Monday, December 17, 2007

Holiday Retail

Apparently holiday retail sales are disappointing so far for retailers. Of course, nobody asked me, because real retailers are comprised of those mega stores that do 40% of their sales this season. They belong to retail trade groups that throw around these numbers. If you did ask me, I would tell you our sales are up around 40% from last year, due mostly to miniature games and our new toy section. We're doing very well.

There's a good article on retail here on the New Yorker financial page about how difficult it is to make a buck in retail. It talks about reference prices and how the Internet fixes the information asymmetry that used to allow stores to make more money. For example, although only 3% of purchases are made online, many people spend hours online researching what they'll buy, including price. If everyone has an item at 30% off, the "reference price" is that 30% off number, something I referred to as the "de-facto" price. For example, if eBay and my competitors are discounting $145 boxes of Magic cards to $85-100/box, the "reference price" is that $100 price point. Nobody who knows any better will buy them at $145, and nearly three quarters of consumers know better.

One factor not mentioned is that nothing can ever be hot again. There will never be another Pokemon craze in which game store owners were buying new homes or retiring early. The Internet with its various discounters and secondary markets like eBay acts as an escape valve for product demand. As long as there's supply available to anyone, anywhere, prices are kept in check. Some older game stores were sticking around in hopes of such a craze, a return to the good old days I suppose. Without the potential for a craze, retail seems a bit dismal to them, it's actually hard work and slim margins with no hope of a big bump. As I've only been open a few years, that's my baseline understanding. It must be hard to keep going knowing the best days are behind you.

1 comment:

  1. "These are not the depressing, gloom and doom, retail comments that you are looking for."