Supply and Demand

May 09, 2017

So first, right out of the gate, I want to acknowledge that this blog has been pretty sparse lately. I had some thoughts about what would happen this year, and then, well, the year got incredibly busy. Like, the last three or four months have probably been the busiest of my life. Well, that's hard to say. I've had quite a few months of intense Gloomhaven development, but I think I'm telling the truth. Anyway, lots of interesting things have happened over these past few months, and I find myself moderately less busy now that the reprint Kickstarter has ended, so I'd really like to start writing about those things. Here goes. What I'd like to talk about first is how I managed to upset board game retailers and distributors two separate times in the span of as many months. This is not a point of pride for me, of course, but I find the whole series of events rather fascinating. First of all, it should be stated that I printed as many copies of Gloomhaven as I possible could the first time around. Well, that's not exactly true. I printed more copies than I reasonably should have the first time around. I printed so many, that there were a few months in there where I was considering getting a sizable loan to cover the costs of shipping. That ended up not being the case, thankfully, because the after Kickstarter pre-sales of the game ended up being much stronger than I expected. But the point is that no one can realistically accuse me of not doing what I could to get a prolific number of copies of Gloomhaven out into the world. And don't ask me how I would have gotten that loan, funding on an unproven game no one knew about and me with no collateral. The down-side to the strong pre-sales, though, was that I ended up only having 2250 copies of a 10000 print run available for retail sales. 2250 is still a very reasonable amount of games for a first retail showing from a small company like mine, but, well, then the hype train left the station. Reviewers started talking it up, people got a look at the massive box, Kickstarter backers started getting their games, and the next thing I knew, 2250 copies seemed like not very many copies at all. Which is how I ended up angering retailers and distributors the first time. I go through a distribution broker, Impressions, who handles all the business interactions with the retail distribution side of things. And Impressions has a standard method for how they deal with orders of a new product coming in. They send out a notice to all distributors that gives them a week to come back and say how many copies of the new product they want. Normally, this system works fine because the aggregate number of orders is smaller than the number of copies available and so everyone gets what they want. Or sometimes, in rare cases, for really popular games, there are maybe twice as many orders as there are products, so Impressions has to take all the orders that come in, cut them in half, and then send out only 50% of what was requested. This sucks, because distributors, who take orders from retailers to get their numbers, then have to turn around and send out 50% of what each retailer requested. Getting half of what you requested isn't great, but it's understandable. People don't get that angry about 50%. What they do get angry about, though, is when Impressions has 25000 orders coming in for a game they only have 2250 copies of and end up having to send out 8% of what was ordered. 8%. That's a single digit. That means that if you wanted ten copies of the game, maybe you'll get one copy instead. Maybe. There really wasn't any way to avoid this. I couldn't print more copies way back when I was deciding how many copies to print, and there wasn't really a more equitable way to handle the stupid amount of orders we ended up receiving. It was a bad situation all around, and the best solution I had was to go full steam ahead on a second print run. A lot of people wanted the game and couldn't get it, so I wanted to rectify the situation. The problem was that I still didn't have any money. Okay, I had some money, and I certainly had more opportunities for loans this time around, now having a proven product that everyone wanted their hands on. There were distributors willing to fund new print runs up-front, which I am told is incredibly rare. Gloomhaven was white-hot in the board game community, and the demand was stupidly high. How many copies do I print, though, and, if it is more than the distributors are willing to pay for, how do I fund the printing? The situation I found myself in was big, and I wanted to be sure I made the right decision. Impressions and I wanted to do right by the distributors and print off enough copies to meet their demand to avoid the shortages of the first print run, so we began to immediately take orders for a second printing to gauge that demand. The distributors then went out to their retailers, saying that the numbers they ordered are guaranteed to be delivered. And then the retailers go out into the streets to gauge their demand the only way they know how - through pre-orders of their own. You see, people in this industry are notoriously conservative, because you never want to get stuck with a large quantity of product that you cannot sell. In general, distributors order a little bit of something, see how quickly it moves, and then order some more if it did well. There are too many products on the market for them to actually research and predict what is going to take off, so they take a more evidence-based approach that is slow to react to swift changes in the industry. I guess what I'm saying is that I didn't trust distributors to get the numbers right, and I didn't want to go through the process of having them fund a 20000 print run only to discover in four months' time that that wasn't nearly enough. So I went back to Kickstarter, which gave me the funds to print as many as I needed and also had the added bonus of being a pretty good indicator of demand. And, okay, look, I'll admit that the profit margin is nice as well. The profit margin on selling Gloomhaven through distribution, even at the new $140 MSRP, is not great. Through Kickstarter, it is multiple times better. The profit margin isn't really that important to me as a person. I would like to make enough money doing this for my wife and I to live comfortably, sure, but, if you'll remember, I ended up in this situation precisely because I didn't have any capital to fund a larger print run the first time around. As a board game publisher, I could really use some more capital to better fund future projects, and I am going to better acquire that through Kickstarter than through normal distribution. If I were Asmodee, would I have made the same decision? Of course not, but I believe that, for where my company is right now, I made the correct decision. Of course, there was still fallout from that decision. Despite making it clear to distributors when we asked for orders that there would be a Kickstarter associated with the reprint, the retailers the distributors were taking orders from were still caught by surprise when it went live. Remember those pre-orders the retailers were taking from their customers? Yeah, those evaporated, and the retailers weren't happy about it. The thing is, though, that the board game community is filled with many different demographics. The people who use Kickstarter and the people who pre-order a game from their FLGS because everybody is talking about it on BGG? Well, those people are in the same demographic, and many stores lost literally all of their pre-orders, which is some strong negative feedback. But those pre-orders aren't the only demographic. They are a great way to gauge demand, but when you drop from 20 pre-orders to zero, that doesn't mean you are going to drop from 50 total sales to zero. It's probably more like dropping from 50 to 25. But still. launching the Kickstarter created the hugely negative experience of seeing lost business first-hand for a lot of retailers, and it robbed them of their main way to gauge demand for product, which was counter-productive to going to them and asking for their demand in the first place. It wasn't handled as well as it could have been, and I heard about it, but that doesn't mean going to Kickstarter was a mistake. I think the main mistake was asking for distributor pre-orders before the Kickstarter went live. If we had waited until afterward, I think most of the negative feelings could have been avoided. In the end, cooler heads prevailed, retailers seemed to come around to the fact that with the game continuing to rise in the BGG rankings and with 35000 new people getting copies and going wild about them, the demand was only going to increase, and they would be the only ones holding copies to sell. We've received a very sizable amount of orders from distributors, and will be printing a sizable amount on top of that to cover restocking for what I hope will be a long time. There will be no third printing Kickstarter. I've made my capital, and I am happy to turn the product over to normal retail distribution for the rest of its lifespan, where the margins are smaller, but the work is also significantly smaller. I'm confident that retailers will have success with Gloomhaven in their stores, and that will smooth over any feathers that were ruffled over the last few months. So that is my story. I hope it was informative, or at least interesting. And I would like to make clear that my story is specific. Creating blanket rules for situations like this is not very useful. People need to make the decisions that are best for them in their own specific situations. My decisions did come under some fire from retailers, who didn't seem to have all the information. I received a fair number of angry emails in the first few days of the new Kickstarter, but I personally responded to each one, pleasantly explained the situation as best I could, and why I made the decisions I made. While some were still skeptical of how they could properly gauge demand without pre-orders, they at least understood my position, and we parted on good terms. So please, let me know in the comments if there is anything about this crazy situation you are still unhappy about, and I'd be glad to work it out with you.

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