In a series of moves that upends the hobby game distribution landscape in the U.S., Asmodee USA is becoming a full distributor, selling direct to retailers in all channels and carrying non-exclusive lines, and switching its sub-distributor relationship from Alliance Game Distributors to ACD Distribution, the company is announcing at GAMA Expo on Tuesday.  This model is similar to the role Asmodee plays in 18 markets worldwide, including France, the UK, and recently in Canada, where it acquired Lion Rampant Distribution last August (see "Asmodee Acquires North American Distributor").

Asmodee’s current exclusive contract with Alliance Game Distributors expires on June 30, Asmodee Head of North American Distribution Andre Kieren explained to ICv2 in an interview, leading to the implementation date for the new distribution model on July 1, 2020.

We asked Kieren why Asmodee believes that selling directly to retailers is a better model worldwide.  "We've got a long history of promoting products and selling directly to retailers, many different types of retailers," he said.  "We've acquired the belief that, by having our own inside sales team, training those folks, focusing on evergreen properties, and stocking and restocking proven successful titles (that's the focus of our business), that that will result in better sales for retailers and better services for retailers."

The planned change affects thousands of hobby game retailers.  Under its current exclusive distribution agreement with Alliance, Asmodee is selling directly to around 400 "flagship" hobby game retailers, which offer organized play, do demos, and have in-store gaming space, and another 600 specialty toy and gift stores. while Alliance is servicing around 2100 stores, Kieren told ICv2.  As of July 1, those 2100 stores will have the options of buying Asmodee-exclusive products directly from Asmodee, from ACD, or from both.

Asmodee has been investing in its logistics operation in preparation for this transition.  Asmodee currently operates two distribution centers, one in the Minneapolis area and a second, opened last August, in Atlanta.  All retailers serviced by Asmodee will be shipped from one of those two warehouses.

For the first two years of the exclusive relationship between Asmodee and Alliance, Alliance operated a dedicated call center for Asmodee products in Minnesota.  That call center was closed last July, and some of the reps were transitioned to Asmodee.  That change was made as Asmodee took over more direct accounts in the third year of the deal (see "Asmodee North America, Alliance Exclusive Evolving").

Retailers switching from Alliance to Asmodee direct will experience some changes in wholesale pricing, freight costs, and credit terms, Kieren told us.  "[W]e think the switch will be advantageous," he said.  "We plan to honor the flagship program.  That's our going-forward strategy.  That's the silver, gold, and platinum tiers, where retailers are rewarded for growing their business with Asmodee's line by getting better discounts.  Also, we've developed, since [Head of Marketing] Ruby [Nikolopoulou] joined the team (which has been over a year now), some trade marketing programs, which we think are quite advantageous: the Bestsellers program, AsmoPlay, and AsmoDemo. For stores that participate in our Bestsellers program, they will also receive free shipping and no minimum order."  The Bestsellers program offers benefits to retailers that stock and restock regularly the 40 bestselling games in the Asmodee line.

We asked why, if Asmodee believes that it’s beneficial for retailers to deal directly with the company, it was continuing to offer its products through a sub-distributor (in this case ACD) as well.  "I think as an American, born and raised here, when we, more than any other culture that I've encountered... get told what to do, it rankles in a way that it may not for some other cultures," Kieren said.  "I think choice is super important.  It's important to me. It's important to our customers, and I don't want to ever box people into effectively a no‑choice situation.  I think retailers should have a choice."

Kieren did not answer directly when we asked why Asmodee was shifting its distribution relationship from Alliance to ACD.  "As Asmodee USA continues to change and grow, so do the relationship we have with our partners," he said.  "I want to thank our partners at Alliance for the three years we have worked together.  I wish them nothing but success in the future.  And as Asmodee USA moves into the future, we are looking forward to developing a strong partnership with ACD as our new distribution partner."

ACD offers proximity advantages over the Asmodee distribution centers for some retailers, with warehouses in the Western U.S. (Fresno, California) and the Northeast (Middletown, Pennsylvania) in addition to its headquarters in Middleton, Wisconsin.  "There's nothing preventing a retailer from buying from both Asmodee and ACD," Kieren said.  "In fact, my anticipation is that many will, because ACD's got a broader logistics network."

Asmodee is kicking off its distribution of lines on which it does not have exclusive U.S. rights with Exploding Kittens, which it will begin distributing this summer (other distributors also carry the line).  We asked whether game companies might be reluctant to distribute their products through Asmodee, fearing that it might favor products it owns or on which it has exclusive rights over those sold by other distributors.  "That's been our operating model for many years," Kieren responded.  "The way that I've talked to both retailers and also potential publishing partners is we're very focused on sell-through, not sell-to.  If I'm selling through, it means I want to make sure that the retailers are buying product that they can sell on to consumers.  They're not decorating their store with items and getting stuck with inventory.  The reason why is because retailers are selling them.  For me, it's a part of our hybrid model."

We asked whether Asmodee was planning to add the major TCG lines, the biggest dollar hobby game products, to its non-exclusive lines.  "Not yet," Kieren said.  "We would love it; at this moment in time, we’re not.  We don’t have any specific plans to do that."

There are a number of major impacts of Asmodee’s moves.  As it adds non-exclusive publisher clients, Asmodee will now be a direct competitor of all of the existing hobby game distributors for retailer business in a landscape that’s already fairly crowded, with five major U.S. distributors and a number of smaller ones.  While its logistic network is not as robust as those of the Big Five (ACD, Alliance, GTS Distribution, PHD Distribution, and Southern Hobby Supply), it would not surprise us to see Asmodee expand that network in the future.

ACD is the only distributor that’s arguably in a better position after the changes than it was before, but even ACD will now face a new competitor for sales on lines other than Asmodee.  Alliance, part of distribution giant Geppi Family Enterprises, suffered the biggest positioning loss, while the remaining three distributors of the Big Five are in an intermediate position.  Those changes put pressure on the existing distributors to acquire or merge with one another to build more throw-weight against their new competitor.

Despite potential conflict issues, which Kieren dismissed above, dealing directly with retailers may also make Asmodee an even more potent competitor for exclusive distribution rights.  Asmodee announced one new exclusive distribution arrangement, for Mantic’s Hellboy: The Board Game line, today.

We note that in other countries, Asmodee has expanded its distribution network through acquisition in addition to organic growth.  For example, in addition to the Canadian acquisition referenced above, Asmodee acquired two UK distributors, Esdevium (see "Asmodee Acquires Distributor") and Coiledspring Games (see "Asmodee Rolls Up Another Distributor"), Nordic/Dutch distributor Bergsala/Enigma (see "Asmodee Acquires Another European Distributor"), and Polish distributor Rebel SP. Z O.O. (see "Asmodee To Acquire Rebel SP. Z.O.O.") over the past ten years.

Whether Asmodee grows its U.S. distribution organically or through acquisition, steps that may already be in motion, the hobby game distribution landscape changed dramatically today, with more change likely to come.

Asmodee also announced a round of price increases (see "Asmodee Announces Pricing Changes on Exclusive Lines"), a new exclusive distribution agreement with Mantic Games for its Hellboy: The Board Game line (see "Asmodee Acquires Exclusive U.S. Rights to Mantic’s ‘Hellboy: The Board Game’"), and an end to its practice of providing replacement parts for games (see "Asmodee Ends Parts Replacement Services on Its Games").