Friday, March 21, 2014

At Risk Stores (Tradecraft)

If you've got a game store that's less than four years old, with Magic sales exceeding 30% of your revenue, you're quite frankly, at risk. The game trade goes through boom and bust cycles, with those slow, drawn out bust cycles comprising "baseline normal." Right now we're in a boom, which is characterized by what other businesses would consider normal patterns of business. 

Having come from other, more successful business models, I recognize what we're in right now. It's a wonderful thing to feel appreciated and have resources to make things happen. We sell things, people readily buy our stuff, we make money, we hire staff and add product, expand our space or add stores, and the cycle repeats until we retire young.

This success is not for us. It's not a normal game trade trait. The game trade is usually about guerrilla marketing, a lot of hand selling, demos of products, having to decide which of the ten broken things gets fixed this month and a lot of diversification. It's running on pure passion most of the time. Problem solving is usually about triage, rather than expansion. Margins are thin, and it's not uncommon to have both profitable and unprofitable months. 

If you are in the at-risk category I described, chances are you haven't had to go through this. Your skill set is not the same as those who have come before. These are hard earned skills, often derived from desperate times. You are likely making decisions based on the "new normal" rather than "baseline normal." I feel the new normal attempting to infiltrate my thought processes every day. Resist. We are geniuses and gods when we're making money and it lulls us into a false sense of security.

You can't help it really, what else do you know? I realized a while back that my understanding of the housing market, my complete adult life understanding, was based on an illusion, a bubble that started 25 years ago. What it required me to do was to think entirely differently about real estate, that it wasn't in a virtuous inflationary rise, but more of a long game, boom and bust cycle. It was less investment and more place to keep my stuff.

That's what we need to keep in mind in the game trade. Magic doubled in sales for us. Then it doubled again. Then it doubled again. It went from our best game, with around 7-10% of our sales, to twenty, to well over thirty percent. Scary. Exciting! Magic makes our role-playing department look like a rounding error, and we sell a respectable amount of that stuff. Our upcoming expansion, to be completely honest, will be built with Magic money, to hold bigger Magic events. Nobody else really needs the space, or at least nobody else can pay for it.

If you're considering a new store because you think hobby games are trending upwards, don't do it right now. Just stop and wait. The opportunity you think is there is already in the rear view mirror. Like any trend or investment, if it's plain there's money to be made and everyone is doing it, it's probably already played out. When it does begin to falter, you don't want to be in that 18 month initial period trying to survive while everyone seeks the exits. 

We are not on the way up, we are teetering at the top. At least that's my impression. If you think you've got a solid, diversified business plan and you're not trying to grab the tiger by the tail on the way up, here's the hard part: you should still stop and wait. The fallout could be messy and the longer we go, the messier it will become, because "new normal" has a tendency to reach its tendrils far and wide, into distribution and publishing. Looking around, there are publishers and manufacturers teetering on the verge of bankruptcy now, and times are good!

If you already have a store and you're in the at-risk pool, consider what would happen if Magic suddenly dropped to 7-10% of your sales. Is your business model still sustainable? Are your competitors diversified while you're not? Will there be something else to sell? Do you have savings to get you through these rough times or are you at the edge with expansion and projects (I know I am). Most importantly, do you have the very basic, in the trenches, business skills to survive during "baseline normal?" If not, start acquiring them. And as I've said before, if you don't know what to do, hold onto your money.

Here's where I would sell you something if I could put business experience in booster pack form.


  1. Pretty sure that if Magic drops that much it would kill all but one or two of the stores in the area (we have four or five now depending on how you count, but two of those are all but Magic only in terms of sales).

  2. There's that horrible saying, "Your first business should be like your first marriage, for the money with a clear exit strategy."

    If these stores knew what they were doing, I would tip my hat to them, but I don't think they do.

  3. For us older timers, another bubble was Pokemon. But that was crazy. Literally anything with Pikachu on it was printed money. I sold over $250k worth of japanese Pokemon through my store and wholesale. And by the next New Years Day it was comparatively dead.

    Question for you Gary - how does one know the market has died, and not just a temporary blip?

  4. There have been some severe crashes that prevent Magic from being an enormous shock to the system. Pokemon was interesting because it was pre-Internet and there was no way to "release steam," how I describe when a product gets seriously overheated. You can't heat things up too much before some jackass store owner is selling product around cost.

    I think if Magic crashes, it will be over a 12-18 month period, as in Born of the Gods repeats itself three to four more times. But it would likely have to coincide with something else, probably a couple something elses. For example, a hot new gaming trend similar to WoW, or a recession or war.

    What I do know is the symptoms of overheat are everywhere. Magic specific shops. Magic shops that take the top earning events and run them at a loss -- every week. Magic specific point of sale machines that appear to be the obvious tech solution. Magic card specific web stores that go stratospheric. Magic related product that serves ever shrinking niches. Sleeves that fit in sleeves that fit in sleeves that go in a cover in a box in a case. Plus just the proliferation of Magic centric stores popping up like crazy, most with no idea of what they're doing. Standard stores opening up new stores and expanding like mad with Magic money (I'm guilty here).

    Now get off my lawn. ;)

  5. I remember when Magic was big first time round (and the slew of other card games - I liked multiplayer shadowfist). What caused it to drop away?

  6. Which time?

  7. I think that was around the mid, maybe late 90's? Confess I last track of most gaming related stuff as I was forced to enter the real world. Well sort of. But I seem to remember the 'pro tour' starting then lots of releases then CCG's in general not doing very well.

  8. IIRC the glut of CCGs caused the collapse. Magic survived but pretty much everything else disappeared. Legend of the Five Rings is pretty much the only other CCG still around from that time, and it's a much smaller thing than Magic.

  9. Actually Shadowfist is still around. They started back up with a kickstarter to do a Customizable Card game version that is still compatible with the original cards.

  10. CCGs also heated up around 2004, when I first opened a store. We carried dozens of them. Everything had a CCG. That collapsed before the recession hit, leaving just a handful to survive.

  11. This is an old post but I think it is worth mentioning that Hasbro just announced Magic's revenue was down.

    There have been some lacklustre sets and the recent M15 set looks better than the last but I think the next big set that comes out (Khans) will be very important.If that doesn't grab people it won't kill Magic but some game stores might not be so lucky.

  12. Game stores dependent on boom time Magic sales are already failing, from what I've been told.

  13. Get daily suggestions and instructions for generating $1,000s per day ONLINE totally FREE.