discount items, COD fees, payment terms, and payment forms. If a distributor allows you to pay by credit card, for example, you might be able to get away from those COD fees and still defer your payments up to 30 days.
Ship Time. The magic number is two days. If you can get a restock in two days, you can order Monday for delivery Wednesday and then get in a second order on Wednesday for the weekend. Obviously, one day ship time would be better, but you’re not likely to take much advantage of that. It might help if you’re in a competitive market where that one day means you get product sooner than your competitor, but you’re not likely to order 5 days a week in the current environment of high product minimums and shipping costs.
Fill Rates. Even the best discount is worthless if your distributor is constantly out of stock. The same is true for an expansive selection. If you’re trying to reach a free shipping minimum, a poor fill rate will leave you banging your head on the wall.
Ordering Direct
Manufacturers already have some infrastructure for delivery. They handle a certain amount of consumer orders, they arrange for shipment to game distribution and might have sales channels elsewhere, as well. It’s a fairly simple thing for a manufacturer to accommodate retailer orders as well.
Why Order Direct
Ordering direct offers two main advantages. By ordering direct from companies represented in the distribution tier, you might be able to save some money, depending on the company’s terms. In some cases, you can save up to 20% of the retail price by ordering directly from the manufacturer, although a 10% difference is a more common savings.
The second benefit is that you can buy product not available through distribution. If you only carried products available through distribution, you’ll have a few disadvantages. First, your store’s selection won’t be unique, making it harder to establish a distinct brand. Second, it’s easier for local competition to capitalize on your success. If you pick up War Gods and do well with it, they can buy into the line, too, making money off of the hard work you spent in creating a customer base. If you succeed with a product not in distribution, your competitors will have to hunt the manufacturer down and seek them out to establish an account and place an order.
As a minor and ephemeral benefit, the manufacturers often have product available when distributors are out of it. Sometimes, distributors themselves have to jump through hoops to place orders with manufacturers, and your distributor might not place a restock for game x if they still have game y in stock. A direct order might allow you access to a product that is sold out through multiple distributors.
Disadvantages/Cautions
Time. If you spent 5 minutes per week with each manufacturer you carry in your store, you could easily spend 35 hours per week. There are more important things in the store for you to micromanage. If you do plan to order direct, you might want to assign a regular re-order schedule to each of your direct accounts.
Shipping Costs. You might order $1,000 or more per week from your main distributor, but you’re not likely to spend more than a couple of hundred dollars with a manufacturer, especially for restocks. When ordering from manufacturers, you pay shipping costs more often, both because of ordering policies and smaller orders that fail to reach a free shipping threshold.
Hidden Costs. By diverting ordering from your distributor, you might end up paying more for your products you buy from that distributor. If your discount is based on your sales volume, and you start buying a large amount of product from another source, you could end up paying more for all of your products, while paying less for a single product line.
Longer Delivery Time. Distributors have a full-time staff who do nothing but receive product and deliver product. Manufacturers are in the business of designing games. Their “warehouse staff” might be the junior game designer’s duties after 3 PM. Instead of shipping your order the same day, which is a service you can expect from your distributor if you get the order in early enough, it might take up to a week—longer, in some cases—before your order leaves the manufacturer.
Factors in Making a Decision
I’m not a big fan of ordering direct to save money on products that are available in distribution. From my experience, the extra time spent, the shipping costs, the delay in receiving, the harm done to your distributor relationship, etc. all combine to make any savings of less than 15-20% negligible. For a particularly large order, (say, a $1,000 or more), a lesser percentage might be worth seeking.
I do recommend seeking out direct orders to gain a competitive edge. Going to conventions and the GAMA Trade Show, checking your mail for offers, and listening to your customers might very well reveal an exciting product that your competitors don’t have. Order direct for something that will bring customers into your store, price the product to make money, and then have your well-trained sales staff upsell them on accessories. Make them new customers if you can; if you can’t, send them back to their regular store broke.
Recommended Direct Orders
Games Workshop. Games Workshop’s prices through distribution are pathetic (though their direct prices are poor, too). Improvements in their customer service and internal policies make ordering from them manageable. Because your sales volume of their products is likely to be very high, then difference in margin is considerable. Ten percent of $50,000 per year is a good number to add to your bank account.
Crystal Caste. I totally admit that this recommendation isn’t for the financial reasons I explained above. I just loved working with Mark Alexander. However, Crystal Caste also has a 100% exchangeability policy. If you end up with a display case full of orange and yellow dice, you can send them back for colors that sell.
Wizards of the Coast. Some stores do and some don’t. They require certain criteria for setting up an account, like having a game room, and they don’t accept all stores. Many retailers feel that ordering directly from WotC is not worth the harm done to your distributor relationship. Personally, I used to order initial shipments from WotC and restocks from my regular distributor until I found a distributor who offered a better price on WotC products. That distributor got all my WotC orders, new and restock.
Used Games
If you plan to sell used games, you might want to buy an initial stock from a convention, eBay or a local used bookstore. Expect to pay more than normal from these sources. Once you’ve “seeded” your local market, you should be able to find all you need from your own customer base.
Put up signs in the store, hand out flyers, take out ads in local convention programs, and tag your existing advertising with “We buy games”, and you should have plenty or product available to you.
