Retail Gaming Store Economics [LONG]

[Sam]

This weekend was a particularly depressing one for my game purchasing ego. I learned over the weekend that my FLGS will be closing early next month and that both local WotC stores are in the process of liquidating their inventory and will be closing shortly. This leaves a big retail gap in my area and forces me to wonder where I'm going to have an opportunity to browse new products before purchasing them.

I've always been a big supporter of my FLGS and purchased most of my gaming materials there, even when I knew I could get them cheaper (and in many cases, quicker) by purchasing them online. I organized and ran RPGA Living Greyhawk gamedays in the store on a somewhat monthly basis for over a year and a half.

That said, the proprietor of the store was, as tends to be the case, a gamer first and foremost. Running a business was not his strong suit. (He's a great guy and a friend, but truth is truth).

This all makes me wonder: Could I do it any better? I’m an avid gamer, but I think of myself as a business-oriented person first. I’ve got an MBA and have 11 years of corporate experience.

Now, I'm not in a position to leave my day job. I make a good living and support three kids, a wife and a mortgage that is way too large to leave the income solely to a new venture. If I hit the $50mm lottery ticket that’s in my pocket, I’d do it in a heartbeat (now that I said that, I’ve just jinxed my chances). I think that I can get some money together (personal and some investors) to open a store, and I’ve got someone in mind (a hardcore gamer and bright guy) to run it.

What I don’t have a very good feel for are the economics of running a store. If any of the ENWorld community that has experience in running a gaming store could help shed some light on this, I would be highly grateful. I’ve got a bunch of questions that I’ll list below. If people with experience could help out, either here, or if you’re uncomfortable posting “trade information” on a public forum, you can email me directly at sschuste (at) optonline (dot) net.

Background: I expect that (and would gear up for) the strong sellers/draws for a store would be the following products:

• Dungeons & Dragons / d20 Materials, books, minis, etc
• Games Workshop tabletop games (Warhammer, Warhammer 40k, etc)
• Magic: The Gatehring (and other CCGs)

Questions:

• What are typical profit margins?
• What would a normal week of sales look like?
• Are there seasonal trends that I need to be aware of? Does the December Holiday shopping season have a significant impact on business?
• How important is running organized play/leagues?
• How much space do you have/require for open/organized play?
• Do you sell only gaming merchandise, or do you have other products (comic books, models, apparel)?
• What is a realistic level of starting merchandise?
• What am I not thinking of?
• Am I just fantasizing about a crazy concept, and is the reason that game stores are closing all over the place because it is not a profitable venture?

Any information is greatly appreciated.

--Sam

 

[DDK]

There was a thread like this over on RPG.net about a month ago. Some bright spark wrote up a whole treatise on the hows and whys of FLGS failure going into three distinct categories from the wholesaler to the retailer. Ask over there and they will probably remember it seeing as it attracted a lot of attention.

I strongly believe that running a gaming store is a viable business venture. I honestly believe that they fail due quite simply to bad management and a lack of business savvy. Like you said, gamer first, businessman second.

 

[emergent]

Hi, Sam.

I am an employee at our FLGS. We sell comics and RPG's, with some anime thrown in. We are a pretty small opperation, with two other employees besides myself and these two guys were just hired a month ago. The owner is similar to to the owner of your (former) FLGS. He is very enthusiastic and great with people, but not so good at the business end. Hence, the store has had some difficulties, but we keep trucking along.

As far as games go, we have lots of d20 stuff, some White Wolf/World of Darkness items, a bit of GURPS, some Hackmaster and the occasional other RPG (Buffy, LotR). We stay away from the Warhammer, because it is expsensive to buy and we don't have the space to set up tables. Nor do we stock collectible card games, mainly because of the owner's distaste for them, but also because they are pretty faddish, impossible to get rid of if/when the fad dies, and are very prone to shoplifting. We also sell HeroClix, but not Mage Knight or MechWarrior.

The vast majority of our sales come from comics. RPG's are a distant second. If I had to break it down (granted, I don't do the books), I'd say RPG's account for maybe 15% of our sales. Maybe.

I know the average markup on a d20 book is around 45%. We buy all of our stuff from Alliance Game Distributors, which is both good and bad (I can explain why later).

In my next post I can try an answer some of your questions specifically.

 

[emergent]

* What would a normal week of sales look like?

I am not sure about weekly sales, but we are very happy if we have a 15K month.

* Are there seasonal trends that I need to be aware of? Does the December Holiday shopping season have a significant impact on business?

Some, but not as much as other sections of retail. We almost got burned when we ordered a bunch of extra stuff for Christmas and sales did not increase that much. We are in a University town, so that influences things. I'd also say game sales increased during the summer, as you have a lot of 13 year old kids who have a lot of free time, a little bit of extra money, and want to see what D&D is all about.

* How important is running organized play/leagues?

We don't have a lot of space to do these things, but I know they can help sales. We are beginning to organize some things for HeroClix. One thing you can do is set an "entry fee" of purchasing a box from the store, then playing whatever is in the box. Plus, it brings people in the store to play, and those people will hopefully spend some money.

 

[gariig]

I'm just going to say something about CCGs. Our lcoal FLGS had owned one prior and he said CCGs are what saved his butt. Grant it this was at the height of Pokemon. Also, CCGs have a great earnings to shelf area ratio(as would comics). On the otherhand RPGs might make more money per sale but they are fewer and you can't have as much. If I hit the lotto I was thinking about opening one(even though I'm young I have a good business head). However, I need to go and make a career first

Gariig

 

[emergent]

Based on my year of working at the FLGS, here are some things I have learned:

1. You need regulars (duh). But when you can become THE place for several groups of gamers to buy their stuff, then that's guaranteed income. Few things make me happier at my store than to see the guys (or girls) who come in every two weeks to get a new book.

2. I don't think a store that just sold RPG's could make it. You'd have to have other stuff -- comics, or cards, or warhammer, or other books, or whatever.

3. There is tension between having enough stuff to have a good selection and having that stuff sit around. We get lots of comments on our selection, but that selection isn't making us any money sitting on the shelf. I keep proposing some liquidation, but the owner doesn't want to look like we are going out of business or anything.


Most of this may be common sense to a business-minded professional, but it's stuff this grad student has picked up over the past few months of being involved in a small business.

 

[JoeGKushner]

I work in a warehouse so I'm coming at this in a completely different fashion.

1. Inventory levels. Not the most important thing. The most important thing is customer service and knowledgable staff. Inventory levels are a close second. You need to be 'lean' and have enough on hand to supply customers with the ability to quickly reorder when inventory levels are down.

2. Data mining. You need to be able to predict trends and tell where sales are going strong and leveling off to avoid having problems with inventory levels. Crystal Reports and a good register with PoS software can help tremendously here.

3. Internet/Discount Cards: Customize your customer service based on past purchases with a discount card that the user pays a yearly fee on that gives him a discount on merchandise and can be used to help track sales.

 

[Sam]

As far as games go, we have lots of d20 stuff, some White Wolf/World of Darkness items, a bit of GURPS, some Hackmaster and the occasional other RPG (Buffy, LotR). We stay away from the Warhammer, because it is expsensive to buy and we don't have the space to set up tables. Nor do we stock collectible card games, mainly because of the owner's distaste for them, but also because they are pretty faddish, impossible to get rid of if/when the fad dies, and are very prone to shoplifting. We also sell HeroClix, but not Mage Knight or MechWarrior.

Thanks for the info. I neglected to mention the Mage Knight stuff. I know my (soon closing) FLGS does a brisk business in this area. Same with non-d20 RPGs. Oversight on my part.

It seems that you are primarily a comic shop. If I go down this road, I think that I'll stock some comics (mostly popular new issues), but it won't be a focus for the store. As gariig said, they have a great shelf area ratio.

I think that a primary reason my local store is closing is a lack of savvy marketing. The owner did no tracking, no incentive programs, no real promotion of the limited amounts of organized play he did have. There was a bunch of room for gaming. We used to run 4-5 tables of RPGA with no problem. The problem there is you have to convert that into sales. It's overhead and if it isn't contributing to sales, then it's not being used effectively.

I think that having the space is crucial for fostering store loyalty and developing new gamers though, and is a big part of my (developing) business plan.

Thanks for the info. Keep it coming

 

[Sam]

1. Inventory levels. Not the most important thing. The most important thing is customer service and knowledgable staff. Inventory levels are a close second. You need to be 'lean' and have enough on hand to supply customers with the ability to quickly reorder when inventory levels are down.

2. Data mining. You need to be able to predict trends and tell where sales are going strong and leveling off to avoid having problems with inventory levels. Crystal Reports and a good register with PoS software can help tremendously here.

3. Internet/Discount Cards: Customize your customer service based on past purchases with a discount card that the user pays a yearly fee on that gives him a discount on merchandise and can be used to help track sales.

I couldn't agree with these three points more. It's important to have the current releases, but after that, people are usually willing to wait a week or so to receive a book/product/etc.

One of the big areas I see improvement over the current management of the local store is in data mining and discount cards. Not necessarily a membership thing, but an automatically tracked purchasing volume that rewards the customer after a certain dollar amount is reached. There's a great comic shop in NYC that tracks your purchases. Once you hit $100, you get $20 in store credit automatically. You don't need a card to punch or anything like that, it's all tracked by the POS system.

Once you've got customer information in the database, letting people know (ala Amazon.com) that a new Warhammer unit in an army they collect is out should be easy and productive.

These things just aren't being done by any local gaming store that I've seen in my area, and I think they could have a big impact on profitability.

I'm still really fuzzy on what the startup costs would be, in both overhead and inventory. Anyone help with that?

--Sam

 

[Lothaire]

From my understanding of several gaming stores in the area, it is extremely difficult to stock games workshop miniatures. They require you to have a large minimum inventory, and consistently order significant amounts of new releases. It is extremely difficult to get the merchandise to sell unless you have good terrain and tables in the store. This requires a large amount of space and effort. The Gamesworkshop miniature games are the most popular but require a large outlay, great support and all sorts of other things.

Heroclix, Mage Knight, Battle tech and other prepainted games are easier to work with. You also might consider stocking Reaper miniatures so they can be used by Roleplayers. I'd think that if the smaller scale games work for you, then you could put together minor scenery and tables over time, and in a year or so time consider adding gamesworkshop to you product line.