FFG-Asmodee: The TRUE Value of Brick & Mortars

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Asmodee North America President Christian Peterson talks plans for rebalancing brick & mortars versus online retailers.

ICv2, just put up a fantastic interview with FFG founder and now Asmodee North America CEO Christian Peterson.  It is a far reaching interview but today I want to focus on a small portion where Peterson talks about the new company’s plans for rebalancing the equation of online retailers of all sizes versus traditional brick & mortar locations:

Full ICV2 Interview

“What do you say to those that argue that online retail is a more efficient channel, one helped by technology that is able to bring product to consumers in a more price-effective manner?
Online retail is an amazing and valuable road to market.  We recognize that and as a publisher we certainly want to keep this channel viable.  However, it is primarily a mechanism to more efficiently effect transaction and delivery for an existing demand.  The stage of transaction and delivery is only one part of the necessary market functions to have a successful sale to a happy consumer.  Another function is communication of availability and benefit (fancy words for marketing) and the most important, and most difficult, function is the creation of demand. Without those others, the function of transaction and delivery will have no reason to exist.

At its core, the value of physical gaming products stems from the medium of shared play between people in the same location.  A game is only as valuable as the customer’s ability to play it.  Our products, in most cases, require players to connect with other people willing to share a gaming experience.

The most significant obstacle in the growth and perceived value of the gaming business is the need for players to find other players, and for new players to enter the hobby.  I estimate that the hobby loses between 10 – 20% of its players every year, so the creation of new players into the hobby is vital for every participant to have a thriving marketplace and have exciting new products developed.

…For a market to be efficient, it must internalize its true cost and be sustainable.  In the case of the current hobby market, one channel (online) is relying significantly on the cost and investments of another channel (specialty retail).  Our new sales policy seeks to reconcile where Asmodee North America is willing to pay (in the form of the wholesale discounts we extend) for the services we need for the creation of demand.

Does the Specialty Retail Policy cover specialty retail chains (e.g., Barnes & Noble)? … 
Broad and mass merchants, being Barnes and Noble, Target, Amazon, etc., are important players and obviously cannot be ignored as important outlets for our products.  We categorize these in different channels, with different scale and cost of operations than that of specialty retail.

What impact do you expect this change in policies to have on the online marketplace for products from the Asmodee companies?
We believe that online sales is a viable and important marketplace, and that some consumers either prefer to buy their games online, or do not have access to a high-quality brick-and-mortar gaming retail store.  As a publisher, we obviously still want to serve those consumers.  We expect to authorize a number of excellent online specialty dealers, and would expect our products to be easily found online…

Do you expect the number of online retailers to decline?
Yes.”

Stock market data with uptrend vector. 3d render.

The Future of Online Retailing

 

That is a very interesting set of answers there. I think we see Asmodee wrestling with how to attempt to rebalance the retail channel in this modern era of ever growing online sales. (Mastercard just announced a 20% increase in online purchases in the 2015 holiday season)

He went out of his way to express support for the online retail business, and explicitly says they expect to authorize several online retailers.  I expect the big-box retailers such as Target, Banres & Noble to continue selling online and maybe even some of the larger existing games estores.

So I fully think that 1 year down the road you will be able to go online and buy X-wing and other Asmodee products online.

What I don’t think you will see past Q2 is the hefty 30-40% discounting you routinely see from dedicated online retailers as they will almost certainly see their discount margin slashed severely, compared to the brick and mortars who will probably keep their current rates.

Note that in the case of the big box retailers (Target, etc), they also have huge investments in their own enormous physical locations, and their own online Asmodee sales would also feel pressured by the dedicated online retailers.

I don’t believe there is anything nefarious going on here as some have speculated or an attempt to drive lucrative sales to the FFG/Asmodee online store. There are no “online store only” products being kept for themselves (the GW model), and retailers will have no MAP (Minimum Advertised Price) restrictions, so they can still offer sales as they see fit.

This looks to be exactly what is appears – an attempt by Asmodee-FFG to rebalance the different retail channels (B&M, BigBox, Online only) by giving each channel a different wholesale discount rather than the previous one size fits all program.

Most importantly it may just work and be a way forward for the industry – to find a new way to keep both the online retailers AND the Brick & Mortars thriving.

~ What do you think the industry will look like in 1 year? 3 years?

 

  • He seems to understand tabletop gaming and what its situation is.

  • Erik Setzer

    I don’t see anything sinister in the plan there. Their own store still has no discount, so even the smallest discount will provide competition, to say nothing of someone like B&N who’ll get the brick-and-mortar discount.

    It’s smart to try to shift focus back to b-&-m stores. As he said, that’s how you recruit new customers, and provide value for the product (some people have no place at home to play games, so they’d need a store, or there’d be little point in actually buying the games).

    Seems like they have an understanding of their market and aim to keep it healthy in order to make sure their long-term prospects are good.

  • Knight_of_Infinite_Resignation

    shades of GW’s attack on online discounters here.

    As well as having physical places to play gamers also need to be able to afford the games. Difficult balancing act here.

    • TweetleBeetle

      The online discounters crushed FLGS locations, however. Brick and mortars can’t run steep discounts and keep their doors open. Most have to rely on high turnover products like Magic: the Gathering, and virtually none of them can operate on miniatures as a focus and survive.

      Even stores that cater to all of them (GW, PP, Wyrd, Asmodee, FL, etc), can’t survive on miniatures alone, as large chunks of products will always sit on the shelves. Many players search for online discounters, yet still use the B&M space to play without ever contributing to it.

      Its a difficult balance to strike, but most stores will shift to predominantly card games and computer/LAN rental time.

      • WellSpokenMan

        FLGS stores make money in other ways. Selling snacks and drinks to the people using the space is one way. Parceling out those Magic boosters and selling the singles is another. Most FLGS in my area offer a 10% discount, which makes them competitive with online sellers once you factor in shipping. They all do OK for themselves in my area. 4 have moved to bigger spaces over the past few years and none that I am aware of have closed. All of this is with FFG’s mammoth gaming space as competition. Certainly, they will appreciate some support from the manufacturers, but they shouldn’t be “crushed” unless they are doing something wrong.

        • Muninwing

          ours runs 15% for members of the gaming club. membership is $20/year, but has other privileges.

    • WellSpokenMan

      Something you should know about FFG, they like games. They are a games company, not a miniatures company. They have a large gaming center at their company headquarters, and you can play any game there. It’s where the local Infinity league meets up. You can even buy most games there. I’ve bought Malifaux stuff there myself. It is possible that the same guy who built this big space where gamers can come and play any game they want while having a beer, is going to go with the kind of cutthroat tactics that GW has employed. However, I’m inclined to give him the benefit of the doubt for now.

      • Knight_of_Infinite_Resignation

        ultimately Asmodee and GW are in the same business and have the same goals. GW want to protect their own stores and to a lesser degree b&m stores. Asmodee want to protect b&m stores.

        Neither perceives any great benefit from online deep discounters. Its not surprising they might act in similar ways.

        FFG do seem to value their customers input more, or at least see it as sensible to do so. GW is a weird company. Both are corporations ultimately driven by profit though, for better or worse.

        As a gamer of relatively small hobby budget I hope my favourite discounters survive as there are games I wouldn’t play if I had to buy them at full retail. There are no FLGS to support near me so the alternative would be full retail+postage cost.

        • WellSpokenMan

          One of my favorite online retailers also runs an FLGS in a different state. I’d imagine that’s true for others as well.

          • Knight_of_Infinite_Resignation

            one of the best deep discounters in the UK, Dark Sphere, has a cracking gaming space in London. Unfortunately my local FLGS has gone online only and closed its gaming space.

      • Oliver Grimwood

        Yeah so do GW

        • WellSpokenMan

          Not where I live. GW stores only sell GW stuff and they only play GW games. Which is fine I guess, since they only have two tables and they are smaller than any of the half dozen or so FLGS in the area. The next time I want something for another system though, I’ll give them a call and tell them you said they could get it for me. I’ m pretty sure they can’t though, because they can’t even get Forgeworld stuff.

          • Oliver Grimwood

            Apologies I should’ve typed “did”. Thing is FFG is part of a big business corporation now, we’re going to see lots of business decisions coming up. Though to be honest I think this is a sensible move and I thought it was when GW did it as well.

  • Jon

    Wow, it’s nice to read something from a game companies senior leadership where they actually understand how business works. GW needs to take note, this is called modern global business and you can’t keep ignoring it. FFG/Asmodee is going to be around for a long time with solid business sense like this.

    • TweetleBeetle

      GW needs to take note? Lol. They are still crushing the competition, you know that, right? And given the positive moves they’ve made the last year or so (more content options, discount starter sets for entry into their games, IP expansion to attract a larger audience, catering to stores instead of discount online retailers, etc), I’d say you’ll see them easily make it another 3 decades as the top miniatures company.

      • Gridloc

        How is closing stores and firing staff considered crushing the competition???

        • Muninwing

          in sales they still lead.

          not nearly as much as they used to, but they still lead.

          and less overhead means more money kept as profit. it doesn;t work long-term, but it’s a short-term trick cmpanies use to look better on paper.

          idiots think that it makes a company better, until they realize that too few is often worse than too many. not just from losing promising employees to other employers that will treat them with respect, not just from loss of name recognition or functionality or reputation (GW’s biggest recurrent mistake), but when they realize that they burn out their workers by expecting too much of them for too little.

          there’s a lot of complicated logic invlved in what the business world thinks a “successful” company is, and it has nothing to do with offering a good product to happy customers. often, it’s instead giving something subpar that makes more money, cutting jobs so profit margins soar, then outweighing that the next year with expansion into a new market or some other trick to artificially inflate the numbers.

          think of it like 40k. at this point, who will take a CAD to a tournament unless the army involved is a beast? you virtually need the extra gifts/rules from them to compete with what others are doing. and a pairing where you don;t have them, but someone else does, is not an indication of how good a player you are, but how good a listbuilder or rules-exploiter just as much as a player. only in the business world with investors, it’s using all the false and dirty tricks to fool your bottom line into looking bigger. if you don;t do them, investors will go elsewhere to those who do. so you could work harder and be more honest, but you; get shellacked.

      • WellSpokenMan

        Why not say 3 centuries, or even 3 millennia? If you are going to make an outrageous statement, make it truly outrageous.

      • Scharfinator

        FAN BOYYYYYYYYYYYYY ATTACK

      • John Felger

        If by crushing the competition… you mean declining numbers with each report… I can only assume you this is a race to the unemployment line?

    • Oliver Grimwood

      It’s a business policy GW instituted years ago.

  • euansmith

    Three years from now we’ll all have personal hover belts and household robots.

    • benn grimm

      And we’ll need them, what with the melting of the ice caps and all the acid rain… Happy New Years eve btw..;)

      • NovaeVox

        2019: The year of the polar bear diaspora, and the first self aware Roomba.

        My god…

        • benn grimm

          Good to have something to look forward to…;)

        • NovaeVox

          Everyone place your bets on The Great War of 2022: The Grolar Intifada vs The Depurator Technocracy.

        • Knight_of_Infinite_Resignation

          nobody’s ankles or glacier mints will be safe.

  • ted1138

    Makes sense to support the FLGS’ while still taking advantage of big bulk sellers, while not resorting to dirty tricks.

  • Lord of Deeds

    Big bulk sellers no more connect players and build community than do online retailers. Also, those retailers tell company’s like Asmodee’s what price they will pay, not the other way around. As far as we know one or more of those big box retailers is telling Asmodee to cut out the online retailers and their traditional discounts to maintain space on their shelves. LGS’s should not believe for a minute that Asmodee has their interests at heart unless those interests align with Asmodee’s.

    In the end whatever reduces consumer choice and artificially impairs competition, is usually bad for the consumer in the end.

  • Red_Five_Standing_By

    In some ways this kind of feels like a sham.

    Right now at Target, you can get the X-Wing starter set for 30
    bucks. How is that fair to the small time brick and mortar stores? The smaller shops cannot afford to offer discounts where as Target can because Target can make up for it in terms of volume sold. When Armada came out, Wal*Mart sold the core set for 60 bucks where as small brick and mortar stores had to sell it for a hundred bucks.

    From my perspective, this really feels more like a witch hunt against online retailers. FFG wants to eliminate online storefronts completely (outside of their own) then graciously allow a handful of the important/large ones to come back. Meanwhile, FFG’s own storefront rises up in prominence due to the lack of competition and the fact that those few online retailers that are left will not be able to undercut FFG by much (if any).

    It really feels like a mirror of what GW did. The biggest difference is that FFG’s products are sold by big box retailers. GW’s policy failed, by and large, because it completely eliminated online storefronts (outside of their own) but allowed eBay retailers to remain intact (who still sell GW products for 20% off). If FFG’s policy is to be successful, they need to make sure online storefronts still exist but none of them can sell their products for a steep discount.

  • Thatroubleshootah

    If any manufacturer seeks to control online resellers thew way GW has done they are going to be making fewer not more sales.

    • Red_Five_Standing_By

      Which is why you wrap such a maneuver as a ploy to help small businesses.

  • John Felger

    Bingo. While I cannot comment on how gaming works in Europe, the gaming culture of the United States revolves around the LGS and tournaments, i.e. places people can see, meet, and play with other people. Without that force driving things, the local community just dies. I’ve said this time and time again, and even suggested it is one of the key reasons the Games Workshop Stores are such an utter failure in the US (because they don’t exist to promote on site gaming).

  • Thatroubleshootah

    I rarely buy miniatures at my flgs new. What i do buy is brushes, paints, glue, used miniatures, out of print miniatures, bottled water, magic packs and birthday gifts for friends of my kid. My flgs makes money off me hobbying there even though i rarely buy new minis there. An old business adage says that if a bunch of people are mining for gold instead of joining them you should sell them shovels.

    Always sell the shovels