Wednesday, May 12, 2010

A Boring But Essential Piece

So, Evil Hat has a company Ipad. This is something Fred and I discussed during the pre-order period, and we concluded we would definitely get a 3g one for the business. Absolutely, some of the decision was impacted by our love of shiny objects, but the bulk of it was a business decision. The ipad seemed like exactly the right device to bring to a convention. You could show off products on the big, friendly screen. 3G meant being able to maintain connectivity in environments where the wifi is slim to nonexistent. Plus, mobile payments are a growing field, and we figured we could use one of the iphone apps to take credit card payments.

I'm not going to pretend we're big time convention veterans. We only go to a few conventions a year, and we have mostly operated under the IPR umbrella when we have. That said, due to Fred's relationship with IPR, we've been pretty cognizant of the business end of things, and one of the important lessons that comes of sales on the road is that taking plastic will net you sales you would not otherwise be able to manage, especially when the ATM runs out of cash (and the ATM will always run out of cash).

That said, taking credit cards is not necessarily as simple as all that. It costs money to make money, and in the case of businesses who don't move a large amount of money (like many game companies), the costs associated with taking credit cards can be high enough to offset any benefit. What costs? Well, historically you needed to get a merchant ID (that costs), pay a monthly fee (more $$$) and then you paid a certain amount of every transaction for the privilege. Plus, you needed to figure out how you would take the cards in the first place. You could get a card swiper, and while that's easiest for your customers, that's the most expensive option (plus you also need to account for how you'll print the receipt). If you've got a register that can handle it, you can punch in the card, but that register probably wasn't cheap, and you're going to pay more per transaction. Plus, in both cases, you need to figure out how to get the connection you need to make the transaction. All these complications are why a lot of folks use knucklebusters, which is to say card-imprints - those old devices that they put your card down on, then with a CHUNK-CHUNK take an imprint of onto carbon paper. That's easiest to set up, but it exposes you to fraud (nothing says the card has any money on it) and it has the highest interchange rate[1].

This model, for all its craziness, works pretty well for a good size business. The costs of equipment, connectivity and regular fees can all get amortized pretty quickly, especially across a chain. Once a company reaches a certain size, they're much more concerned with reducing interchange because that's the biggest bite for them. Oh to have such problems. But for a small merchant, especially one who is selling things only occasionally?

With all this (and other factors I haven't even mentioned) in mind, the prospect of a way for a small merchant to take payments without paying through the nose is pretty appealing, and the good news is these options are starting to emerge. While they generally cost more per transaction, they reduce or remove the other fees in such a way as to make things much more cost-reasonable for a merchant who isn't producing the kind of volume in a year that a Target is seeing in a day.

So, I started looking into this, and two real contenders stood out: Intuit[2] and Square. Intuit's a known player in this space since they're the folks behind Quicken, and Square was created by a founder of Twitter (of all things) and is looking to shake up small payments.

Both of them offer pretty decent terms. Intuit's GoPayments is $12.95 a month, but it's month-to-month, so there's no setup or breakdown fee. It charges 1.7% + 30 cents for a swiped transaction and 2.7% + 30 cents for a keyed (the number is entered by hand) transaction. The big rub is that you need to buy your own card reader ($145, $220 if you want it to print receipts, which you probably do). But on the plus side the readers are bluetooth, and plug into a huge number of phones.

Square has no monthly fee and they offer a swiper for free (for Iphone, Ipad and apparently Android too) but they charge more per transaction: 2.75% + 15 cents swiped, 3.5% + 15 cents.[3] the swiper, it might be a tough call, but on the face of it, Square looks like a clear winner for smaller merchants, with things tilting more towards intuit the bigger you get.

Let's assume you're a game company with a $30 product and someone buys it by swiping a card: with Intuit you'd pay 81 cents per unit. With Square you're paying 97.5 cents. Not a huge difference, and it's going to take a long time to make up the difference in price from the monthly fee and buying the hardware. At $100 a sale, then it's 2 bucks for Intuit versus $2.90 for Square. Still not huge, but at roughly a dollar per transaction, it's only 250 sales or so before you make back your costs.

All of which is to say, it's worth looking at what you're selling and how much you expect to sell before picking an option. Take the DFRPG for example. Most sales will be $90 pairs of the two books, so, ballpark, Intuit starts being a better deal for us somewhere around the 300th sale. If we decide to bring 500 copies, then the decision on what service to use is a difference of almost $200 in our pocket. Yes, that's a small amount in terms of the whole of the game, or even the whole of the convention, but I say this: if you're a small game designer, I doubt you want to leave that $200 on the tables.

Now, these aren't the only options out there, and I don't want to pretend that they are, but I want to call a little attention to this very dry topic because it's one of the realities that you're going to have to deal with, whether you're a game designer, and artist or god knows what else, if you're looking to sell your stuff at a convention. Personally, I've signed up for Square just to see how it works out - never underestimate the power of free signup plus ease of use - but I'm still waiting on my swiper to arrive. I'll probably have more to say once it actually gets here.

1 - Interchange rate is the percentage of the transaction cost the merchant pays to the credit card processors. It's arcane, but the important part is that the riskier the transaction, the higher the rate. CNP (card not present) transactions and transactions where the card isn't authorized online are generally the riskiest, and thus elicit the highest fee.

2- And in the interest of full disclosure, I actually deal with Intuit's stuff in my day job, but not in a way that gives me any particular insight into this product.

3 - Square has no printed receipts, but it has a robust receipt-emailing capability. That's nicely futuristic, but I can see that being an issue.


  1. If I were at a convention, I'd prefer getting my receipt via email. I end up with so many things to carry around at the big cons that not having to keep track of a piece of paper is a big selling point.

    I always use the email option for my receipts from the Apple store and I think most people are used to getting confirmations by email due to internet shopping.

  2. I actually feel the same way about the receipt. I genuinely feel email is a superior way to handle such things. But I don't think everyone's quite in that space yet. I doubt it's a dealbreaker, but it's something to keep in mind. (One problem I foresee, for example, is that people might view it as farming email addresses for future spam - worth reassuring people about that explicitly).

    -Rob D.

  3. Tangent, but spawned by the use of EHP as an example:

    300 copies is a LOT to bring to a convention. 500, moreso. We're looking at 300 copies at Origins.

    We're also having Hero run the register for us -- while that means we're "leaving a lot of money on the table" (i.e., in Hero's pocket), it also gets us a number of benefits in terms of ease of attendance. I don't expect us to make a big pile of money (or really any money) for attending Origins, but in a number of cases attendance just ain't about that. It's about exposure.

  4. The portability of Square (whose swiper fits in your pocket like a pack of gum) cannot be underestimated. You could be sitting at Alcatraz Brewing Company and make a sale to someone at the next table. I think that's more problematic with Intuit.

  5. @fred I like to view that as "Paying for our own sanity"

  6. @Rob -- Yeah. Sanity tax. On that note, having Hero run our commerce/attendance side also let me charge forward with publication plans instead of trying to juggle a lot of Origins prep together with the run-up on DF. I mean, ultimately this might add up to thousands of dollars that could've been ours but won't be ... but I might also have been a broken man by this point. :)

  7. @justin Intuit's non-printing swiper looks pretty small, so I don't think that's much of a barrier. I worry more about paying a month to month fee if your sales are erratic.

  8. @fred Oh, absolutely. I used DFRPG solely because it's at the top of my head.

    Though it also illustrates something. I admit I will be surprised if we don't run through all 300 copies we bring, but we're very lucky in that regard. For someone with a smaller game, that 300 may seem much less reliable, at which point Square seems like a smart, conservative bet. If you go past the threshold, well, that's a good problem to have.

    Though this also raises to me a curious specter of one shots as sales tools. This is exactly the sort of setup that would allow a GM to run a game and, at the end, have it available for purchase *right there at the table*.

    Totally alien sales tactic in our universe, but I think back to your clipboard-box full of DRYH, and it doesn't seem entirely crazy.

  9. Yeah. Importantly, I'm most interested in Square from a "I'm here and I have a dozen copies to sell" scenario.

  10. @fred I also think Square is probably perfect (maybe even more perfect) for our artists friends who set themselves up at cons.

  11. Stupid Chrome beta eating my comment...

    Anyway, even if you own the booth, hiring help could be seen as "sanity tax", even if you could handle it all on your own, you often wouldn't want to. It's crazy for 3-4 day cons, especially when you're one of one or two booths total (Israeli scene is small).
    That's how I got started at cons, just helping people.

    Now, I sometimes help a friend of mine who runs a booth and sit at his booth while he takes lunch/smoke breaks. Sanity is good.

    And yeah, more sales due to ye olde credit card ironing thingy, though it's annoying to use and there's an ATM 2-3 minutes of walk away...

  12. What if you simply let the customer use the ipad to purchase through the internet, check to make sure you got the payment, and then hand them the book?

  13. @jesse Setting aside the flight risk that's actually an option. By my recollection, it's effectively what the Paizo guys do at conventions, only with a laptop. However, it's definitely a little awkward - even with the easiest interface in the world, everyone hits a speedbump picking up something new. So speed is definitely an issue.

    Also, when dealing with people's money, making them feel secure goes a long way, and a card swipe is what people expect. If they type in their number, they suddenly think that maybe someone might be shoulder surfing them or logging their keys. The fact that their swipe is not actually any safer is less important than the _perception_ that it's the safe, which is necessary to get them to use it.

    Lastly, if they punch in the information on the Ipad or computer, you're going to get an even worse interchange rate. Copying card #s are east, but copying a magnet stripe takes work, so the presence of the stripe gets you a better interchange rate, by a percentage point or more.

    -Rob D.

    -Rob D.

  14. We've been taking credit cards through an incredibly jury-rigged, but effective, system at the Design Matters booth for the last two years.

    1. I did create a merchant credit card processing account. Via the wonders of the internet and an incredibly nice representative, I have a plan that's $8/month to maintain with the usual CC processing fees (I don't remember them off the top of my head, but lower than paypal and what you've posted for Square, etc). These costs get folded into the overall booth buyin, so these costs get amortized (is that the right word?) over the 6-8 partners we have each year.

    2. I can only process CC by manually entering the info into an internet portal. Obviously, this is a problem if you're doing any more volume in sales than about a conventions worth.

    3. Customers get an email receipt when their info is processed. We also have a hand-written receipt book at the booth, but I think only 2 people in two years have asked for a receipt at the point of purchase.

    4. We collect the CC either by manually typing it into a spreadsheet (year 1) or via USB swiper (year 2). We lost about 6 transactions due to typos the first year, so the $50 CC swiper is totally worth it.

    5. Because the cost for onsite internet is killer at Gen Con, we process the CC's after hours (or after the Con, depending).

    6. Like the knucklebuster, we're assuming the fraud risk - if the # doesn't process after-hours, we're out the sale. I think this has happened with exactly 1 card in two years. Honestly, I'm fine being out the one sale rather than pay the 500 bucks for an internet connection.

    7. Ideally, we could use some wireless device to process the cards on site. Maybe this year.

    Why this whole rig-amoral? Well, for the customer, here's what happens: they hand us a card, we swipe it, they walk out, they get an email receipt a couple of days later. And that's totally worth it for us.

  15. @Nathan you're not the first person I've spoken too who has observed that their fraud incidence at conventions is incredibly low. I'm not sure that speaks to the quality of the community or the low payout on stealing games, but either way I'm glad for it.

    That said, thank you for that breakdown. I think your final paragraph really sums it up - whatever song and dance we want to do on the backend, that friction-free experience for the customer is what we really, really want.

    -Rob D.

  16. Hey, Rob, I just gushed about the (yet hypothetical) Square over on my blog, too.

    I had a merchant account for a while. It was infuriating nickle-dimey bullshit.

    What interests me about this the most is for $5 items, frankly, or, as Fred puts it, "I have a dozen special edition items here to sell." Cuz that's the order of operations where most of us live.


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