Recommend
 
 Thumb up
 Hide
11 Posts

BoardGameGeek» Forums » Gaming Related » General Gaming

Subject: OLG Sellers may be the last nail in the coffin rss

Your Tags: Add tags
Popular Tags: [View All]
Ian & Karin of the Tinker Gnome
United States
Woodstock
New York
flag msg tools
Hello everyone

I was browsing through some old copies of the General and decided to plug the prices into the CPI (Consumer Price Index) calculator available at the US Bureau of Labor Statistics (http://www.bls.gov/cpi/)

I find Magic Realm going for $15 in 1979, or $41.92 in 2006 dollars. Probably pretty close in components to Settlers, which new on Ebay goes for about $33, or $38 at the FLGS. But remember, in 1979, if you didn't have an FLGS, you had to mail order it directly from AH and they charged you full price.

1977, The Arab & Israeli Wars cost $10, or $33.48 in 2006 dollars. This would probably be equivalent to a GMT title of about $35-40 list price. Assuming it was widely available; we'd expect the actual market price on BGG marketplace or elsewhere to be about $30.

In 1978 I purchased the D&D players handbook for $9.95, or $30.96 in today's money. Very similar to the cover price of $29.95 for the 3.5 Players Handbook, but it goes for about $22 on Half.com.

I believe I paid a hefty $25 for Axis and Allies sometime around 1985, which would be about $47 in today's money. It was at that point the most I had ever spent for a game. The current A&A msrp, very comparable, but online it is much less.

In the online prices, I haven't included shipping, but typically folks aren't paying sales tax either. States like New York which require voluntary sales tax remission haven't been able to enforce the law due to federal gov't disallowing. (There will be a lot of sad folks the day ebay's records are audited and individual consumers are forced to retroactively pay their sales tax, plus p&i).

On multiple occasions I used to purchase duplicate copies of rules for AH games, as I wanted to lend out a copy to an opponent to be. Now I can download these inexpensively on the internet, with almost no marginal cost.

If you notice from my above examples, it seems like there is a 10-20% gap between the old prices and the new, even considering shipping being more than sales tax.

Where is the extra money going?
- Well some of it is going in consumer's pockets, which is OK.
- The shipping companies (UPS)
- Web software companies
- OLGS

Who's losing?
- FLGS
- Game Companies

Most online game stores are only in business because there is an opportunity here to make some money compared to FLGS. But OLGS don't really help create any demand. They really do not 'market' games - they advertise, but don't market. Since being an OLGS is really just about opening boxes, warehousing, repacking and shipping - there isn't anything about games that makes them special. Managing retail space is a lot more expensive. An OLGS can delay shipping to restock, after the sale has been made. Most people just walk out of an FLGS if the item isn't there, unless they happen to love their FLGS. (A similar argument could be made about books - although bookstores have a tradition of being able to return non-sellers, so their risk is much smaller - just the opportunity cost of the shelf space.)

Game Companies, with few chances to sell games at full msrp (compared to the 70s), will need eventually need lower wholesale discounts - as WoTC has just done - without necessarily upping the retail pricing. For the OLGS, they just adjust their prices upwards, maintaining the margin they need, a lower margin than the FLGS due to what should be lower operating costs. For the FLGS, this means just sucking up the reduction in gross profit. For some that means going out of business, since the point where OLGS prices are the same as FLGS, all the FLGS are out of business, which is what we're in the middle of right now.

As I have pointed out in the past on other threads, the price of an OLGS must be less than a FLGS due to an imbalance of information between the buyer and seller about the product. This imbalance will be much heightened with the demise of the FLGS, as it will be difficult for consumers to go 'somewhere' to shake the box. Of course, sites like board game geek have reviews, and bad OLGS can be found out, but a lot of folks won't bother, and getting new gamers into the hobby will be nearly impossible.

Having said all of this, I don't know what the answer is. Encouraging you all to spend your money at your FLGS is of limited use. A better tactic might be to get the game manufacturers to stop selling to companies that retail at deep discounts. Certainly the practice of making different rules for different markets is especially painful - if Barnes and Nobles can send back extra copies of D&D books, why can't the FLGS? If gaming introduced retailer returnability, it puts most of the burden of selling the game on the publisher. But then no one will be willing to publish games that aren't surefire hits - that is, most of the product on this site.

What I predict:
As the number of FLGS reaches a negligible quantity, fewer niche games will be published and these will cost more. Most game manufacturers will go out of business. Games that can get into box stores will survive, and we may even see the box stores carrying a greater diversity, but the manufacturer's costs of getting onto the shelves at these stores will be prohibitive for most game companies. This trend will be ended if:
Game Companies start 'licensing' retailers and putting terms of use on products,
or
The US federal government allows states and municipalities to enforce their sales tax codes (which, by the way, would be very nice for property taxpayers!)

Q. - How do countries in Europe enforce the payment of the VAT for online sales?

Sorry for the long rant, needed to get that out.

Gnome
http://www.tinkergnome.com
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
United States
Boise
Idaho
flag msg tools
badge
Avatar
mbmbmb
tick.... tick.... tick....

(cover your ears and duck)
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
United States
Texas
flag msg tools
badge
"that's a smith and wesson, and you've had your six"
Avatar
mbmbmbmbmb
Just Because
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
1603-1714
United States
Georgia
flag msg tools
badge
Now I can add text to my avatar? Sweet! How do I do it?
Avatar
mbmbmbmbmb
I think OLGS can help increase demand simply by selling games at a discount. When friends play Ticket to Ride: Europe at my house and have a great time, many of them are interested in getting a copy of the game for themselves. But when they find out that the game costs $45, that interest declines considerably. The reduced price of the game at an OLGS can help revive that interest and then lead to future game purchases.

Just my two cents.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Amelia Tharme
United Kingdom
Eastbourne
flag msg tools
Avatar
mbmb
TheTinkerGnome wrote:


Q. - How do countries in Europe enforce the payment of the VAT for online sales?



I'm not sure quite what you mean by 'enforce', but as someone with a business registered in Sweden, I am required to charge 25% VAT on all my sales (unless they were outside the EU) and then to declare and pay this each month. I'm sure that if I wasn't declaring any sales, the tax department would be wanting to know why. (In fact, when I was starting up and had claimed some VAT refunds for purchases for the business but hadn't declared any income, I did receive a letter with some fairly detailed questions about the state of the business and what my refunds related to and so on.) Generally speaking, retail prices in Europe, whether online or in shops, include the local rate of VAT, it's not added on at checkout as it is in the US.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ward Batty
United States
Atlanta
Georgia
flag msg tools
designer
Avatar
Interesting post.

Most game stores don't rely on boardgames for most of their income. Most of the income comes from the "hobby-games" products, CCGs, collectible miniature games and to a lesser extent RPGs (which have been made almost-extinct by the online games like WoW).

Still, when I opened my store, a number of retailers discouraged me from trying to be strong in boardgames because boardgame customers have a well-earned reputation for being disloyal. I had numerous customers that played games at my shop every week but brought in games they bought online and rarely if ever bought their games from me because I sold at MSRP. The value of having a place to play didn't equal what they could save online. I closed the shop two years ago.

There are lots of product lines that can be sold at full price, so the logical reasoning for carrying boardgames is less than, say, CCGs which can be sold at list. A pack, or even 10 packs of CCGs aren't worth ordering online. You lose some box sales to online discounters, but most CCG players are not buying entire boxes, just a few packs a week so they can play.

I agree that it is hard to grow the hobby without B&M stores. I disagree that game companies will cut their wholesale price, in fact the opposite is more likely. Online stores prove through discounting they can get by on a lower mark-up than a B&M store (which really can't) so the game companies are inclined to increase, not decrease, the whilesale price. In fact, Days of Wonder recently increased the wholesale price retailers pay for their games.

The hobby is lucky there are enough retailers who simply love boardgames that they continue to carry a line that is a lot more trouble and less profitable than, say, Ugly Dolls. If it were a simple business decision, most game stores would probably just carry no board games or at best just stock the Carcassonne and Settlers lines and Blokus and be done with it.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ian & Karin of the Tinker Gnome
United States
Woodstock
New York
flag msg tools
You said: "I disagree that game companies will cut their wholesale price, in fact the opposite is more likely"

Actually, we agree - I said wholesale discount would go lower, therefore the wholesale price goes up... I think my sentence was convoluted...

Your post sadly echos my own experience...

cheers
Gnome
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Ian & Karin of the Tinker Gnome
United States
Woodstock
New York
flag msg tools
Re the VAT:

I understand that the VAT is paid by the seller, effetively that's true in the USA, but as a custom we put it on top of the price at the shop and not blended into the price. Other than that it works the same, and lots of businesses in the USA blend the taxes in too (think gas and cigarettes)

So someone from Sweden purchases a game from someone in the USA, then does no one collect the VAT? This then is the same situationas I discussed in the US, between the states.

At some point, the gov't of Sweden will want their VAT, if everyone starts buying everything online, or will give up the VAT altogether. So it is possible the customs agents will one day start opening up packages and refusing to release them unless someone pays the VAT.

Gnome
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Amelia Tharme
United Kingdom
Eastbourne
flag msg tools
Avatar
mbmb
TheTinkerGnome wrote:
Re the VAT:

So someone from Sweden purchases a game from someone in the USA, then does no one collect the VAT? This then is the same situationas I discussed in the US, between the states.

At some point, the gov't of Sweden will want their VAT, if everyone starts buying everything online, or will give up the VAT altogether. So it is possible the customs agents will one day start opening up packages and refusing to release them unless someone pays the VAT.

Gnome


Technically speaking, the customs people charge VAT and fees on all parcels over a certain value that come in from outside the EU. In practice, it's a bit more random, so it's pretty much pot luck whether we (as private buyers, not as a business) get charged or not. As pretty much all parcels have to be collected from the post office here anyway, they have an easy way to make sure people pay before collecting their parcels.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Jeff Bakalchuck
United States
Durham
North Carolina
flag msg tools
mbmbmbmbmb
I think you're price comparison is too selective to be meaningful. Add in that the CPI is probably the wrong stat(GNP price deflator is a much better figure to use and perhaps disposable income would be even better) to use and you get data, but is that data useful?

I've bought games on Ebay for far less than they sold for years ago, look at the 3M line of games for example.

There are multiple segments of the board game market.

1 segement is general family gamers (folks that buy candyland, clue, monopoly scene it etc?) they generally buy at mass market stores(target, wal-mart etc). If you want to see how this market is doing, check out Hasbro and Mattel's financial reports.

Another segment is Wargamers and Eurogamers. These are clearly niche markets. I think OLGS are a much better distribution system then FLGS for these types of products. The number of local gamers in just about all places is far to low to support a local store. Since a small handful of online stores can service an entire country they are just more effecient. Some companies in this market are doing well, others are not. Rio Grande, Mayfair and Days of Wonder are strong. OOTB(which has moved more towards Eurogames recently is doing well also). Smaller niche companies are starting up and some are doing very well (Face to Face and Z-man are both expanding their lines nicely). Some companies are innovating(GMT with its P-500 for example).

As a Eurogamer the OLGS give me access to a wider range of products than any local store does, so I have a great benefit regardless of price.

Wargamers and Eurogames spread mostly via word of mouth. If Rio Grande started doing TV ads for Caylus I think they'd be out of business in a short time. These products don't appeal to the masses and I don't think they ever will. WE have to understand we are a small(monopoly probably outsells Caylus 500 to 1(or more) in the US.

Online stores are better suited to service a specialty market(especially a low-priced specialty market).

Boomer
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Dale Stephenson
United States
Buford
Georgia
flag msg tools
Avatar
mbmbmbmbmb
TheTinkerGnome wrote:
Game Companies, with few chances to sell games at full msrp (compared to the 70s), will need eventually need lower wholesale discounts - as WoTC has just done - without necessarily upping the retail pricing. For the OLGS, they just adjust their prices upwards, maintaining the margin they need, a lower margin than the FLGS due to what should be lower operating costs. For the FLGS, this means just sucking up the reduction in gross profit. For some that means going out of business, since the point where OLGS prices are the same as FLGS, all the FLGS are out of business, which is what we're in the middle of right now.


Do game companies really have fewer chances to sell games at full MSRP than the 70s? Was the direct business that significant back then? If you are willing to pay full retail, it's far EASIER to buy directly from the manufacturer. Thanks mostly to pre-orders and a niche market (wargaming) I probably spend half my gaming money directly at the manufacturer. Twenty-five years ago I never would've considered a direct order from Avalon Hill. I could buy at full retail from the FLGS at far less effort, unlike today where online ordering is more convenient.

Game companies may be suffering compared to the 70s, but I'm unconvinced the loss of direct sales is a substantial impact. Indeed, in the case of wargames I believe the direct retailing has helped keep the hobby alive.

Quote:
The US federal government allows states and municipalities to enforce their sales tax codes (which, by the way, would be very nice for property taxpayers!)


Historically speaking, government entities do not shut off revenue streams simply because other ones become available. Enforcing sales tax on online entities would be good for state/local governments, good for B&M retailers, bad for online retailers, and bad for online consumers. It would be neutral for property taxpayers, unless they also fall into one of the other four categories.
 
 Thumb up
 tip
 Hide
  • [+] Dice rolls
Front Page | Welcome | Contact | Privacy Policy | Terms of Service | Advertise | Support BGG | Feeds RSS
Geekdo, BoardGameGeek, the Geekdo logo, and the BoardGameGeek logo are trademarks of BoardGameGeek, LLC.