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FFG-Asmodee: The TRUE Value of Brick & Mortars

4 Minute Read
Dec 31 2015
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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…

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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.

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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?

 

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