401 Games Group Paper

The market for board games has seen annual increases of 10-20 per cent over the last decade, leading some to suggest we are in a “board game renaissance” (Carlson, 2013). 401 Games is a Toronto-based retailer of board games, card games, and collectibles which also provides on-site gaming space. A recognized early mover in the board game revolution, owner John Park was among the first to tap into the collectible gaming card segment, starting with Magic: The Gathering (MTG) in 1993, which he introduced in response to customer interest. He later moved into hosting tournaments in the store and offering other card and board games. Concurrent with the increased interest in gaming, the company has seen an increase in competitors. This includes competition from online sellers, large retail outlets and coffee shop style gaming establishments (query: are they going after the same people? Need to clarify this) Historically, John has had limited advertising, relying primarily on word of mouth, and ad placements in both the print and online editions of the Yellow Pages.

His website is used primarily for informational purposes and does not presently offer online sales; his Facebook page and Twitter account are updated intermittently and have minimal followers (says who? Can we find stats for industry norms?) 401 games opened its original premises at 401 Yonge Street in December 1992, and in 2013, moved to a larger space at 518 Yonge Street. The current store comprises a 3780 square feet main-floor store space, 200 feet of storage space, and a 2500 square foot basement which is used as a gaming space. It operates from 930am to 10pm, with regular games nights and weekend tournaments. In the long-term, John would like to expand 401 games to other parts of the Toronto area. In the near-term, he has been offered an opportunity to rent an additional 3500 square feet upstairs for another $7000-$8000 a month in rent. Problem/Issue (Colin)

The core challenge facing 401 games is how will they maintain market share and grow the business in a changing competitive environment. Analysis indicates there are several subsets to this challenge: we will limit our discussion to the top xx Issue/Problem Identification (Ranking to come)

401 Games is a strong business that is continuously expanding; however, there are some several problems that 401 Games must address if they wish to remain competitive in the Card Game/Board Game market.

One of 401 Games major problems is their Marketing and Communications strategy, using the word of mouth technique. Word of mouth advertising is a traditional method of spreading news about a business. Most often, this form of marketing involves customers informing their family and friends of their experiences with the company. The problem that 401 Games faces by using this approach is that they are limited to a number of potential customers. The key issue is that 401 Games is only able to reach out to those who come into the store. As a result, it is nearly impossible to track the amount of potential business that could be generated.

For example, John could ask new customers if they were referred and how they heard about the company; but, this only gives 401 Games information about people who responded positively to their word of mouth strategy. As well, gathering information about those who were informed about the business but chose not to come in is a major problem that John must address. In this case, John is not receiving all of the potential information that he truly needs to expand his customer basis. If people are not coming into his store, John must understand why and adjust it. As a result, if 401 Games continues to utilize this approach, their sales will surely decrease along with their store’s reputation unless new promotional tactics are developed.

401 Games must also revitalize their Social Media Pages. Like the website, John is using his Twitter and Facebook pages to inform customers about events, stock, and incoming shipments. However, John is missing a crucial aspect that businesses must add to obtain value from their customer basis, he must find a way to create an online relationship with his current and potential customers. Engagement is the key to trust, conversation and social media gives your business a voice. Social media is no longer a trend; it is a necessity for business. With a strong Social Media presence, 401 Games can effectively interact and share online with customers, which increases its brand visibility.

401 Games can also use its Social Media pages to obtain personal feedback from customers. Social Media is a dialogue where people with similar interests can interact and share things that they like and dislike about a product or the business. Consumers do not limit their online expressions and opinions to businesses with a Facebook page or a Twitter account. By not engaging in social media, 401 Games is ignoring these discussions and limiting their ability to participate, apologize or defend. Social media is the best way to find out what your customers are saying about your brand.

The next issue that 401 Games must address is their Online Sales (E-Commerce) Absence. E-Commerce is the buying and selling of products or services by businesses and consumers through an electronic medium, without the use of paper documents. Although 401 Games has a website, its primary use for it is to inform customers about what they have in stock and what they have coming in. This may be a good idea for local and loyal customers but for 401 Games to really benefit they must expand their market and begin selling online to reach new potential customers. Not only is E-Commerce effective in terms of online shopping, but it is quite useful and easy to operate for business owners like John who require consistent changes to the website especially with continuous changes in prices and the availability of certain products. By implementing E-Commerce into the 401 Games website John will be able to sell his products throughout the world regardless of store hours and geographic location.

401 Game’s Product Matching with MeepleMart is another core issue that must be addressed. If John continues to bring in the same products as MeepleMart there is little differentiation besides the fact that MeepleMart has an online selling presence, and 401 Games sell the products for a slightly lower price. Ultimately, it is the buyer’s decision whether they want to physically go into 401 Games, or choose to pay the extra money on MeepleMart for less effort. As well, by copying similar promotions or sales that MeepleMart has, 401 Games sends a message to customers to be more price focused, rather than focus on the actual value and professional service 401 Games provides to its customers.

Current marketing situation
Strengths:

– Traditional storefront model, which is a relatively easy infrastructure to establish and maintain.

– Unique market that targets customers of all segments and demographics.

– Exceptionally trained staff to provide better customer service than the competition.

– Three product lines which directly increases the size of perspective markets.

– Established supply lines allow product to be taken to market at a fair price that is often less than that of the competitor.

Consumer confidence based on pricing, selection and expertise. Extensive selection and well trained employees. Developed relationships with many customers.

Weaknesses:

– Lack of an online store sacrifices much revenue from web traffic.

– The product is a specialty item, which can make it a slight challenge to find new customers.

– Retail sales only, there has been no expansion into services such as food and drink as some of the competitors offer.

Opportunities:

– Plan and build an online website to increase sales and revenue.

– Expand into new product lines, potentially food and drink.

– Ease of infrastructure and operation allow simple expansion into new locations given the right amount of success.

Threats:

– The product offered is now duplicated with smart devices which could see a decline in sales in the years to come.

– A variety of established competition can threaten sales and command a good bit of the market share that 401 Games would benefit from.

Consumer Analysis
401 games is a company that sells products and brands which are universal, and cater for people of different age and gender. This customer segment was about 40% female and ranged from kids to seniors, with the remainder comprising of males of different ages in the greater Toronto area. Within the board game market customers have typically been segmented into “hard-core gamers” and “casual gamers,” foaming the major psychographic segmentation attribute of the market. In the two different segments, different benefits are derived depending on the board game being purchased and by whom. The rise in the number of consumers was attributed to several different factors such as the design and release of better games. Some consumers viewed board gaming as an art, so the release of better games would create a platform for targeting consumers in different segments.

Board games would also provide target consumers with a different platform of playing games, since most consumers were tired of playing games on their consoles. Board games are not only found in physical products, but online versions can also be attained for those who want to play online or those who want to share the game with their friends. Board games are also a good way of creating personal relations amongst individuals as they give people the opportunity to socialise, and create strong bonds. The approach to the target market is based on consumer confidence through, pricing, selection and expertise.

Segmentation Scheme

Customer Profile Table
Consumer
Gender
Age
Location
Motive
Hard-core Gamers
Unisex
No specific age
Greater Toronto area and online websites
Personal satisfaction through gaming. Can be a hobby for most people Casual Gamers
Unisex
No specific age but mostly between the ages of 12-30.
Online websites and in stores across the nation.
These consumers are not as passionate about gaming as the hard-core or the gaming “Geeks.”

Competitors Analysis

Competition is good for any store because it increases total demand in the products and distributes cost of market. In the games, cards and collectables market in Toronto there is many options for the consumer to find the products that they desire. There is two ways for the consumer to get the products they want. The first is being a traditional storefront such as 401 games. Of the thirteen storefront mentioned in exhibit A of the study, 11 have a storefront component to their business. Five of these stores are also found within the area of downtown Toronto along with 401 games. Almost every company in the market has an online component to their store, except 401 games and Hairy Tarantula. Two of the stores have an online only set-up. Many of the stores have games as apart of their core business, but none have cards. For people that are looking for cards and people with the knowledge of cards 401 games would be the unique in the market. Some stores may have cards but most likely not as much selection as 401 ga

mes. A direct competitor in the card segment would be Amazon.ca. They may not have the expertise, and knowledge that 401 games would have but they would have the same or maybe even better selection. Most of the competitors are not as diversified when it comes to the products that they offer. Most have one or maybe two core product lines, and 401 games has three. This allows them to be part of different markets. A company such as Snakes and Lattes and Fun Games Cafe is very diversified because they offer more then just the buying of selling of games. They also sell food and drink. They allow people to play games before they buy, which may increase sales but could also hinder them. There is many more one-off stores in the market rather then chains. This may be because when selling some of these games and cards you need knowledge.

Places like Toys’r Us and Chapters may have the products but do not have the customer service or knowledge about the products those 401 games may have. 1,000,000 Comix, Amazon.ca, FG Bradleys, Hairy Tarantula, Silver Snail, Meeplemart, Mind Games, and Starlit Citadel are direct competitors for 401 games. Their core business focus seems to be closely related to 401 games. The other companies are indirect competitors for 401 games. They are focused on more then just games, collectables or cards. Such as books and toys. As far as price goes 401 Games in generally cheaper then the competition. Other then Amazon.ca and Amazon.com, which needs to be shipped, 401 Games has low prices. This market is fairly intense. It can be a difficult market to survive in because only people that have knowledge of the product buy things like cards and collectables. It is a speciality item The products that each store can get are usually very similar it makes the stores have to diversify themselves in other ways.

Constraints
Location / Equipment: The store has only one physical location at 518 Yonge Street, Toronto. People who wish to play or shop there must go to this location. It is unclear from the project overview if the building is accessible to persons with mobility issues. While parking is an ongoing challenge in downtown Toronto, the store is in walking distance from a number of key transit routes including Wellesley station and College station. Financial: John is cautious by nature and wants to undertake one major change at a time. In 2013 that was moving the store; in 2014 it will be renting the upstairs place.

His longer-term ambition is to expand to other parts of Toronto. He is also considering a “Snakes and Lattes” format to attract more customers. Policy: The store’s primary focus is on board games, card games and collectible. This has been a deliberate decision. The store does not sell video games. Stock: Because the store offers such a wide variety of games (he has almost everything available, with the exception of products under exclusive licence to others). This represents a significant cost in terms of the amount of stock maintained on site, particularly if it is not being turned over quickly.

Alternatives (based on our discussion Sunday)
There are a number of possibilities ranging from doing nothing at present, to expanding existing space & services, or even accelerating plans to open additional stores in the Greater Toronto Area (GTA). Option 1: Do nothing. John can decide to do nothing, keep his current space as it is, and continue to serve his existing customers. While this may serve him well in the short-term, it has little potential for growth and poses significant long-term risks to the viability of the company Option 2: Expand upstairs with current delivery model. John can maintain his existing model and expand the store into the space upstairs. There is no indication that John is unable to meet the demand for playing space within his current format. Expanding into larger space without expanding his offerings will simply increase costs without significantly expanding revenue potential. Option 3: Expand upstairs with added services/products. John can expand into the upstairs area and expand his existing offerings to attract new clientele.

This can include: a convenience/coffee counter for snacks and beverages (useful for new and old guests), discount nights aimed at students at nearby University of Toronto and Ryerson, or even on-campus event nights to increase visibility and drive interest in the store. While John clearly sees new entrants such as Snakes and Lattes as a concern, we are not told that he is losing market share. A wholesale move to a similar format risks alienating existing clients. John needs to find a way to balance the needs of existing customers with potential new growth. By providing the upstairs space for gaming, and using the main floor for retail/coffee gaming, John should be able to make existing clients feel that they will continue to have a space of their own, while opening the area up to new clients.

Option 4: Open second store. John aspires to expand into other parts of Toronto. John can capitalize on the current ‘latte culture’ and desire to become more connected by expanding 401 games into a new part of the city – ideally, one with a high number of singles/young couples with disposable income – eg. Yonge and Eglington area (get demographics to support). Introduce board games to young people with disposable cash and a desire for entertainment. (401 North?). Build a new following

Analysis of Alternatives – Decision Matrix (what other criteria should we use?)

Alternative 1
Alternative 2
Alternative 3
Alternative 4
Decision Criteria
Do Nothing
Expand Existing store into upstairs space with existing model Expand to upstairs space with added services/products
Open Second store along lines of coffee shop model
Growth Opportunity

Profitability

Cost

Risk of alienation

Recommendation (to come)
Hybrid model?
Query…
Has john lost market share to Snakes and Lattes?
Will his current customers appreciate this style or will it turn them off? Need a good breakdown on customer base.
Snakes and Lattes style approach may work for a new store…. (see also Snakes and Lagers – bar, and Snakes on the Go) Competitors Snakes and Lattes and Castle Board Games both offer online shopping Consider Google AdWords / Twitter / Facebook

Can we find info on demographic makeup of U of T / Ryerson – how many students from out of town? Make 401 a place to meet people with similar interests Survey current customers on what else they might like to see. Survey areas for potential expansion.

http://www.blogto.com/eat_drink/2014/06/the_top_20_bars_and_cafes_for_board_games_in_toronto/ http://beforelastcall.ca/blog/7-toronto-board-game-cafes-to-help-ruin-friendships www.blogto.com/sports_play/2013/05/the_top_8_board_game_stores_in_toronto/ http://www.tabsonline.net/

www.deseretnews.com/article/865585477/We-are-living-in-a-board-game-renaissance.html?pg=all

Appendices…..
Appendix A: Competitive Analysis Table
Company
& Product
Strengths
Weaknesses
Threat level
Snakes and Lattes
Unique approach to board game culture
Target demographic has a high to moderate disposable income
Perceived as ‘innovative’

Tied to need to purchase convenience goods along with games/ gaming time High
Taking board game culture to a new level
Targets higher earners
Meeplemart
Online sales
Ability to offer lower prices

Walmart

Anonymity to people who know what they want / don’t need customer service support Large distribution networks
Ability to offer lower prices
Online sales

Impersonal – low customer service support
May not have rare / specialized products

Moderate
Will provide continued cost pressures for common games

Appendix B: SWOT Diagram – 401 Games

Strengths

Well-trained staff
Exceptional customer experience
Location (downtown Toronto)
Traditional storefront model is relatively easy infrastructure to establish and maintain. Unique market that targets customers of all segments and demographics. Three product lines which directly increases the size of perspective markets. Established supply lines allow product to be taken to market at a fair price that is often less than that of the competitor. Weaknesses

Product is a specialty item
Retail sales only
No option for online shopping
Traditional storefront model means customers must come to physical location Price-matching strategy may eventually undermine revenues / brand position

Opportunities

Board games market growing 10-20% per year
Maintain industry leader position as ‘brand of choice’ for consumers Reinforce market share
Plan and build an online website to increase sales and revenue. Expand into new product lines, potentially food and drink.
Ease of infrastructure and operation allow simple expansion into new locations given the right amount of success. Proximity to university/college market (on campus events, student discounts) Multicultural city – consider targeting various cultural demographics, offer games in original language

Threats

New entrants to market
Some board games (eg. Yugi-oh) now offering options for online play The product offered is now duplicated with smart devices which could see a decline in sales in the years to come. A variety of established competition can threaten sales and command a good bit of the market share that 401 Games would benefit from.

Discussion of Key SWOT issues

Strengths:

– Traditional storefront model, which is a relatively easy infrastructure to establish and maintain.

– Unique market that targets customers of all segments and demographics.

– Exceptionally trained staff to provide better customer service than the competition.

– Three product lines which directly increases the size of perspective markets.

– Established supply lines allow product to be taken to market at a fair price that is often less than that of the competitor.

Consumer confidence based on pricing, selection and expertise. Extensive selection and well trained employees. Developed relationships with many customers. Location is downtown Toronto is walking distance from major transit stations and near both the University of Toronto and Ryerson Polytechnic. 15 minutes from Bay Street / business district

Weaknesses:

– Lack of an online store sacrifices much revenue from web traffic.

– The product is a specialty item, which can make it a slight challenge to find new customers.

– Retail sales only, there has been no expansion into services such as food and drink as some of the competitors offer.

Opportunities:

– Plan and build an online website to increase sales and revenue.

– Expand into new product lines, potentially food and drink.

– Ease of infrastructure and operation allow simple expansion into new locations given the right amount of success.

Threats:

– The product offered is now duplicated with smart devices which could see a decline in sales in the years to come.

– A variety of established competition can threaten sales and command a good bit of the market share that 401 Games would benefit from.

Customer Profile Table
Consumer
Gender
Age
Location
Motive
Hard-core Gamers
Unisex
No specific age
Greater Toronto area and online websites
Personal satisfaction through gaming. Can be a hobby for most people Casual Gamers
Unisex
No specific age but mostly between the ages of 12-30.
Online websites and in stores across the nation.
These consumers are not as passionate about gaming as the hard-core or the gaming “Geeks.”