Tuesday, October 9, 2007

Deficit Days

Game stores are in a time of the year where sales are down and new, post-Summer, pre-holiday products are arriving. This is a somewhat uncomfortable period when we're expected to buy more stuff than we're selling.

Let me explain how we buy things. Each store has a set budget for inventory.Lets call it $50,000. This is the cost the store paid for games, not the retail prices (cost is generally 45-50% of retail, except for AT-43). Lets say a new game comes out. For example, there's a new $50 board game. Where does that money come from? It's supposed to come from the inventory budget. We're supposed to look at the list of re-order items that we sold this week and cull $50 worth of slow selling stuff. These items have had their day in the sun and they're through. For a more positive example, perhaps we had ten copies of a new book and we're down to a reasonable number, thus adding money to our inventory budget.

The problem with this season is that sales are good for new items, but older items slow down tremendously. Customers are back in school or back to work, re-focusing, and the holidays are still a couple months away. With slower sales, there are fewer options for culling the inventory herd. Worse, coming soon is a holiday ramp-up of thousands of dollars in extra stock. Many stores fail when they guess wrong or the economy tanks or a variety of other problems that leave them with holiday overstock.

During my first holidays, I sold a lot of mass market games, like Life and Risk. The subsequent year, I learned how to play and sell Euro board games. When my second holiday came around, I spent deeply on mass market games, because that's what I could sell the year before. Big mistake. I ended up selling Euro board games. I had learned to sell them and it turns out customers were receptive to the idea. This left me with a lot of mass market overstock, although I still did well because I was selling more expensive, higher margin items. I also still have those mass market games for this season. My impression that people bought mass market games was wrong. They generally bought good games I was able to sell them.

So what does deficit spending problem mean for game stores? Those with the financial resources can ride out this period. Eventually the deficit and overstock problem goes away, but it might not be until late December. Those without the resources often can't keep up. They run out of popular items because they simply can't afford to stock them deep enough. They may go out of business if they can't hold out. I recall my second year realizing I couldn't keep up and thinking it entirely unfair. Then a light bulb went off in my head and I began to understand the business a bit better.


  1. I have faith that this ought to be an okay holiday for you... you are in a pretty good shopping plaza location... even if you are situated in the back corner...

    plus I have a good feeling about your increased general toy type stuff like the trains and doug and melissa stuff... I even plan to make some purchases this winter as Christmas presents for some of my cousin's kids...

    ...plus if my meds kick in i'll buy more than i need and so totally save your numbers...


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