Monday, October 13, 2014

We Expect Customized Goods and Services at Commodity Prices.



I have picked up the habit of posting a weeklong series of quotes from the same person on my personal Facebook page, one quote per day. Last week’s quotable person was Robert Rubin, Secretary of the Treasury during the Clinton Administration and currently head of the Hamilton Project, an economic policy think tank (as if we need another one of those). However , one of those quotes struck a chord with some  people in the industry, enough so that Gary Ray of Black Diamond Games borrowed it as the basis for a post on his Quest for Fun blog and I liked enough that I am stealing it back for this week’s column.

The quote in question from Dr. Rubin is this:  “All of us as consumers have gotten spoiled... We expect customized goods and services at commodity prices.”

Yes we do, and while this is great for consumers, for retailers it causes a monumental headache. Why? Allow me to explain but first we need to discuss what a commodity is.

Simply put, a commodity is any product that can only be differentiated by price. Take bananas as an example. One Cavendish banana (those are the long yellow bananas you find in every grocery store in America. There are hundreds of other varieties of bananas but you won’t find them in any mass market store) looks pretty much like any other Cavendish. It peels the same, feels the same and tastes the same. If I showed you one I bought at Wal-mart and one I bought at Kroger, you couldn’t tell the difference. The only difference is whether I paid 59 cents a pound at Kroger or 54 cents a pound at Wal-mart.

In a similar vein, games (and yes, comics) are commodities too. If I show you a copy of the FUDGE RPG,  or Roll For It or a Warmachine starter army or even a copy of Harley Quinn #6, unless there is a price sticker on it, you would be hard pressed to tell if it came from Barnes & Noble or Amazon or your Friendly Local Game Store. Although each is a unique product, there is nothing to differentiate any copy of Roll for It from any other copy. They are not one of a kind items, such as you might find at a crafter on Etsy or selling at your local farmer’s market or even your local bakery. They are commodities and the price can be affected by Barnes & Nobles’ economics of scale (economies of scale means simply that the more you make or sell of an item, the cheaper it becomes to produce) or Amazon’s combination of economies of scale and willingness to lose money since the day it opened or your FLGS’ lack of either.

The local game store (or comic shop) just does not have the size or capital behind it to compete on price on commoditized items. It’s futile to try to compete head to head with Amazon or Wal-mart, though the two of them may start competing against each other much more visibly, especially if Amazon starts opening physical locations as it has announced it will. So if local stores cannot compete on price, what do they compete on?

Same things we always have, the other 3 Ps. The customer can walk into a store on impulse and find a Magic card or a copy of Dark Heresy or a copy of Love Letter or other non-mainstream game (or comic) and walk out with it that day and play it that night. Though some online retailers are working on it, same-day delivery is still costly. At the FLGS, it is free. The customer can also find staff who know the games (and comics) and who are willing to discuss the finer points of Pokemon deck construction or X-men continuity. You won’t find that at Wal-mart or Barnes & Noble or Amazon. The key is showing the customer that, in order to do this, the FLGS cannot afford to compete on price but competes, and is far superior, in other areas.