DireWolf is Throwing Brick & Mortar a Bone
Contrary to what the nursery rhyme teaches us, some wolves are big fans of brick and mortar. That is, brick and mortar friendly local game stores.
On DireWolf’s pre-order page for Rise of Ix (the expansion to Dune Imperium) there is a section about pre-ordering the game through a local game store. Consumers who choose this option will receive a promotional card “Boundless Ambition” which features Barron Harkonnen, the big baddy from the game and book.
Barron Harkonnen uses anti-gravity suspensors to support his enormous weight (and ambition)
To understand why this is a big deal, let’s talk a little about board game fulfilment and the retail distribution chain (as always Jamey Stegmaier has a great resource on the topic) .
A publisher orders games from a manufacturer
Games are freighted to warehouses (& fulfilment centers) in local markets
The publisher sells games via two channels
Direct to consumer.
To distributors, who then sell the game to retail stores.
Pre-pandemic, about 90% of games were sold through distributors. But, that doesn’t mean that those games made their way to a friendly local game store. A large portion of games are sold by distributors to discounted online retail stores. To understand why, let’s look at the numbers.
The classic bored game “Abacus”
The rule of thumb is that a game’s retail MSRP is roughly 5x the landed cost. That is, if it costs $10 to manufacture and freight a game to a local market, the expectation is that the end price at a retail store is about $50.
The publisher sells the game to distributors for 2x landed ($20)
Distributors sell the game to retail at ~$25
Retailers have a lot of overhead (rent, employees, etc.) so price games at 2x their cost, or $50
Where this breaks down is when you introduce discounted online retailers. They don’t have the same overhead as brick and mortar, so they can undercut stores, and the publisher’s e-commerce store (which is kept at MSRP so as to not undercut brick and mortar retail).
A note on margins: the $50 game sold through retail nets the publisher $10 per unit of profit, whereas direct to consumer they would net closer to ~$25.
Brick and mortar stores, or Friendly Local Game Stores (FLGSs) play an important role in our gaming community. They introduce new players to the hobby, promote games, and provide a safe and welcoming space for players.
Publishers have taken on a number of efforts to support FLGSs - mostly by trying to restrict online sales (an approach that makes stock management harder for game stores - a whole other can of worms).
DireWolf’s approach impresses me because they are speaking with their wallet. Not in the cost of the promo-cards, but in foregone direct to consumer pre-order revenue.
I would assume that most consumers who are pre-ordering a game like Dune Rise of Ix, are relatively enfranchised players and so more likely to find and order the game directly through DireWolf’s e-commerce store. That means, instead of netting something like $25 a unit, DireWolf is shifting the profit downstream to distributors and brick and mortar retail.
By limiting discounted online sales of the promo card, but not of the game itself, DireWolf incentivizes consumers to shop retail, while not limiting inventory management options at brick and mortar stores.
Retail exclusives look like an interesting (and hopefully effective) way to support FLGSs.
Have you shopped retail because of exclusives? Would you?
