Wednesday, September 7, 2011

Ec-CON-nomics

Many regions of the country have regular game conventions, local events where people play games and vendors sell their wares. In the Bay Area, we have several and Black Diamond Games attends both Dundracon and Pacificon. I've attended other conventions as well, including a nearly disastrous sci-fi convention and a couple other gaming variants.

So do vendors make money at these events? Lets take a look at the economics of a three day holiday weekend convention.

Expenses:
$200/table x 3 tables = $600
Con Labor: $9/hour x 20 hours = $180
Setup/Tear Down: $9/hour x 4 hours = $36

That's $816 in expenses, assuming that there are no truck rentals, no hotel expenses, and that our heroic convention employee is covering their own food. In reality, we usually cover some of these expenses, but we'll pretend. We'll also assume we're bringing milk crates of stuff to place on tables and we're not bringing a full convention setup with gridwall and fixtures. We'll also ignore the startup costs, such as banners, flyers, and other paraphernalia. Oh, and it assumes our heroic employee is working alone, a daunting task, but one I performed for several years before handing it off (because it's daunting, like I said).

So with a fixed expense number, lets look at a variable one, the cost of goods. The cost of goods overall in our store is 55%. That includes the cost to buy the item, usually around 50% and another 5% in miscellaneous. Miscellaneous includes things like credit card processing fees, shrinkage and shelf wear, and the expense of bags, pens, forms and office supplies, all of which are present at the convention, so we'll keep them.

Our break even then at your average holiday weekend con is one which covers our $816 in expenses with our 45% gross profit margin. That's $1,815 in sales. Can you make $1,815 in sales at a local convention with a thousand people? We can, just barely and with prices of tables increasing and expenses on the rise, it's beginning to look a lot like a losing proposition. Our con sales have decreased year over year since 2007. Going to a con looks even worse when you figure you're reducing the appeal of your brick and mortar store while your employees and a good amount of stock go on vacation to the con for the holiday weekend.

Also, most con vendors will tell you they make nothing near $1,815 in sales. Again, this assumes that 55% cost of goods. If you're a publisher, your cost of goods might only be 10%. For some RPG publishers, it's even lower. Also, most won't factor in their own time, it's something they love, they tell themselves. They get to be close to their fans, they declare with a smile, secretly wondering if they have gas to get home. But that's not very good business, is it? Most game stores will counter that it's a marketing expense, the last refuge of a poor business decision.

What we do for conventions is increasingly bring higher margin items to the cons, such as ding & dent and used items. At cons timed well for the release seasons, we'll usually sell a good mix of 50% new and 50% high margin merchandise. At an end of season or off-season con, our mix is almost entirely high margin stuff, and often at very small average tickets (say $10 versus $100 at the better cons). These are bargains that can't be passed up. I'll also venture to guess that con organizers have no idea nor do they care about any of this.

Most convention organizers would actually prefer not to have retailers in their dealer's room, the dreaded middle men. Instead they want the guy who makes his own silly hats, the woman who sells her armor online, and most importantly, publishers and manufacturers of games. Dundracon makes this very clear by limiting tables to four, and recently raising prices for tables beyond one. They want small. I understand that. Kublacon won't even talk to retailers unless they're also some sort of publisher or distributor as well. So making money at a convention as a retailer is a little counter-intuitive, because really, they don't want you there so the economics don't favor you.

If you're a new store, absolutely go to a con. Do your best to at least break even. Have an enormous banner with your name and location. Hand out flyers and business cards. Sponsor gaming celebrities (we sponsored Dave Arneson and Richard Borg at past cons). Provide prize support for events with your business cards attached to them (we gave out expensive box sets of Flames of War). Let everyone know what you did to get the best marketing bang for your buck and absolutely offer no support for cons that won't let you go. In the end, know that it's likely going to be a marketing expense, with the off chance you'll make a buck.


Our ding & dent sales are a good convention alternative

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