15 December 2016
Before I bookend this tale of transition that began on Monday, I want to be clear about two things:
- I will continue to write about crowdfunding twice a week until I have nothing more to contribute. I haven’t had a live project on Kickstarter for over a year, but I’ve written 100+ articles about crowdfunding during that time. It continues to fascinate me, and hopefully the posts will continue to add value for my fellow creators.
- These posts are truly not meant in any way to discourage creators from using Kickstarter. My business wouldn’t exist at all (or in its current form) if I hadn’t used Kickstarter to start and grow Stonemaier. Unlike this article, these posts are geared towards creators who have grown to the point where the reasons I list in Part 1 have become significant concerns.
Let’s start with the story of the Scythe expansion, our first new product for which we didn’t run a crowdfunding or pre-order campaign.
When I decided about 5 months ago that I was going directly to distributors for Invaders from Afar, I quickly realized that it meant two things:
- I needed to make a lot of copies to satisfy what I hoped the demand would be (I determined this number to be 30,000 copies).
- I needed to only make one version of the expansion, with any add-ons made as promo items sold separately (power dials and metal coins).
I also wanted to have as close to a simultaneous worldwide release as possible, so I reached out to a few distributors in Europe, Asia, and Australia/NZ to see if they would be interested in buying directly from the source–our manufacturer in China. There was plenty of interest, and the remaining copies (a substantial number) were sent to the US in three shipments.
What should have happened was supply would have met demand, with all expansions released by retailers in each region at the same time in late November. Here’s what actually happened in chronological order:
- The first shipment arrived in the US around November 10. My broker in the US should have shipped them to distributors the following week, but there was a miscommunication that resulted in hardly any copies being shipped when they should have.
- Meanwhile, the European shipment was taking longer than expected. It wouldn’t end up being available to retailers until the first week of December (it’s still arriving at some of those retailers). Asia was fine, and Australia/NZ is still a work in progress.
- Back in the US, the second shipment had arrived, and Thanksgiving week was upon us–not a good week for freight shipping. Our broker prepared the shipments for several distributors, but FedEx Freight didn’t pick up anything until the following week.
- The freight shipments were finally picked up, one day after another. It was a big shipment, and big shipments take a while. Our broker wasn’t quite equipped for it in terms of manpower, which we talked about and will fix in the future.
- I made the mistake of not issuing a release date–I told retailers that they could sell the expansion as soon as they received it. This created an inequity between retailers whose distributors received their games first and retailers who received their games last (our broker can’t send everything simultaneously).
- During the week of November 28, our broker shipped all orders to distributors. At that point, because I had listed on our website that the expansion would be available from retailers sometime between December 1 and 8, customers were frantically calling their preferred retailers trying to get copies. But most of those retailers didn’t have copies yet, and their distributors didn’t have any information about them (there seems to be a breakdown in communication between distributors’ purchasers–all of whom knew that their shipments had been sent–and their sales team, who mostly just care when the product has arrived at their warehouse).
- In Europe, it was revealed that demand exceeded supply, requiring “allocations” for many retailers (they only receive a portion of their order). The good news is that we still had the third shipment of the expansion en route to the US. The bad news was–and still is–that US customs randomly flagged it. That was 2 weeks ago. They still haven’t even started the inspection of that shipment.
Look at all those layers. With Kickstarter fulfillment, there are many layers–factory to port to ocean freight to customs to freight trucking to fulfillment center to courier to consumer–but there are at least twice as many layers involved in distribution. If one link in that chain is weak, delayed, or unpredictable, it throws everything off.
If you need to go back and read Part 1 now to remind yourself why I’d do this to Stonemaier, feel free.
In case it isn’t already clear, the distribution system is when a publisher (like Stonemaier) sells products to a distributor, who handles the logistics and orders to get those products to retailers (online or brick-and-mortar). The retailers sell those products to individual consumers. Also, in our case, we employ the use of a broker to warehouse our games, manage inventory and sell our products to distributors.
For publishers, distributors are super helpful because it means we only need to handle the transactions of a dozen customers (the distributors) a few times a month instead of hundreds of customers every day. The difference in the scope of sales and time is immense, especially considering the worldwide reach of distributors despite the need of a single origin point for us (instead of me managing inventory in 5 different warehouses worldwide).
For retailers, distributors offer the convenience of consolidation. Think of it this way: Say you want to make a pizza from scratch for dinner tonight. You can go to the grocery store and buy tomatos, basil, flour, eggs, pepperoni, cheese, etc all in one place. Super easy. Now, imagine how inconvenient it would be if you had to go to a tomato store, a basil store, a flour store, etc–a different vendor for each item. The amount of time you save is worth the additional cost of consolidation.
Okay, here’s where we get to the nitty-gritty: What are the top 10 problems created by shifting from a pre-order model to the distribution system, and how are we addressing them?
- Risk in over/under-estimating demand. Kickstarter lets you determine–at least for the first print run–the exact demand for a product. Without it, it’s a huge gamble. We really don’t know how much to make. If you make too little, you can make more, but retailers get frustrated while they wait for something they could be selling to arrive. If you make too much, you’ve tied up a lot of cash in something that isn’t selling. Solution: Poll fans, distributors, and retailers to gauge their interest in a product before the print run begins, and continue to use our future printing request form.
- Lack of consumer connection and community: Kickstarter is wonderful because it gives backers the opportunity to build something with creators, and it gives creators a direct line of communication (updates) with those backers throughout the process. It’s a very personal, collaborative process. Solution: Kickstarter or not, I spend a lot of time interacting with people and communicating information about our games on Facebook, Twitter, BoardGameGeek, and our e-newsletter. We don’t quite have something that simulates updates (other than our use of Facebook groups), but we can easily do that using product-specific newsletters. This flies in the face of my “don’t talk about it until we’re ready to release it” strategy, but I can see that evolving over time.
- No more Collector’s Editions? It’s arguable that Collector’s Editions are a good thing in the first place. Yes, they’re fun for those who get them, but they’re a huge hassle for everyone else, especially completionists. This is the case even if all the items are available separately afterwards (expensive Collector’s Editions are not tenable for the mass market). However, Kickstarter is a great place for these editions. Solution: Continue to find retailers worldwide who will carry promos and special accessories (like Meeplesource and Board Game Extras), and maybe–maybe–on occasion return to Kickstarter for a Collector’s Edition of a new product.
- Bigger barrier to entry for consumers: At least at the point of purchase, Kickstarter is easy. Within 2 clicks, you’ve made a pledge, and unless you forget to update your address, the reward magically shows up at your doorstep a few months later. Without Kickstarter, it requires more effort for a consumer to request a product from a retailer (or track down someone who carries it) and place a purchase. It doesn’t help that Stonemaier has “trained” our fans over time to expect an easy Kickstarter/pre-order system. Solution: I’ve addressed part of the solution by creating a Google Doc of all retailers who are at least aware of how to stock our products (at least, all retailers who have been in contact with me). Ideally this would be a much more robust, dynamic system that could let consumers go to one source and quickly find which retailers have our products in stock, but no such solution exists (to my knowledge).
- Multiple layers of potential communication failures: With Kickstarter, there’s one source for all information. But with the distributor system, I have retailers talking to distributors, customers talking to retailers, distributors talking to my broker. I still have a lot of that information, but with such a widespread system, it’s natural for people to come to me less. Solution: I have a mailing list of all retailers who have opted into that list (contact me at email@example.com) and I keep them updated once a month or as needed with upcoming releases and any pertinent information. That system does, of course, rely on retailers to opt into that list and read the e-mails, which is tough when Stonemaier is just one of many, many publishers.
- Inequity of releases: With Kickstarter, I have full control over when games are released to backers within each region. I mistakenly relinquished that control for the Scythe expansion release, as I didn’t like the idea of making stores hold inventory until an official street date. However, I’ve found that both stores and customers really like a street date, as it gives puts them on a level playing field as everyone else. Solution: Implement a street date for each region for new releases. This date will be heavily padded to accomodate slower distributors and freight delays.
- Loss of urgency and buzz: Let’s face it: Kickstarter projects are exciting. Watching the funding total, backer numbers, and stretch goals grow is fun, and it’s all within a confined amount of time. Non-Kickstarter publishers tend to use conventions for big, buzz-worthy releases, but Stonemaier doesn’t use conventions that way. Solution: I think Mechs vs. Minions did a fantastic job at generating a ton of excitement by having a coordinated release (down to the exact minute) for early reviewers, a pre-order date that was just a few weeks later, and a release date that was just a few weeks after that. I think that model can work for us to some extent as well (and use some of these techniques). Also, I think there’s a certain power in knowing how well a game is selling–this could mimic the effect of backers wanting to fund a Kickstarter project because of how well it’s doing. Maybe I could post the total sales for each of our products in a prominent place on our website?
- Decreased potential for discovery: Kickstarter has slowly improved its discovery system over time. My hunch is that very few people randomly discover projects on Kickstarter–they usually find out about it from some other source and then search for it–but there are some merits to the element of discovery created from friends and creators you follow. Solution: We intend to advertise on BoardGameGeek and send games to reviewers as we usually do, and I think if people are excited about something, they’re going to share it with their friends. We just might need to worker harder at giving them something fun/playful to share (like the photos of pets with Scythe we had fun with). It helps that we have nearly 25,000 e-newsletter subscribers and over 9,000 Facebook fans, but those are just numbers–it’s important to engage those people in ways that value their time.
- Thinner margins for publishers: Distributors typically buy from publishers at a 60% discount off MSRP. Let’s use Scythe as an example to show the difference in margins. Scythe has an $80 MSRP. Scythe costs about $22 to make and ship from China to a distributor. So when a distributor buys it for $32, we make a profit of $10. There was a close equivalent (retail edition plus promos) on Kickstarter for $59. Kickstarter/Stripe take 10%, and the per-unit courier cost subsidy built into that price ended up being around $15. So that puts the total cost around $43 for a total profit of $13. Solution: It’s really not that big of a difference. $3 adds up, but Kickstarter is a one-time thing for a product. Distribution is forever (potentially).
- Higher prices for consumers: Because of the direct approach, Kickstarter allows creators to offer backers prices that are lower than their retail equivalents. So I do struggle a bit with the idea that we’re making a choice that hurts our valued customers. Solution: The new system is meant to remove a key cost for customers: shipping. Whether you buy from a local game store or an online game store (over their “free shipping” threshold), you’re more likely to avoid paying the guaranteed shipping cost on Kickstarter (whether it’s built into the cost of the reward or added on). But this is only a partial solution, and I can understand how it may be frustrating for some people.
This is going to be a learning process for us. It always has been. But I look forward to the journey–a very well-informed journey, thanks to people like you who offer me their thoughts, ideas, and opinions in constructive ways–just as I look forward to sharing that journey with you on this blog, as I do in Part 3.