Friday, September 13, 2013

Game Store on a Budget (Tradecraft)

I've got a friend whose investing in another game store and we've been brainstorming. It's interesting to get a different perspective on the same type of business. Here's how I would do it, based on my own experience. This is very idiosyncratic and I would love to hear other store owners chime in.

If I were to start a game store now (and we consider a second store all the time), I would put an extraordinary amount of time into picking the exact right location. It's going to be my life for years, even if it fails. It takes time to fail if you're doing it right. Many people put their store by their homes, because that's where they live, but that's not always the best location. Location is key. If you don't live in an area that will support a store, move, or don't open a store.

The "right" location is about population density, assisted by things like universities and military bases, prime buyers of gaming materials. It's also about the Gamer Goldilocks Demographic (GGD). Yeah, I just made that up. You don't want your demographic to be too poor, since it means not only do they not have money to buy your things, but they probably don't have the education level to think outside (inside) the box. Gamers are a geeky crowd. At the same time, a high income area tends to follow popular trends, and gaming is somewhat retro. The high income areas near my store tend not to be where my customers live, according to my demographic studies. Not too poor, not too rich, juuuuuust right. Location is at least half the battle.

The right location is also about how much money you personally want to make. If you figure a 5-7% net profit margin on top of a small managers salary, you'll get an idea of how much money you'll need to make to be happy. With the average store probably in the $200,000 in annual sales range, decide if average is good enough for you. If not, you'll need stronger demographics. Build your salary into your business plan. Then find a location that will satisfy those numbers.

The next thing to consider is your FFE's, furniture, fixtures and equipment. I usually buy high end, matching fixtures, designed to last a decade or more. That's not what I would do on a budget. I would shop around for closing businesses (Borders was great for us) or if I had skills (I don't), I would build fixtures myself. The priority is you keep your store spotless and well lit. Fixtures are something you can buy over time and as long as you're meticulously clean and neat, customers will respect what you're trying to do.

As for a point-of-sale machine, hold off. Track your inventory on a spreadsheet or some other low cost option, but don't blow your budget right now.  If you don't have much inventory, that state of the art POS doesn't have a lot to track. Save it for later, but know you'll need it. For right now, I would focus funds on inventory. Coming from IT, the POS was my first project. On a tight budget; wait.

Next is inventory. If you listen to your community, my guess is you'll be having a lot of CCG events, like Magic, Yugioh and Vanguard. I would never be out of anything that's in print for those games and I would sell Magic singles on day one. I would have all the supplies you can find. We carry nine brands of card sleeves. With CCGs in a bubble, you want to capture this income now to expand your business later.

On day one, you want to represent the rest of the game trade, as feeble as this effort might be. For example, you want a dozen of the hottest board games, all the core books for Pathfinder and D&D, and a representative sample of 40K and Warmachine. This doesn't need to be a comprehensive collection, although if you have the cash, you might jump on that soon after sales pick up. The key is to represent to customers that you are a full spectrum game store, even if your selection is anemic to start.

Talk to your customers and be receptive to them, even if you know nothing about their game. Learn their names (I'm horrible at this). Let them educate you. Encourage them to volunteer to run an event in your game space. Assure them that if sales pick up in that department, you will bring more of those types of games into your store. Be wary of their recommendations, but respectful of their opinions. And when sales pick up, follow through on your promise to expand inventory.

Gamers love to be the authority on their game. Let them. Make sure they aren't feeling marginalized, as in don't put board game night squeezed into Fridays with the Magic players. Give them a discount for their efforts or a free Mexican Coke. Treat everyone with respect. These people will tell others of your endeavors and will be your best sales people. They might even become future investors (this has happened twice to me). Make the time to sit in on their games so you know them, or paint an army or run an RPG campaign. You don't need to run games yourself or put 20 hours a week in the back room, but you should be well versed on the top games.

As for space, beware locking yourself into a small location based on CCG sales. A "casino" store that focuses on CCG sales can be mostly tables with product behind the counter, but a full spectrum game store, which you want to become to be successful, will need at least half the square footage to sell product. If you pick a tiny location, this won't work and you'll need to move eventually, which is very costly and dangerous. I recommend at least 1,500 square feet and probably no more than 2,000. I think the perfect game space for the average store is about 1,000 square feet. An "alpha" store, one that's top tier in the industry, needs more, but that's not you (us) yet.

As business grows, bring in inventory first and keep an "open to buy" worksheet so you track your inventory budget. This means you're capitalized properly and have startup losses set aside for your expenses until you break even. It means you budget money for new releases when they come out, not the week after. You don't want to end up in an inventory death spiral (I didn't make that one up), where you're taking your purchasing money to pay your expenses. You also don't want to discourage your alpha customers by being late on releases. Buy a bit more product here, another used fixture there, and maybe after a profitable holiday season you spring for a POS system.

I did some of this when I started. A lot of what I did when I started was wrong and I tell other game store owners that I only know how to open a store the wrong way. If you don't have the experience, you're going to waste a lot of time and money. The key is to learn from your mistakes. All successful game store owners have.

1 comment:

  1. I would add do your research, and know the difference between needs and wants. My business plan changed so many times it looks like a wiki edit. I added video games, computer supplies, robotics, hobby, electronics and took them all out again. I took out comics and put them back in, My store changed cities half a dozen times and traveled more than 50 miles while doing my research and writing my plan. each change was in response to research, and differentiating needs from wants. I don't carry miniature games because there is no need for it, there is a want for it. I carry magic because there is a need for what i carry (magic singles specifically) I carry comics because there is a need for it. I carry Board games because there is a need for a game store with a bigger focus on family friendly in my area. Wants allow a store to open, needs allow a store to survive and thrive. Needs help a store survive down turns and changes.
    Second, get everyone that is going to invest anything in your business to share the excitement for it that you have. This means employees, landlords, customers, creditors, bankers, neighbors, spouses, children. Anyone that has something to lose or gain from it is an investor of some sort. My wife and Kids will share my destitute or my financial independence depending on my success. My customers will have a place to go for what they want, or they will not depending on my success. I pay less for my lease than I should because my landlord is excited for my business. My employee works harder than he needs to because he is excited. My customers help each other out, they tell their friends, they let me know about deals, opportunities and threats that they don't need to because they are excited about the store. Part of that excitement comes from doing many of things talked about in this post, part of that is sharing MY excitement, and part of that is letting people know the needs that you fulfill.