Discounting, Disintermediation, and the Death of the Professional Card Shop

 

This week I counted four 100+ comment threads in game retail Facebook groups about Magic booster discounting, and I’m not even in most of those groups.

The new Magic set, Aether Revolt, is not selling terribly well. This, on the heels of a winter weather event that caused shipping delays and business slowdowns during what for many is a critical post-holiday cash crunch, means that many sellers large and small are dumping quantities of Magic product onto the marketplace at pennies above wholesale cost. For some retailers it is currently as cheap to buy Kaladesh boxes from StarCityGames as through distribution.

This is an acute moment in what many retailers believe to be the industry’s chronic condition. Many stores, including stores much larger and better than mine, have seen Magic sealed product sales drop to near-zero levels. We’re fortunate to be a diversified store, but the bulk of game stores are actually card shops, and a dip in Magic frequently results in a wave of store closings. When customers can buy their product online for near-wholesale prices, store owners who never made much money may run out of cash altogether, and store owners with more profitable businesses may find that there are better uses of their time.

Leaving aside for the moment that you can always count on intermediaries to be firmly against disintermediation, the evaporation of the middleman in this particular industry matters more than most, since it’s at the middleman’s tables that Magic: The Gathering is played. If you can’t find someone with whom to play, you may soon give up your Magic habit. If there’s no shop to centralize that activity, it’ll be easier for you to play Hearthstone instead.

That’s the conventional wisdom among retailers: “Discounting will lead to the death of Magic!”

I think they’re wrong.

The barriers to entry in the card-shop business are essentially zero: You can get in with a thousand square feet of questionably-zoned space, some tables and chairs from Sams Club, and $1,500 for some stuff to sell. Since Magic product has a turn-rate that is fantastic, this non-business-plan sort of works out in the same way that IKEA furniture is a good deal when you don’t value your time or the result’s durability.

This compounds that online discounting problem by adding to the mix inexperienced business owners who, very recently having been mere consumers, know of only one way to grow their business: discounting. “I’m buying customers,” they say, as they sell unprofitable product to attract players to unprofitable events, or maybe the other way around.

So they chug along, working six days a week, until the end is brought on by the ballooning lease they signed without the help of an attorney, or the need to buy groceries, or the end of their spouse’s patience with their lack of progress. They close their store or sell it at an escape-with-your-life price to some other fool (this is how I bought my store) and then, presumably, they go join a local co-op and start teaching workshops about running a startup.

When the hamster dies, another is waiting to defer its student loans and take the wheel.

And when a card shop fails, like a fairy getting its wings, another poor dumb bastard gets a commercial lease, and commences throwing the best years of their life down an unprofitable well without so much as an index-card business plan. Hakuna matata, it’s the circle of mediocrity, and it moves us all through despair and hope. There’s always a place to play Magic, because there’s always someone willing to sign a two or three year lease to run a clubhouse that keeps the lights on without much left over. Last I checked we are making underemployed twenty-somethings at a pretty steady pace, so I don’t see the cannon fodder drying up any time soon.

Wizards of the Coast will of course insist that they want clean, professionally-run stores, but the resources dedicated to that are mostly a team of web developers and maybe one or two sacrificial lambs that herd cats in the WPN Retailer Facebook group. Wizards doesn’t appear to be doing anything about the race to the bottom resulting in a cycle of mediocre, unprofitable clubhouses because to Wizards, it’s not really a problem. If you accept that their responsibility is to create shareholder value, it shouldn’t be: If you had a nearly-unlimited supply of free labor facilitating the movement of your product out of your warehouses, would you really care if your free labor is making 5% or 40% margin? Would your shareholders allow you to care?

This is all very cynical, perhaps more cynical than I intended it to be. Magic is about a quarter of my business and I don’t see it going away entirely anytime soon. I do anticipate my peer group getting smaller over the course of the next year. Magic is so very sweet when times are good, but running a dedicated card shop is like depending on the only person who knows where you live to keep bringing you food. My hope is that some who will remain will diversify soon and build a cash buffer so that they can survive and thrive and, just maybe, provide a play space for Magic players that doesn’t have big holes in the floor.

The January Slump Grumps (Take a Knee, Drink Some Water)

I paid $10 for this stock photo and I feel like it’s a sign that I’m finally growing up.

I’m not a psychologist. In college I bought a Psychology for Dummies book, read it in a day, barely passed the CLEP exam to fulfill the requirement, and promptly forgot everything. Even though I don’t have any formal training in helping people with their feelings, I am a person who has feelings at least once or twice a month.

Something I noticed this week as I dealt with the aftermath of my aborted expansion came courtesy of Facebook, which has started helpfully showing me posts from my account on the same day in previous years. The thing I noticed is that I’ve been a genuine bummer this time of year ever since I purchased my business. I’m frequently angry, scared, or sick in January, in contrast to December and February when sales are rocking due to Christmas or Tax Refund Season and I’m king of the world.

As I investigated further, I found that this wasn’t limited to my posts. As I looked through January posts from the half-dozen Facebook industry groups that I’m in, I found that people were being awful to each other, in contrast, again, to their nominally-civil behavior at other times.

This is a hard time of year. You’re probably seeing what feels like a dramatic slowdown in sales as Christmas wraps up and the Grandma Money that was given to your customers runs out. Our sales are never bad in January, but with the payroll and credit terms coming due from the comparatively-bonkers holiday season, it can feel like a pinch. This is in addition to all of the the things that non-retailers go through this time of year, like family stress, Seasonal Affective Disorder, disruption of diet and activity routines, and the post-holiday-shopping financial crunch.

Once again I’ll stress that I’m not a professional brain-helping person, but here are some things that are helping me:

Make a list of the the things that are making you sad.

This week I was struggling with the feeling that my business was in a spiral. Everything was a giant hassle, every product line was doomed, it was all a lot of trouble, and I didn’t want to do it anymore. I found myself in the shower leaning my forehead against the wall when I decided to make my list. I hope you won’t be weirded out if I share it.

  1. The disappointment of cancelling my expansion plans.
  2. Stress related to the Magic Prerelease and all of the problems caused by too-limited allocation and flawed technology.
  3. Stress related to what is probably a vent hood problem at one of my neighbors, which has caused my store to intermittently smell like farts through no fault of anyone inside.
  4. Unusually-intense pain related to an injury sustained in my previous career.

Once I made the list, I realized that my brain was lying to itself about the overall state of my business and my life. Nothing is perfect, but these problems are far from insurmountable. The last three were probably exacerbated by my feelings about the first. I made the decision that it was okay to be bummed about curtailing my expansion, as long as those feelings were honest, specific, and not outside the scope of the decision’s actual consequences. For instance, it’s okay to be sad about the fixtures I bought that will not be used. It’s not okay to feel like I’m a failure and that giving up was a show of weakness.

Make a list of opportunities and the things that are going right.

I can give you a few of those right now, too!

  1. We had a steady 2016, and process improvements meant that it was our most profitable year ever.
  2. My staff is wonderful. We have no problem children, and my managers are growing into the professionals that every store owner wants.
  3. Cancelling the expansion means that I suddenly have extra cash, which is allowing me to correct some of the tightfisted budget behavior that has held us back in areas.
  4. We have lots of inventory, which means that our profits in Tax Refund Season should be obscene.
  5. My store looks flippin’ awesome, my technology is all humming along correctly, and we have a more-professional presence than ever.
  6. The GAMA Trade Show is only a couple of months away. I get to see some really great friends. I have so many opportunities to help and be helped! They’re letting me present about video games!

Step away from social media, or at least try to understand the stress that your peers are under.

I have turned off Facebook notifications on my phone. I’m going to limit my Facebook time to intentional daily time spent using it, rather than grazing throughout the day. I have sent notes of apology to several of the peers with whom I’ve been snarky this week, even if they totally had it coming. I’m going to make an effort to be positive, uplifting, and helpful for the remainder of this month when talking to others in my industry. Edify, stupid!

Engage in therapy through generosity.

If you’ve been under the gun, your staff have been feeling it, too. This is a great time to spread around modest bonuses if you can afford it. If you can’t justify something in the paycheck, then consider a little extra store credit or a pizza. If you’ve got staff that have knocked it out of the park this holiday season, it is not an insignificant gesture to write them a note telling them how much their work means to you and your business.

Reconnect with the things that you love about your business.

This week I’m going to intentionally make some time for process improvement, repairing some game equipment, and making quality-of-life changes to our point of sale system that our employees have been requesting. Your list probably looks nothing like mine since I do my best work for the store while away from the store, but the important thing is to attempt to put yourself into the situations in which you do your best work for the improvement of your business.

“There’s no ‘should’ or ‘should not’ when it comes to having feelings. They’re part of who we are and their origins are beyond our control. When we can believe that, we may find it easier to make constructive choices about what to do with those feelings.” -Fred Rogers, The World According to Mister Rogers: Important Things to Remember

Scared Money Makes Plenty of Money

Nope!

About a year ago, in early 2016, I made a short-notice someone-is-closing-their-store trip about two and a half hours away. These trips happen often enough that I keep a bag packed for them, but they’re rarely successful. Usually by the time an owner has decided to bail, they’ve already gone through a series of clearance sales that cause whatever is left to be garbage. This trip was different: The store was fully stocked and hopping. The owner was behind the counter and drunk.

I asked him for his story and found out that he was being forced to liquidate the store because of his pending divorce. When I asked him for his sales records and an asking price for all of the assets of the business, he produced them, and I liked what I saw. He and I were standing outside while I looked over his numbers, when a passing bird pooped on the paper and my hand. I probably should have taken this as an omen, immediately wished him good luck, and departed.

I asked him on the spot if he would lock the door and sign an asset purchase agreement with me as soon as my attorney could send one over. He said yes, excused himself to the bathroom for twenty minutes, then came back and said maybe.

Things kind of went downhill from there, with three increasingly-desperate trips to see him over the next five days. The final trip involved showing up unannounced with $20,000 in a bag. I finally got a handshake agreement to sell me everything in the store if I could get it all out the next day. I rushed over to a storage unit place five minutes after it closed, plunked $100 down, and got a phone call on my way out of the parking lot: The game store owner couldn’t sell me the stuff because there was a bank lien on it. Of course I’d asked him about this three days prior, but he didn’t think I was talking about THAT kind of bank lien. Yeah, it was that kind of a negotiation.

I was bummed that I hadn’t been able to execute my plan of signing the agreement, locking the door, and reopening the store six weeks later under my own brand. Still, I had seen his numbers, and I had spent some time researching the town. The town was seriously under-served. I kicked myself for not having the resources to immediately act, but gave myself a plan to open a store there in May 2017.

In 2016 I gathered a substantial amount of cash. I hired an additional manager, freeing up one of my existing managers to move to the new town and co-manage the store with me while we built a staff. Hastings’ timely death was the perfect opportunity to get the type of fixtures we use, so I chased Hastings stores all over the state. I put 4,000 miles on my truck in one month. As 2016 drew to a close I poured a few dozen hours into working multi-location awareness into my point of sale software.

I made half a dozen scouting trips with my wife and each of my managers, and we picked some likely locations. Christmas was maybe not quite as profitable as I’d hoped, but we seemed to still be in the safe zone for making the expansion happen. If I wanted everything on track to build out and open a location, I needed to have a signed lease by the end of January at the latest. This week I scheduled meetings with five different commercial real estate agents and left for a three-day trip to make my decision about the location. Yesterday I arrived in town, met with my first agent in the most promising spot, and nailed down enough details that all that remained was putting our lawyers in touch.

It was scary in the way that buying a house or a new car is scary, and I told my wife that all I really wanted to do was get back to my Airbnb condo and punch numbers into spreadsheets to assure myself that it would be okay. I’ve done this about a dozen times in my life when I or my wife lost a job, or had an air conditioner break, or had our insurance premiums triple (cough). Putting the numbers on paper and planning out my cash flow almost always makes me feel better about a major decision. This time it didn’t.

I looked at the number in my spreadsheet representing my startup costs for the new store, plus two months of rent and lights. I looked at my cash flow estimates, subtracted out our typical operating cash buffer for my original store, and compared the numbers. They were nearly equal. I could do it safely, maybe? (If you have to qualify something as “maybe safe” then it’s not safe.) If everything went swimmingly, we didn’t have any unexpected setbacks, we didn’t miss any expenses in our planning, and if the store performed reasonably well right out of the gate, then we could make it through the labor and delivery.

If anything went wrong, I’d be out of cash. I always held in the back of my head that I was willing to borrow a reasonable amount of money if we ran into a cash crunch. If things went a little more than slightly wrong, I might not realize how much trouble I was in until the debt was sufficient to harm my net income in a long-term way. I asked myself how much cash it would take to make these fears go away, and the answer was in the low six figures. I wasn’t going to go deeply into debt for a business model that could expire five to fifteen years from now. It was at that moment I realized that this expansion wasn’t worthwhile at the price that it would cost to do correctly and safely.

In the space of about two hours, I went from normal nervousness, to deep anxiety, to a certainty that it was the wrong move if I wanted to be sure of the future of my first store. I called my wife to let her know what I’d decided, then called the manager who was planning to move to let him know. I sent out emails to cancel my remaining appointments, had an adult beverage, watched an episode of Archer, slept five hours, and came home.

Rationally, I knew that there would come a go/no-go moment and I would have to make a decision. I know that I have too many people counting on me to go with a reckless plan when prudence tells me that it’s a close shave. Our culture values hard-chargers and risk-takers highly, but I value this business and the jobs it provides more highly. Emotionally, it’s a mixed bag. I can relax the tightfisted finances I’ve operated over the last nine months. I can make plans that don’t involve working myself half to death. Still, my gut calls softly to my intellect: Coward.

Whatever. My gut has crap for brains. I’m going to write some bonus checks and then take a week off.

Variable Trade Value (Fair Payouts, Great Stuff)

This is a super-crunchy, kinda mathy post, but if you hang in there, you might find yourself making a lot more money running a much better business.

When I started this post I wasn’t really sure who it was for. Really it’s most useful to those who are developing point-of-sale solutions for game stores, but there’s not many of those people, and most of my current readers are game store owners. I suppose that this is still useful to them as both an introduction to what I think is an important concept, and an idea of a feature in their Point of Sale solution that they didn’t know they were missing. Customers of POS vendors: You need to be asking for this.

I’m going to talk about the problem in terms of video games for the most part, because that’s where it started for me and it’s where I think examples will be the most relatable. I’ve now come to see that this is every bit as essential if you’re dealing in Magic: The Gathering singles.

The Problem: Feasts of garbage and famines of quality

When I first started out, I paid a flat 50% cash on all games. My point of sale system didn’t have an elegant store credit solution, and I knew that I couldn’t kludge one together out of index cards or spreadsheets, so we just paid cash for everything. As time went on, I realized that I was getting far too many of some categories (Playstation 2) and far too few of others (Xbox 360, which was still current-gen at the time). I changed our price update routine so that some systems had different payouts. For example, I paid 25% for a long time on NES games.

This was still bad. For NES, I was paying over a buck for Captain Skyhawk and Silent Service, which are two garbage bulk games that few people actually want. Meanwhile, I was making trade-in customers of games like Final Fantasy and Kirby’s Adventure very, very angry. I had a LOT of inventory on the shelves, but it was mostly crap and I paid too much for almost all of it. What little high-quality merchandise I had on hand was the result of us inadvertently taking advantage of someone who didn’t know what they had, or me making exceptions to try to account for the shortcomings of our trade offers.

(Systematizing All The Things is always the goal, because it corrects for the deficiencies of your lackeys and of your frail meatbag brain. I’ll make a blog post on it.)

The Solution: VTV – Variable Trade Value

There are junk games for which you only want to pay a pittance. There are great games for which you’ll happily pay a premium. Even if you were relying on your judgment (which you shouldn’t do), you’d be able to make these calls easily. What about everything in-between? Some systems allow for pricing rules on trade-ins that will allow you to create a stair-step tiered trade-value regime, but even those involve a lot of fiddling, and take a lot of labor to adjust. Here’s the component parts of what I figured out and has worked well for me for four years:

  • LowPercentage – This is the percentage of your sell price that you’ll pay out in store credit on the low-end chaff.
  • HighPercentage – This is the percentage of your sell price that you’ll pay out in store credit for the high-end, desirable items.
  • LowThreshold – At or below this price, you pay out the LowPercentage trade value.
  • HighThreshold – At or above this price, you pay out the HighPercentage trade value.
  • CashPenalty – The percentage taken off the trade value if the customer wants cash instead of store credit.

Everything in between the LowThreshold and HighThreshold price has its trade value determined by a straight line that runs between the LowPercentage and HighPercentage numbers. It looks like this:

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This photo was taken while eating a sandwich at Desert Sky Games in Arizona the week after GAMA 2016. I taught them video games, they taught me comics. I think I got the better end of the trade.

Moving the inflection points of this graph give you a lot of flexibility and power. For categories where the line between good stuff and junk is very fine, you could make the slope of the center line vertical or nearly so. If you want to pay out a flat percentage on a category, you can still do so by setting the low and high percentages to the same number. For categories where the desirability and sales velocity of the items increase steadily as value increases, you could set the LowPercentage/LowThreshold very low and the HighPercentage/HighThreshold very high.

Implementation of this is basically impossible if you’re not running a POS that was designed for game stores. If you look up your prices with a spreadsheet you could probably write this into it, but it would be a pain. In my perfect world, both IMP POS and the Dumpster-Fire Goliath POS solutions would implement this.

Basically, what you want is the formula of a line. This is what it looks like in our system:

Make Money, Improve Life

This is not purposeless fiddling: Very little else in my business changed in the year that I moved to VTV. My total dollars spent on trade-ins dropped by a third, the total volume of my trades increased, and the quality of the inventory I was buying dramatically improved, which meant that sales shot up. My net income jumped by something like 30%. I bought a new vehicle for the first time about six months after I switched this on. These improvements in business process are life-changing.

Examples: Super Nintendo

LowPercentage: 30%
HighPercentage: 65%
LowThreshold: $1.00
HighThreshold: $20.00
CashPenalty: 20%

If you sit down and think about the Super Nintendo games on the used market, you’ll probably come to the conclusion that there’s a handful of garbage low-end titles, a handful of high-value games, and quite a few desirable mid-value games in-between. We’ll look at three examples with their current payouts, and I’ll show you some sales numbers for each going back to the implementation of this software in February 2013 so you can see the larger story for each title and how our pricing has changed.

NHLPA Hockey ’93 – Sell $3.00, Trade $0.70, Buy $0.56

This game is bad. We want some copies of it, but if we paid 50% we’d attract dozens of them. At this payout we’re currently sitting on six copies.

Chrono Trigger – Sell $122.00, Trade $79.30, Buy $63.44

Chrono Trigger is an amazing game, and even if we marked it well above market value, a copy in good condition would be drooled over frequently and eventually sold. We want to give a fair payout for this game, because most people who are getting rid of it know that they could get $120 if they were only willing to deal with the hassle of eBay. If we were paying out a flat 30%, we’d be offering $36.60, which is not a fair trade offer and would upset sellers. We currently have one copy. In the report below you can see how the value of this title has shot up over the last few years.

Super Mario World – Sell $17.00, Trade $10.11, Buy $8.09

This is a common, bread-and-butter game that everybody wants, and I could probably get $25 per copy for it without too much trouble. We are currently sold-out in the post-Christmas crush. You can see from the history that it tends to move a little too quickly, meaning that I should think about adjust the pricing manually for both sales and payouts.

Extra Crunchy Extra Credit

If you’ve got a high enough volume in either games or cards, you can go a little further to protect yourself from anomalies in the trade flow. We haven’t even turned this on in our system yet, but as volume increases it may be useful. For each category we have the following fields in addition to the ones listed above:

  • default_optimal: Each item has an optimal quantity number. This is the default for that field. For most video games that’s 12. For Magic singles it might be 8, or 16, or 32, depending on how deep you want to stock. You can always adjust this for individual items if the need for an exception strikes.
  • over_optimal_penalty: This is the percentage taken off of a trade if you have over the optimal quantity.
  • default_excessive: This is the default for the excessive quantity, which is like optimal quantity but far higher. This is the “hey, there’s something wrong” number. For video games that’s 20 for us.
  • over_excessive_penalty: A very high percentage taken off if the quantity in stock is over the excessive number.

Because I Love You: Our category spreadsheet

Here’s the category spreadsheet with all of our values. You can see that many of them are the same. This is one of those 80/20 things where you get the most impact from a relatively small amount of effort. If I wanted to fiddle with it more I could probably squeeze out more efficiencies, but I am trying very hard not to fiddle for a living. It isn’t a super-pretty spreadsheet, with lots of depreciated categories and placeholder values on categories that aren’t price updated regularly, but if you’re data-minded this will help. Video Game pricing comes from PriceCharting and MTG pricing comes from exports of TCGPlayer‘s price data via Gatherer Extractor, since they won’t give out API access to stores for love or money.

I hope this helps someone.

The Incompetence Trap

How do I say this in a way that is not legally actionable?

I think that Crystal Commerce is awful.

We attempted a migration to Crystal Commerce in 2012. Promised features were not present, and promised development did not take place. We cancelled our service, and it did not go over well. Someone called during dinner to ask me to apologize to their CEO, because apparently he was really upset and it was hard to get anything done in the office. I avoid them at trade shows.

After that disaster, I was able to finally put my Computer Science degree to use, creating a point of sale system that isn’t very good but which my employees adore. It should be a foretaste of what I’m going to say about the state of game retail technology that it made more sense for me to spend hundreds of hours developing software for my one 1,700-square-foot store than to make someone else’s solution work.

Of course, almost nobody was in the fortunate situation I was in.

See, it’s my considered opinion that the entire tabletop game retail scene is propped up by Magic: The Gathering. That isn’t the impression you’d get from looking at pictures of game stores, or from talking to the owners at trade shows. They’re not talking about Magic. They’re talking about Third Place theory and board game nights and hand-selling the new hotness in the short space of time between it getting popular and it getting sold dollars over wholesale on Amazon. Some of these guys are seriously good at running game stores, but if you poke them in the chest long enough and listen to the little bits of information that slip through the cracks, you’ll learn or infer that the biggest category for most of them is Magic. It’s been Magic for years. Hundreds of people who call themselves board game store owners walk the halls of GAMA, hoping that nobody finds out that a pie chart of their sales categories look like a Pac-Man named Magic is about to devour the rest of their business model.

Not that there’s anything wrong with that, but I want to make sure you understand that most of these people have to make Magic move through their cabinets, or they will have to go get real jobs.

If you want to make money in Magic, you probably have to deal in singles, which is a kind way of saying that you sling used cardboard for a living. If you want to deal in singles beyond the four walls of your store, you are almost required to deal with TCGPlayer.com. If you want to sell on TCGPlayer at any kind of scale, you have to have a way of making mass updates to your inventory. You can either manually enter this data on a regular basis (and give up on having unified cabinet/online inventory), or you need a point of sale system that integrates with TCGPlayer.

Do you want a point of sale system that integrates with TCGPlayer? You have to use Crystal Commerce.

TCGPlayer used to advertise that they offered integration with outside software, but now they tell you to just get a Crystal Commerce account. Nobody in retail is quite sure why this is. I figure that either they are under some sort of contractual agreement giving their existing partners exclusivity, there’s some deep-seated underlying dysfunction over at TCGPlayer, or they’re unwilling to go any further down the rabbit hole of crushingly-bad game store technology than they’ve already been dragged.

There’s at least one upstart competitor. He’s a friend of mine, and though he’s developed something that seems like it should do the job, TCGPlayer doesn’t return his calls. I don’t know his work well enough to know if it scales, but I know that he’s mentioned in threads daily on retailer discussion boards, and the repeated refrain from frustrated Crystal Commerce customers is, “I hate this, but until someone else integrates with TCGPlayer, I am stuck with Crystal Commerce.”

I believe that it speaks to the larger state of the industry:

p1030105

Most retailers are stuck with a dumpster fire solution that has literally had days of downtime for even basic point-of-sale in the last six weeks. They despise it, but they can’t leave. The most promising alternative is from one guy coding in the back of his game store. He’s got pluck, and he’s doing good work, but he’s a small operation. There is no big software company looking to pick up the challenge and run with it, because there is not much money to be made there. I fear for my friend for the same reason that I refuse to sell my own POS solution to other stores: Precious few in our industry are making enough money to pay what a good solution is worth. An enterprise-level solution to this problem would cost six figures, but retailers will balk at a $199-a-month service package. Have a look at the support board for the existing solution, and ask yourself how much of that you’d be willing to put up with for the paltry amount that most retailers would be willing to spend.

Game retail is small because it’s mostly bad. It’s mostly bad in part because it’s got a shortage of well-developed process and technology. It’s got a shortage of well-developed process and technology because there’s no money. There’s no money because game retail is mostly bad.

Welcome to the Incompetence Trap. I don’t have a solution, but I admire the perfection of the problem.

Will somebody deliver us from this body of death? Will we escape the Incompetence Trap before the eventual end of Magic makes it a moot point? I don’t know, but while we wait to find out, there’s lots of great TV.

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The Only Thing That Matters

Your customers don’t matter.

The number and happiness of your employees doesn’t matter.

Having nice shelving and a freshly-waxed floor doesn’t matter.

Having clean bathrooms doesn’t matter.

Being satisfied with your business doesn’t matter.

Your health doesn’t matter.

What kind of car you drive doesn’t matter.

Your great location doesn’t matter.

Your store’s community doesn’t matter.

Your house doesn’t matter.

It doesn’t matter how often your kids get to see you.

Your gross sales figure doesn’t matter.

Nobody gives a flying flip whether you’re doing what you love.

The number of your peers that want to talk to you at a trade show doesn’t matter.

Your charitable contributions don’t matter.

How much cash you have in the bank doesn’t matter.

Your products don’t matter.

Your Point of Sale system doesn’t matter.

How many locations you operate doesn’t matter.

The only thing that matters is net income.

Until you have sorted out your net income, none of the other stuff matters, because you will lose that anyway. If you think that you might have to pick something–anything–over net income, then you need to get out of your business and get a real job. At a real job there’s work-life balance, and your employer is nominally prohibited from taking away whatever that thing is that you think is more important than your current business’s generation of net income.

As it is, you can’t have two number-one priorities. Choose this day whom you will serve. All of the things in the list above are awesome and super-important, but if you’re in business for yourself then the first and only question must be: What is your take after all expenses have been met, and what can you do to get that net income number to an acceptable level?

If you’re carrying the products you love and only those products, but you’re not making money, you’re not going to be carrying any products soon.

If you’re building a great community in your store but you’re not making money, that community will soon be gone.

If you’ve got lots of clever ideas and get featured on websites but you’re not making money, you’re going to lose your store. Not very clever.

If you’re able to take off whenever you want and spend lots of weekends with your kids, but you’re not making money, then you’re going to lose that control over your life when your store goes out of business and your personal bills start coming due.

Only after your net income is present and accounted for can you start asking what else might matter. This is a tough thing to require of yourself, and it wouldn’t be wrong to shrug it off and go get a jobby-job. Business ownership is a tough racket (NSFW). There is no net. You have no employer to be understanding when you phone it in for a month because of something else that’s going on in your life.

Let’s review. What’s important? Net income.

Say it with me: Net income.

I know that you just read that instead of saying it out loud. Try again, even under your breath. Come on. Ready? Net income.

It’s ten o’clock. Do you know what your net income is this month? What are you going to do about it?

Net.

Income.

(Acknowledgement: When this post was a draft at about 60% completion and languishing far down on my to-do list, Gary at Black Diamond Games did something similar but different.)

netincome

 

Stop Closing Early (You Must Be Present to Win)

It’s 4pm on a Tuesday. You’ve done a total of $18 in sales today, and you’re working alone because you don’t have any employees or they’re all off work. You’d normally close at 9pm, but you decide that if you don’t break $100 before then, you’re going to close at 7pm.

It’s Halloween and you’d like to spend the evening with your family, so you close early.

You’re not feeling well on a Monday morning, so you post on Facebook that the store is opening at 2pm today instead of 10am.

Your employee calls in sick on the day you were going to go fishing with your friend. Rather than stand your buddy up, you close the store.

Your business has been doing poorly and you’re not sure week-to-week when you can get the store open.qnalr0s

There’s a video game coming out that you know everyone will want to play. You know that this will lead to a crappy sales day, so you just close that day.

You’re a fool, and I’ll tell you why.

Every time that a customer pulls on your door during your normal business hours and finds that it’s locked, you are not only losing whatever sale you were about to make that day. You also degrade the reputation and reliability of your business in the mind of that customer and their friends, forever. The next time they think about making a trip out to give you their money, they will wonder whether you are going to be there. Yes, I know that they could just call before they visit or check your Facebook page, but you know that they won’t, and in your heart you also know that they shouldn’t have to.

We are open seven days a week. We are open on Veteran’s Day, because it’s a school holiday and we’d be fools not to be available for that. We are open when a new World of Warcraft expansion hits, because our employees can play that night after work, and not all of our customers play WoW. We are open on snow days as long as the store has electricity, even if that means that I have to put my truck in 4WD and work the shift myself, alone. We are open when nobody appears to be buying, because there is always work to do and we don’t have perfect knowledge of who will come in.

If there’s some question in the minds of even a minority of our customers about whether we will be open, we will be open. We’re closed on Thanksgiving Day and Christmas Day, but if we thought we would even do modest business on those days, we’d be open.

We are reliably open because we’re professionals and we don’t want our customers to worry about whether or not we’ll be there when they need us.

Be open.

Emergency Used Video Game FAQ

 

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I suppose it’s some combination of election-season jitters, a lackluster Magic release, and normal October retail awfulness, but a bunch of my retailer friends are in distress, and well over a dozen of them have contacted me in the last two weeks about video games. I’ll be giving a presentation in March at the GAMA Trade Show about diversifying your game store into video games, but here’s a FAQ post containing the most common questions that I’m receiving. I’m still happy to answer your questions if this doesn’t cover them, so leave them in the comments.

Where do you get new games?

I don’t. I deal in used games, consoles, and accessories. I buy some new accessories from Hyperkin, who are awesome. New games and consoles are terrible, low-margin, high-risk sellers. A $60 video game typically wholesales for $52-$54, and if it’s a turd the market price can drop to $40 or $20 without warning. You will not be able to negotiate price guarantees or returnability for your independent game store. I have been selling used-only for five years. It’s possible and easy to do.

How much money can video games make me?

I’m more willing to discuss specific numbers privately than I am to post them on Al Gore’s Internet for everyone to see, but suffice to say that I could keep my doors open, pay a couple of part timers, keep the lights on, pay the rent in a very good location, and pay myself a very modest salary. I would not be in just the video game business, but in combination with tabletop games and electronics repair, I make an excellent living and provide for a bunch of people.

How do you price your games? How do you get this stuff into your Point of Sale?

PriceCharting provides an excellent price guide that you can look up game-by-game or download as a big spreadsheet. I have a subscription to the price guide and my point of sale downloads the new prices automagically every night. You may be able to import this price guide directly into your POS system. If you have CrystalCommerce, and your admin panel isn’t currently on fire, they have pricing data and covers and stuff. Nate Peterson’s IMP POS is an upstart alternative that shows potential and also takes care of pricing for you.

How much do you pay for games?

I started off paying 50%, cash or credit, for everything. This grew my inventory quickly but resulted in a lot of low-value junk. What if you gave a quarter for any Magic rare? Yeah, it’s like that. We ended up going with a variable trade value scheme that changes the percentage we pay for a game based on the sell price. This prevents the problem where you have to choose between paying a too-high rate on cheap bulk games and a too-low rate on valuable high-end games. My rates vary between 20% and 80%, but most games are under 50%.

Don’t people try to sell you stolen stuff?

Yes. Take ID and make a record of every trade-in. If your point of sale system doesn’t allow you to attach customers to transactions in order to track them, you’ll want to fix that. Don’t take trades from people who creep you out, and don’t hesitate to call your local constabulary if you feel that something fishy is going on. I deal with this perhaps three or four times a year.

Won’t it change the culture of my game store to have all these video gamers come in?

You are going to get a wider variety of customers than you are used to, but it’s an opportunity, not a liability. I thought you wanted muggles to come in to your store for conversion into meeples? I never thought that store owners would be concerned about lots of new customers, but I have gotten this several times.

For overall civility, I would say that your average video game customer rates with or just a hair below your nicest Magic players, and much higher than your average Yugioh player. (Haters gonna hate.)

How much space do I need? How do I display this stuff?

Figure on devoting 300-600 square feet of shoppable retail space to the category, in addition to two four-foot display counters and maybe a small closet’s worth of extra storage and supplies. More is better, but you don’t need much on the whole. Gridwall or slatwall displays will work. Bookshelves will not work.

How much do I need to invest up front?

Not counting fixtures? Figure on making a $500-$800 Hyperkin order first thing. You’ll also need to spend a couple hundred bucks on some solution for storing CD/DVD media behind the counter. You need a small TV to test systems. You need to be ready to spend several thousand dollars in cash buying games and systems off the street, and you need to spend some money advertising on Facebook that you’re the buyer with CASH IN HAND for their video games. When I open my second store next year I plan to spend five grand over three months getting the word out.

Can I get effective results on a near-zero budget?

No. I can only help you be a professional retailer. I don’t know how to help hobbyists.

How do I get into this category in time to be effective for Christmas?

You don’t. It’s October 27th at the time of this post, and it’s too late to bring in enough inventory from the street to be anything other than pathetic for the holidays. After the holidays is tax refund season, where sales continue to be strong and trade activity scarce. When everyone runs out of tax refund money in April or so, trade-in season starts. That’s when you want to strike.

Of course, it’s possible to either overpay for inventory on eBay or buy out a closing store. If you’re buying out a store, avoid the deal if the store has been running any kind of pre-close clearance sale. You can get started with garbage inventory, but you shouldn’t. You’ll regret it.

I can’t make my November rent payment and I need to make a change in the next six weeks, or else.

I can’t help you if it’s gotten this far. Go to a quiet place tonight after you close tonight, look at your store’s profitability over the last six months, and determine whether you’re collapsing or merely failing. If you don’t have a plan for making expenses other than hoping for a miracle, it’s time to be a grown-up and start moving toward responsible closure.

As a totally heartless aside, I buy out closing stores. Contact me, and maybe I can help you get out without losing your shirt.

Maintaining Adequacy and Suffering Surprises Only Once

This is a quick, lazy post, but I wanted to share something that seems obvious to me but would help a lot of store owners that struggle in two areas: The amount of time spent scrambling to restock supplies when they run out, and the difficulty in doing the cleaning that needs to be done less frequently than every day.

It’s lists. Sorry, that’s boring, but it’s just lists. What’s important is that the staff knows that we go through these lists EVERY WEEK, without fail.

We call ours the “Sunday Supply Checklist” and the “Wednesday Cleaning Checklist”.

The Supply Checklist tells the user where to find the items that need to be counted, and how low to let the supply dwindle before contacting the appropriate person for reorder or addition to the shopping list. The idea is that, any time we run out of something and it becomes a phone call to the owner at home during dinner, that will be the LAST time we are surprised by that particular item. Nobody is angry or scared when this happens, because they know what happens next: It goes on the list, and it’s never an emergency again.

Similarly, the Cleaning Checklist means I never have to hound my employees about occasionally checking the air freshener refills or wiping down door trim. The first time I get annoyed that nobody else has noticed the smudges on the fronts of the supply cabinets, I add that as a thing to be checked, and it’s the last time I have to worry about it. What’s fun about this list is that, as my managers have taken more control of the day-to-day operations of the store, the list has been mysteriously growing with items that I hadn’t thought of. It’s a great feeling.

The result ends up being that many issues are magically solved in our store. There are always more rolls of receipt paper. The drawer under the register is always neat and orderly. This process does what all good processes do: It accepts the fallible, imperfect nature of human attention, and makes the result perfect or near-perfect anyway.

Here’s the lists. Maybe reading them will inspire you.

Sunday Supply Checklist

Toilet paper at least 20 rolls, men’s/women’s room
Paper towels at least 15 rolls, men’s/women’s room
Toilet cleaner At least two full spare bottles, men’s room shelf
Mop cleaner At least one full bottle, under mop sink
Bleach At least one full refill bottle, located under mop sink
Windex At least one full refill bottle, located under mop sink
Clorox wipes At least two full containers, on men’s room shelf
Q-tips At least half a box, located in large front cabinet
Alcohol At least half a bottle, located in large front cabinet
Swiffer wipes At least 24 wipes, located on men’s room shelves
Gloves at least one full box, men’s room shelf (Paul)
Large black trash bags, at least one full roll, men’s room shelf
Small white trash bags, at least one full roll, men’s room shelf
CD sleeves at least 4 bundles, bottom CD cabinet drawer (Paul)
Price gun labels, at least six rolls, bottom CD cabinet drawer (Paul)
Price gun ink, at least two refills, bottom CD cabinet drawer (Paul)
Disc buffer replacement jugs (Paul)
Receipt paper, at least 15 rolls, bottom CD cabinet drawer, extras in office supplies cabinet in back (Paul)
Post it notes, at least 6 pads, bottom CD cabinet drawer
Label printer rolls, at least 6 rolls, in the bottom CD cabinet drawer (Paul)
At least two refills of GOJO hand soap, men’s room shelf
Sharpies, at least 6, front/back pen holders
Pens, at least one spare box of pens, office shelf
Gift cards, at least 15, in the point of sale drawer (Paul)
Microfiber towels
Denture brushes
Free FNM Entry cards, at least 10, in the point of sale drawer
Rubber bands, at least one full bag, in the large front cabinet or a CD cabinet drawer (Paul)
Penny Sleeves, at least 20 packs, in the large front cabinet
“Grocery bag” bags, at least one full box, in the large front cabinet and/or back closet.
Copier/Printer Paper, at least 3 full reams, office supplies cabinet
Small number labels for game cases

Wednesday Cleaning Checklist

– Wipe down everything on the cash register cabinet with a damp towel. Look for dirt in crevices. Make sure you examine it from the customer side of the counter to see what looks dirty.
– Spend 10 minutes dusting. Try to find new cobwebs and dust to destroy.
– Clean the inside front glass everywhere you can reach. Squeegie the glass outside.
– Wipe down the aluminum trim outside and inside. Clean the door handles.
– Pick up the trash in the parking lot.
– Check around the dumpster. Clean up any trash that could belong to us, (neighbor), or (neighbor). Report spilled (restaurant neighbor) trash to Paul.
– Empty the cigarette bin.
– Sweep cigarette butts out of the sidewalk cracks.
– Make sure the supply shelves in the bathrooms are orderly.
– Re-stock bathrooms with paper goods.
– Tidy up the back closet. Try to get everything into boxes and on shelves.
– Tidy the office. Use the air duster everywhere. Clean the glass desk top.
– Look through all the food in the office. Throw out anything that is expired or gross.
– Clean the inside of office fridge and microwave as needed.
– Wipe the office chair down with a wet towel. Sweep the floor. Try to get into corners.
– Replace the four air freshener bottles as needed.
– Clean out Disc buffer machine. Clean anywhere the buffer machine splatters (surrounding consoles, fan, counter, etc.)
– Wipe down all cabinet fronts with Clorox wipe.
– Wipe down all trash cans with a Clorox wipe.
– Wipe down any footprints/scuffs on inside of bathroom doors.

Defining Game Store Success, Survival, Failure, and Collapse

I’m working on a post about clubhouse stores, but I’ve decided that it is unfair to identify clubhouses without also talking about how the owners might escape clubhouse status. The problem is that escaping clubhouse status is hard, requiring resources that most clubhouse owners don’t have. Thus, the inevitable second part of that post has to turn to accepting reality and leaving the game trade.

So before I talk about clubhouses I have to talk about means of escape, and that escape might be closing the business. But how does one know when it’s time to get out?

The easier question to start with is, why did you get in?

I was a police officer before I bought my store. The politics of policing in the American South were not quite as complex as they are today, and the economy was worse. There were so many applicants that there was an 18-month wait at my department for jobs that had awful hours in dangerous conditions and paid $26,000 a year. I looked around at my respected peers, and realized that they almost without exception had spouses working as well to make ends meet. The Chief of Police at the time was making $66,000 annually. That wasn’t the future I wanted for my family, so I saw the opportunity to buy a business as a potential escape from a job I loved that didn’t love me back. I defined success at the time as replacing my cop income, while allowing me to have one or two part-time employees for a couple days off a week and the occasional vacation. I was wrong. That is not what success looks like.

I will not claim a perfect understanding of life and business, but that understanding certainly feels more developed after five years in this business. Your view may differ, but here’s what success, survival, failure, and collapse look like to me these days:

Success: The owner makes enough money to pay taxes, drive cars that are not breaking down, live in decent housing, pay off debts, and save for the future. He or she is not a slave to the counter, though working it is an option if the owner finds joy in it. The owner has enough employees that he or she can leave town on short notice for business or pleasure, and those employees are paid enough that they consider themselves lucky to work there. Because of the relatively high wages, the owner is able to be more discerning, and ends up with good people that are well-liked and well-cared-for. There is enough slack in the owner’s resources that he or she can take on extraordinary projects that benefit the business and jump at time-sensitive opportunities. There’s plenty in the budget for new product, so an extra Magic release or hot new limited product is an opportunity, not a financial trial. The owner’s spouse is not required to work, and may find themselves filling the role of administrative assistant or marketing director, allowing the small company to punch above its weight for professional presentation and outreach.

Survival: A store that is surviving pays its owner what would be considered in the area to be a living wage, though the pay comes unevenly throughout the year as the business booms and lags. There’s enough extra to pay for twenty to forty hours a week of part-time help at minimum wage. This allows the business to be open for predictable hours while allowing the owner a day or two off and gives them permission to do things like catch the flu. The bills are almost always paid on time, though careful planning goes into the timing of the outgoing payments to ensure there are dollars in the account to cover them. The owner drives an older but reliable car. There’s no extra to invest into marketing or R&D, and trying new things frequently has to be done in a way that can most charitably be described as “plucky.” If a new Magic set and a new Pokemon set come out at the same time, there might not be enough Pokemon product on hand because of cash flow difficulties. The owner’s spouse probably works a full-time job. Rob’s record store in High Fidelity is a survival-mode store.

high-fidelity

“I lost it. I lost it all. Faith, dignity, about 15 pounds…”

Failure: A store that is failing is not paying its owner a living wage. In all too many cases, the owner has never received a consistent paycheck from the business. The store is doing enough business to pay the rent and utilities, though it is frequently late making those payments. Employees are a happy fantasy, though the store might have flunkies sorting cards or running events in exchange for product or store credit, all under the table and untaxed. The exact financial status of the business is hard to nail down because the owner frequently buys groceries out of the till. This store will not survive an audit, but isn’t likely to be the subject of one since there’s nothing to take. New Magic releases are ordered in box quantities instead of case quantities, and the phrase “sorry, no cash, only store credit” causes a heartbreaking number of trade-ins to walk back out the door. The owner drives a car that is not long for this world, with breakdowns resulting in “Surprise! We’re closed today.” posts on the store’s Facebook page. The spouse’s full-time job is paying the owner’s living expenses, with early optimism turning to resentment as the years drag on with no change in the financial prospects of the business.

Collapse: The owner is probably benefiting more from the business than he or she ever has, but it’s done by shuffling goods and fixtures out the back door to sell before creditors can change the locks on the store. The store has completely abandoned any attempt at regular hours, and posts on Facebook are the best way to determine when they’ll be open this week. Everything is late. There is no new product because last month’s product was never paid for. This is usually the time when a hastily-composed GoFundMe or Kickstarter campaign will be launched. The owner doesn’t understand that even $10,000 of free money will not save his or her business. Nobody donates, anyway. Depending on how the owner is handling things, their spouse is either relieved that it will soon be over, or is moving back in with Mom for a while.

This is what the various states look like, but the definitions should be more personal and concrete for each owner. When I say concrete, I mean that you should determine what the operating profit (which will determine things like number of employees) and net income (which will determine which car you drive) numbers are for success, survival, and failure. Write these numbers down under each heading, then figure out where your store’s state falls in that list. Nobody is looking over your shoulder, so you can, and must, be brutally honest with yourself.

If your store is succeeding, then there’s more to be done than ever. You thought that you would have it made, but now you’ve got something to lose, so in a lot of ways it’s even worse. The days of your friends and customers seeing and appreciating your hard work are over, because most of it is now behind the scenes. You just traded all your small business glory for a little more money. Tough. There’s people counting on you to feed their kids. Get back to work.

If your store is surviving, then you’re not alone. Most game stores that make it exist at this level. You certainly shouldn’t give up, but you should definitely examine your options. If you’ve got an education and career prospects that will lead to a better financial future for your family, you should consider a graceful end to the business. Or you could find some poor sucker with an inheritance to buy it from you, I suppose.

If your store is failing, then you have hard decisions to make, but it’s not a disaster unless you wallow in mediocrity for years or allow it to collapse. Most stores that didn’t start with plentiful capital were in this state, at least at first. If you just started, you may be able to doggedly ride the momentum up into survival, and then possibly into success. If you’ve been stuck here for a while, though, the prudent thing is to arrange for a timely, dignified closure. If you met your obligations to your creditors, and didn’t leave your building in shambles on your way out, then there is nothing wrong with closing a business because it didn’t work out. You can shake everyone’s hand and still be an adult when you lock the door for the last time.

If your store is collapsing, then now is not the time to try to execute a Hail Mary play for success. If small business success is in your future, it’s not in this iteration of your business. Do your best to close without hosing anyone, then rebuild your personal and financial life and decide what’s best for the future of your family. This is your opportunity to do the right thing. Don’t miss it.