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The Business of Games

To all the game stores out there actually making a living selling games:  God Bless you.

When I first started seriously researching opening a game store about 3 years ago, I didn’t realize how little a store made per item.  Or, more specifically, as I was coming from a background of making a living selling stuff online, I didn’t realize how little they made in comparison to what my company was selling.  People really do have to love a game store to ever try to make a real living out of it.  I gave up on the idea when I first got accepted by a distributor and realized I’d never be able to compete online, as I was still several years at least from opening a brick and mortar store.

To give some detail…I expect our store to fall into the 47% discount level when I first open.  What this means is that a distributor will give me 47% off the MSRP on most of the itemSupportYourLocalGameShops I buy from them.  As many game store owners have complained and discussed ad infinitum, this first doesn’t take into account that no one pays MSRP for anything.  So that 47% off is really 47% off some random number chosen by the manufacturer, and has little bearing on the real world.  The more difficult factor is that online retailers with much lower overhead sell their products so that many brick and mortar game stores cannot sell competitively enough to thrive if they just try to sell games.  Either A)  Many of their customers will buy online and come to the store and play, or B)  The store will try to be competitive and not make enough margin to survive.  Of course I’m ignoring a lot of factors at this point (concessions, tournaments, etc), but I’m just establishing a base of discussion.

To give you some hard numbers, consider a recent Magic the Gathering expansion, Battle for Zendikar.

Amazon Price:  $95.99

Coolstuff Price:  $94.99

My 47% Discount Price:  $76.12

Now, some might think, wow, $18.00 a box is pretty good!  Well…umm…no, it isn’t.  That equates to a margin of 19.87% or so.  I consider that poverty level margin.  To give you some comparison…Dollar General, where I used to work prior to starting my own business, tries to get a minimum 28.5% margin on core items.    Sounds better, right?  Not to me.  On an item I just purchased (a wholesale arbitrage item at that, meaning I am simply buying at website wholesale and selling individual units), I paid $7.47 each for 12 units…it sells for $24.99.  That is a margin of 70.11%.  Even after considering selling and credit card fees, my NET margin on the item (the profit after COGS, Shipping, and Fees but not counting taxes) is 37%, almost twice what a box of Zendikar will net.  After taxes, the box of Zendikar will net about 13%…random item I found on the Internet to sell will net 24%.  That might not sound like a huge difference, but multiple that by 50,000 (about the total number of transactions we did last year), and the difference is ginormous.

So yes, God Bless you FLGSs!

That said, what do I plan on charging for a box of Zendikar at my store?  $94.99.

I want everyone coming in to my store to know they will get their stuff at Internet pricing, so they don’t ever have buyer’s remorse, or a reason to buy anywhere else.   I’m convinced at the very least this will drive most of the available traffic in my little town to us, instead of the Internet or the bigger stores in Franklin or Cool Springs.  My belief is if I can get all the available traffic (which is not a large number considering its a county of population 31,000), I will make enough on incidentals (branded items, sleeves, accessories, concessions, board game/table rental) to support the store.

It helps that I own the building and that my other business will be ‘paying the rent’ so to speak, at least until Outcast gets its footing.  My medium term goal (3 years) is to see if I can get to the 50% or 55% discount distributor tiers (which simply may not be possible even with 100% of the gaming foot traffic in Marshall County).  I understand that not a lot of retailers have the grace of a second business (though I’d be happy to advise any games store owners on how to sell more profitable stuff than games online), and so I do recognize how it must be very challenging to thrive without the fates smiling down.

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