Wednesday, February 8, 2023

Magic Box Prices

Discussions over box prices and how the FLGS should really focus on their snacks tend to arise on the Internet every few years. It is believed that: A) Game stores are ripping off their customers with their box prices and, ironically, B) Game stores can't possibly survive by selling a commodity product like Magic. This "it can't be done" attitude arises because nobody understands business. It's not surprising when our margins are so thin, you need a spreadsheet to figure it all out. Here's a primer on Magic box prices and how they work within my business.

Box Prices

My best price is $91.12 for a box of Phyrexia All Will Be One draft boosters. Draft boosters are unpopular nowadays. Before they were just boosters, the boosters, with the 36 count format everyone is familiar with. The oldest box I can find in my point of sale system with a verified price is Saviors of Kamigawa from 2005 at $74.39. That price, adjusted for inflation, should be $115.25. Wizards of the Coast has done a fine job at keeping the price low.

Let it be known there is no set net price for this product. I pay $91.12 from one distributor, $92.70 from another, and $95.16 from a third. I may pay any of those prices based on availability or possibly to round off an order for free freight. In the case of Set booster boxes, I needed all three of these suppliers, at three different price points, to get the amount of product I needed. The allocation from each of these suppliers failed to meet my needs, despite a pre order from all of them.

The price I pay is based on my business with that distributor. A smaller store likely pays more than me. A larger store could see somewhat lower prices, but not by a lot. This contributes to the confusion amongst the uninitiated. How much does a game store pay for a box of Magic? It depends. Probably between $89-95. We're a long way from the days of $74.

What I Charge For a Box

I sell only to my local market. I do not sell online. That means I only order an amount to satisfy my local market. It's still a Toyota Corolla sized order, a Camry if it's a hot set. I have no strong incentive for volume purchases, which would result in my pricing more competitively to move that product. I buy for my people.

There are stores who don't care about box sales and will simply keystone a box, meaning doubling the cost. Keystoning a box of draft boosters would bring the price to around $190. Very few people will buy a box for $190, and that's fine for those store owners trying to hold the line. The price a few years ago, when there was an MSRP and the costs hadn't gone up, was around $145 a box. Many customers still live in this world, with boxes discounted to under $100 online.

But that doesn't answer the question of how much do I sell a draft box for.

Commodity Pricing

My goal is to competitively sell this commodity product, a plentiful staple of Magic players, available everywhere, at market rates, tracked like a stock. I do not care what my local competitors are selling for, I am competing on the national market for sales. My price is around the TCGPlayer median price, plus or minus. It can be higher to a degree. I run a premium store with higher costs and I would like higher margins. If I have a smaller supply, I can afford to sit on higher priced product, but that's generally not how Magic works. Still, there is maybe a 10% variance before I lose a significant portion of my sales.

I currently sell my draft boxes for $125. If you look at the graphic above, that is within a penny of the TCGPlayer median price right now. Because I don't sell to a worldwide market, if I reduce my price to something lower, like $110/box, my local customer base won't move the sales needle. Sure, they'll buy another box or two, but at a significant cost to me.

My Margin

My gross margin to survive is around 45%. With a lot of work, last year we managed 47%. Now let's look at that draft box:

A draft box sold at $125, with a cost of $91.12, has a gross margin of 27%. That's pretty bad. If the whole store were at 27%, I would be out of business. Even worse, check out some of the COVID era sets and you might notice that some prices are below these costs. Stores are dumping these titles at a loss, just to pay their rents. It warps the perception of Magic prices, since the floor is artificially lower

So how do I get to my 47% overall store margin? Well, it's sure as heck not selling Magic the Gathering. I run a diversified store. I buy high margin liquidation items and constantly shop for bargains. We should clear a couple million dollars a year in sales this year and CCGs will be about a third of that. The best way to sell low margin product is quickly, with borrowed money, and that's exactly my goal. I buy the amount of product I expect to sell when my bill is due in 30 days. Most stores have no terms, so they buy the amount they managed to save up. I do have a Corolla worth of COVID era dead Magic, but we don't need to discuss that. I can afford to wait. I still believe you should never bet against Magic.

In Conclusion

This is fine. I've been doing this for 18 years. I have sold Magic at full MSRP, and at deep discounted prices. I have tried singles, sold them online, and decided the labor costs are too high and the investment too great. We run three Magic events in store each week that get from 12-40 people. There are 17 other event options customers would love us to run, if we had the interest and the coordinator. How much thinner can we slice this onion?

I make pretty good money in year 18. In fact, I've finally surpassed my last IT job's salary from 2004, adjusted for inflation. It only took nearly two decades and the best earning years of my life to get to parity. I wrote a book on how you can make such wise financial decisions.

I make that money by being well diversified, constantly reinvesting in my business, and focusing intently on where my customer wants intersect with my business needs. For now, a 27% gross margin on Magic boxes is fine. I can imagine a time where it won't be. I certainly won't put up with that with other card games. One day Magic might be viewed as that other card game. I am a retailer; I will find something else to sell.

Please share this to someone who needs to hear it.

No comments:

Post a Comment