Online Discounters: How It Affects Publishers, Distributors, Retailers, And Consumers

A point and counterpoint article by M. Joseph Young and Ian O'Rourke

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When Mr. Woolworth was running his own five and dime, one day a man came in, bought some nails, and left. Mr. Woolworth asked the boy who waited on him what he sold the man. The boy said it was a pound of ten-penny nails. "Ah," said the boss. "What did he come in for?" "A pound of ten-penny nails." "I'm sorry--what did you say you sold him?" The boy was becoming frustrated. "A pound of ten-penny nails." "But I thought that's what you said he came in for?" "Yes." "So you didn't sell him anything," Mr. Woolworth said. "You filled his order for a pound of nails."

The question was asked, how will online discounters affect the role playing game world? I reacted immediately; but I thought it best that I should actually see an online discounter's site before making statements about them. So I took a look at the site which I was told was currently the largest, and changed my mind--a little.

A man walked into a local music store and asked the sales help about a song. No one recognized it at first, but they got together and in a few minutes they were singing it, and had a title, artist, and album identified. One of the staff produced it from the rack and asked if the customer would like to buy it. "Goodness no," was the reply. "I can get it for much less on the Internet."

And that is the fear I have of online discounters. But why should I care? I don't run a game store; I'm a publisher and author, and I make the same amount on my games if you buy them from a local store or an Internet giant. Yet I do care; I think that the local game store is very important, and most important for the small press in this industry.

If you walk into a game store, you'll see rack upon rack of Wizards of the Coast, World of Darkness, BattleTech, and a few other major games. But hopefully you will also see at least a couple of racks of games you've never seen, of which you've heard nothing--some of those small press games which are so important in our industry. Maybe you'll see a copy of Multiverser there, page through it, and realize what a fabulous game it is; maybe you'll buy it, maybe you won't, but maybe you'll tell someone you saw it and it looked good. And without that, those of us in the small press have a much tougher time convincing you to buy our games. In fact, some of you won't buy a game you haven't seen somewhere, no matter how good the reviews are. We need those game stores to showcase our games. And the discounters threaten those stores.

We could debate whether most gamers need the small press companies. If you just play Dungeons & Dragons, or World of Darkness, or BattleTech, you have no trouble finding your books; and if you know what you want, you can order it online cheaper. But the big companies today were all once small press, and the small press enriches the blood of our hobby. And in every creative endeavor the artists look to each other for inspiration. Smothering the local game stores hurts the independents, and so chokes the creativity in the industry and dries up the artist pool. It's even bad for the major games.

And my exploration of the discount site shows exactly this kind of problem. It is heavy with the better known games; you are unlikely to notice the smaller games if you aren't seeking them. Although available books are pictured and described, it was not immediately apparent how to find the descriptions. Overall, the site was designed not to sell you something, but to take your order. And that's bad news for me and for all the small press companies, because you aren't likely to buy our games if you haven't heard something good about them.

But as it turns out, it's not so bad as it first appears. The discounts available are not so steep; large retailers are already selling at close to these prices, and even smaller stores give their regular customers good discounts. And there are steep shipping charges on small orders. If you want only one book and it's less than twenty dollars, you might save a dollar if you're willing to wait a week or so for it. You won't see substantial savings until you're buying a lot of books at once, so unless you typically drop a lot of money at once on game supplies the discount probably is not worth the time.

The idea of online discounters in the gaming industry seems like it would have a major impact on the way small press companies reach their customers, but in practice the savings aren't enough to threaten retail. The discounters are just another retail outlet; the discount is a gimmick to attract customers, not a significant level of savings.

That's how I see it. What about you?

--M. Joseph Young

M. Joseph Young is co-author of the Multiverser role playing game and Vice President for Development at Valdron Inc in the United States.

The key to understanding the Internet is acknowledging the fact that it is an ultimate enabler, and a technology (more a suite of technologies) that has and will have a great effect on peoples lives, the way and means by which we communicate and also the way we do business. The business world is replete with the Internet's effect, from the outrageous evaluations of .com companies to the 'success' of Amazon.com and somewhere down the scale comes the RPG industry, and the selling of gaming materials over the Internet.

The nature of online retailers is a varied beast; we have the larger online retailer such as Dragonscroll.com which is a true online retailer in the sense they provide secure ordering via their website, to smaller outfits that use the Internet to display a more dynamic catalogue with the majority of (if not all) product still being actually ordered over the phone, by fax or even by e-mail.

The presence of these online retailers (whether having the internet as their sole revenue stream, or if they also own a store) has to have an effect on the industry.

THE FLEXIBILITY AND THE PRICE

An online retailer has a number of advantages over a traditional storefront, the main advantages can be summed up as follows: reach, flexibility and price.

The Internet as a revenue stream has one big advantage; it is a shop front that theoretically has a global reach. This global reach would seem, in practicality, to not be as easy to achieve as is first believed due to shipping costs. In truth, the majority of online retailers sell to their own countrymen. Still, having a storefront available to any customer in your country of business (or neighbouring countries?) does offer a significant advantage.

A pure online retailer can even be very flexible in how he handles stock, as he does not to have to place stock on the shelves for people to peruse. The more business-focused retailers will keep stock, so that they can respond to orders quickly, but they will still try to keep surplus stock low. A proportion of retailers keep negligible stock or zero stock and effectively order direct from the distributor/publisher.

The online retailer can also break down barriers between author and consumer in ways that traditional retailers cannot hope to duplicate. As an example it is now relatively easy for a games designer to sell his product direct via an online retailer, or his own website. This is how John Wick chose to sell the first run of his self-published game: Orkworld. While this 'near' direct sales model has advantages for all sides when applied in small doses, it could cause serious problems if it happened en masse due to the loss of the distributor between the many publishers and stores (online or not).

While the flexibility advantage of the Online Retailer cannot be ignored, the discount is what attracts the majority of customers. The 'low overheads' theory of the Internet driven company has become so commonly accepted by the public that they expect items to be sold for less money. Obviously, the Online Retailer always wanting a competitive advantage is willing to oblige. The problem being that while the theory still holds that this discounted, Internet driven model should be viable, the vote is still out on if any one has actually created a viable business using it. Even Amazon.com has its detractors, people who believe, despite its aggressive expansion, that it may be hiding serious difficulties.

Little doubt exists that the online retailer is a good thing for the customer. You can order at any time, from pretty much anywhere and at a reduced cost. What more could you want? In the UK this can be very useful as the only national network of gaming stores in the UK no longer stocks role-playing games so we all rely on the very patchwork existence of independent stores. The Wizards of the Coast stores with their well designed, and well lit interiors is something we can only dream about (only computer games stores get this treatment in the 'Green and Pleasant Land').

At the same time though, some people believe that the nature of online retailers, specifically ones who discount heavily, may be damaging in the longer term.

DOES IT HAVE A DANGEROUS SIDE?

The nature of the role-playing industry (as it is) brings into a play a number of unique aspects that make the bricks and mortar versus online retailer a slightly different argument.

The problem some people have with online retailers is that is that some Online Retailers are the millennium equivalent of a hobbyist selling by mail order out of his bedroom - he has just been given a more powerful advertising medium. These Online Retailers can sell for extremely low margins (in that they do not plan to survive on the business's products just for it to provide a return of some variety) as they have zero overheads. This is a quirk of the hobbyist nature of the role-playing industry, in no other industry (such as the selling of books) could such a player exist and even be viable on a 'pocket money' return basis. Indeed, what individual would want to?

The size of the role-playing industry means that this small retailer, with his national (theoretically international) store front can survive and muddle along if he is lucky. This takes sales away from shops that already make little profit. It can be argued that expecting a business with assets to compete with such a small retailer is not fair.

A theory also exists that a core of online retailers are transitory, in that they provide few reasons to engender customer loyalty (something pure online retailers have always had to deal with, and which companies like Amazon have conquered to some degree) and as such customers move from site to site. This can mean online retailers disappear only to have another re-appear but in the process no business has been created - but traditional shops may have been lost in the process. Once a role-playing shop closes in a particular area it is often the case that another does not open to replace it.

The main problem seems to be the devaluation of product (essentially the discounts as indicated by the articles title). I have seen the Third Edition Dungeons and Dragons Players Handbook on sale for #9.95 by an online retailer which is 25% off the RRP (UK price). The role-playing industry already suffers from a lack of product value; if this is combined with a lack of value in a literal sense, in that the customer comes to believe that the RRP (Recommended Retail Price) is too high due to the significant online discounts I can see why traditional stores get frustrated. After all, in the more traditional retail markets the competition for online retailers is often large companies with strong brands that allow them to compete with the 'new companies' (to such an extent that many believe the old guard will be the strong web companies as the new entrants die) but this is not the case in gaming as most stores are not part of strong chains with strong brands.

WHAT DO I THINK?

I am not an avid industry watcher, neither am I experienced in the nuances of the RPG retail market and its dynamics. All I can do is base my opinions on the suppositions put forward in this article.

In the main, online retailers looking to create a viable business (however small that business is, considering it is the RPG industry) are not a good or bad thing, they are just a choice. If an online retailer can organise his stock better or store it cheaper to provide next day delivery with a cheaper price then he should be allowed to sell at that cheaper price, this is business at the end of the day. A few individuals believe no discounts should be allowed period, I believe this is wrong. If you can run your business cheaper, you should be allowed to sell cheaper if that is your strategy.

At the same time I can see why traditional retailers get frustrated with online retailers who are effectively running a business from a bedroom, but with a storefront that has a national reach. This does not seem fair as in no way can the 'true business', whether traditional or online, compete. This sort of online retailer is offering serious discounts based on the fact he is making pocket money rather than running a viable business. He may eventually give in, but another will take his place. If these retailers are affecting the industry in a bad way I would have to agree they are a dangerous element. The trouble is I doubt they have that far a reach or volume of sales to affect anyone, but I may be wrong.

The problem is: where is the line drawn between a serious business capable of offering discounts and the part-time hobbyist looking for pocket change?

In short though, times move on and business models change, and even if the hobbyist nature of the RPG industry means these new models put it further under strain, they are not going to go away.

I also believe that online retailers may be able to offer useful services (that could bring more visitors and potentially more sales) by providing a vehicle for the more 'professional' D20 material (I name this as an example due to the expected demand for material) on their websites. At the same time I think this is unlikely to occur, but will happen either in isolated pockets by individual authors, or via portals for such material.

I am not sure how online retailers in their current form can cause a radical change in the publisher/distributor/Retailer/Consumer dynamic as the distributor is present so that that the many publishers and the many stores do not have to manage a complicated web of relationships. In a larger industry, Internet driven marketplaces could replace a distributor, but this is not likely to happen in the role-playing industry. As a result I think the Internet may make the publisher/author and consumer relationship 'closer' via isolated examples only, such as the Orkworld example.

At the end of the day though this article, along with its partner, is just a vehicle for debate, so what do you think?

--Ian O'Rourke

I would like to thank the following people (who offered useful advice) during the writing of this article: Andy Warner (www.legendgames.co.uk), Alan at (www.mordor.ltd.uk) and Stormbringer (never had time to get his real name). Please note: all the above thoughts are mine and should in no way be taken to represent the opinions of the above named.

Ian O'Rourke spends his time constantly trying to find time in a hectic life to write and to run role-playing games which fulfill his simple dream to tell stories. Ian has written for Arcane magazine (before its sad demise) and writes The Chimeric Files for the Gaming Outpost. He also maintains Chimeraweb his own website. Strangely, unlike most people on GO, he has no desire to write his own role-playing game.