Friday, September 25, 2009

Will experience pay off?

O.K. you guys, you can watch me make a bet, a bit of a gamble, based on experience and instinct. If I'm wrong, I'll own up to it. If I'm right, you get to watch me make a bit more money than normal.

Wednesday night, I got a call from a customer in Redmond. He wanted the newest Magic the Gathering brand.

"Are you pre-selling Zendikar boxes?" he asked.

"I'm selling them for 100.00 in advance."

"I want to buy 6 of them..."

Uh, oh.

"I think you might be better off buying that many boxes online," I ventured.

"No...I checked."

Double uh, oh. Thinking fast, I said, "I'll sell you 5 boxes at that price." Right instinct, but I wasn't draconian enough. 3 boxes would've been better.

After I got off the phone, I called my supplier and sure enough, the boxes were selling for slightly less than I'd just sold them. I ordered enough more to cover the 7 boxes I pre-sold so far; without making any real money on them. I half hoped he wouldn't show up, but he did.

But I still had the original number of boxes I intended to sell.

Which was more or less twice as much as I'd ordered of the previous release, 2010. Core sets had never sold well in the past, but when I saw there was a demand, I was able to scramble and get just enough in just often enough to never sell out at regular price.

I thought about it some more, and got on the phone and ordered another case of Zendikar at the higher price. If I sell all these cards at regular pack price, I make basically the same as I would've made selling boxes at lower prices.

Then this morning, I wake up to another alarm. Turns out, Magic has inserted 'Alpha' cards into the packs. They've never done this before, though it's an old trick in the sports card world.

I called my supplier yet again. "Are you having a feeding frenzy?" I asked. "Can you sell me any more?"

"We've been beating them off with a stick," she said. "But I can still sell you one case....we'll be out by the end of the day."

"I'll take them," I said. Just then, the Man walked by. I've been buying from Roger for over 20 years now. He was the only reliable distributor back when sports cards were hard to get. We went through sports cards and pogs and beanie babies together. "Is Duncan ordering yet more Magic?" I heard him laugh in the background. "How much does he want?"

Um, I'd got on the phone thinking I'd order as much as 10 more boxes -- 12 more boxes makes two cases. "I'd love to get two cases," I said.


"Good man, Roger. We've been through the wars...."

So my experience and instinct tells me I really can't get TOO MUCH of the new magic. Plus, I'll be able to maintain the regular pack price. If I get it all, and it doesn't sell like I think it will, I'll have more or less a half years worth of product.

This is one of the reasons I wanted cash in the bank. So that I could take advantage of these kinds of situations. I'm might have gambled ordering this much in any case -- but I would've been very stressed and nervous about it.

My intention is to tell people: "I'm selling Zendikar for regular retail price by pack. For the foreseeable future, I won't be any higher and I won't be any lower...."

I think I'll have enough, and if I sell through, it will be a nice boost to my business; like 3 times my normal magic sales. If I'm wrong, I'll just not need to reorder much in the future....

The tendency in these situations is to take a 'wait and see' attitude, or to order conservatively. But if you wait, it's usually too late. There's just too much smoke in this product for there not to be fire.

We'll see...

The following is a bit more perspective, but really inside baseball, so you may want to skip it....

Back in 1992, I was still reeling from my drop in sports card sales. But early in the year, I started to get rumbles about this player named Shaquille O'Neil. Phone call after phone call.

I was still in the sports card mode then, even after having had my head handed to me, even after getting cases of cards I couldn't sell. I got on the phone and ordered all the 1992 basketball cards that anyone would sell me. I called on every favor, used my long time contacts to beg for more.

When the 1992 cards showed up, they started selling out almost immediately.

I raised prices, I raised prices again. I kept them there, no matter how many people complained.

See...I'd just had the experience of selling cards for BELOW retail price for years and years, and then....the prices dropped through the floor and my customers abandoned me in droves. I wanted a little of my own back. Nor was I concerned about 'future' business anymore. Customer loyalty had proven weak when confronted with half-priced product from my competitors. (And in hindsight, I really can sympathize with the customer -- why would anyone pay twice as much just to keep me in business?)

But the same held true for me: why should I sell for less than I could get?

So...I had the cards. I charged the price. I pulled myself out of debt -- temporarily, and arrived at the conclusion that:


Flash forward 17 years.

I've been sticking to retail prices on my product for about a decade now. It's been easy to do, since none of them are 'fad' product. Sometimes there are little mini-spurts, but mostly I've been able to stock the store without resorting to higher prices to slow demand and/or buy product at higher than wholesale.

There is nothing really wrong with it -- prices are something the customer can accept or reject.

But I didn't like doing it -- even if it's perfectly valid (you know, "supply and demand?") So I built my store over the last 17 years with 'retail' pricing in mind. I wasn't going to be a discounter, nor was I going to charge more when the demand warranted it.

So even with the new demand for magic, I'll be sticking to regular price until I sell out.


tim said...

I can't understand a thing you're saying. I don't know anything about this Magic thing at all.

But it sounds as if it's a fad that's been around for a while. Why is that? Has it never gotten big enough to flame out?

Duncan McGeary said...

Magic is like the 'killer ap' of card games -- the original. It's challenging and social and fun.

It was starting to fade from it's fad peak back in the late 90's, but Pokemon brought it -- and the concept of card games -- back in a big way. Wizards of the Coast was very canny in creating a tournament system, even creating a 'pro' circuit.

Pokemon and Yugioh have faded, but magic managed to establish itself solidly. A good month for me is probably only 15% of what I was selling in 1995, but that ain't bad.

The manipulation of the market is relatively new. There was an example of shortages and allocations early on, and a disastrous release called Fallen Empires which washed out the speculators in the late 90's.

This is going to bring them back, unless I'm mistaken.

I predicted a year in advance that they'd start doing foil cards. This is another borrowing of the tricks that sports cards used -- which work for awhile until people realize how hard it is to get the 'special' cards and when it becomes normal instead of special.