Wednesday, November 1, 2023

Magic Pricing Experiment

While sitting in my RV in Mexico, I came upon an idea that probably wouldn't have occurred to me, if I were closer to my store. What if I took this pretty much dead, Magic product from 2020-2022 and sold it at market prices? It wasn't selling at all and was starting to clog up my inventory reports. The stuff was dead, so why not try? What did I have to lose?

Market prices for a lot of this stuff range from well below cost to slightly over cost. Putting it on sale, in store only, would hopefully get it off my reports and perhaps bring in some extra cash that I wasn't realizing. My big hope was flippers would take notice, buy my Magic, and re-sell it online; something we should be doing ourselves. I have three people who watch my online store for discount Warhammer product and they buy it up within minutes of the listing.

The results after several months of this Magic pricing experiment were not great. Sure, it moved enough to get that product off my dead inventory reports, but not enough to make much of a dent in the supply. Worse, it tended to skew my numbers. 

If you've ever had a great sales month and your bank account is empty, it's probably an issue with margin. When Pokemon was on fire and sold well over keystone, I would stare at the income statement and not understand what was happening. Where did this money come from? We are accustomed to a pretty static margin, and adjust that up or down and we've been transported to a different universe.

What I think happened was I was diverting strong margin sales into poor margin sales. I was taking my best product line in the store and deciding not to make any money selling it. Is it possible I wouldn't have had sales otherwise? Sure, and with a true experiment with a control store, maybe we would have found out. At this point, I will be happy knowing all Magic sales have a reasonable margin.

No flippers took interest in my cheap Magic, although the customers at the lowest economic tier tended to buy a pack or two here and there. We put some booster boxes out on the counter at below cost, and the reception was lukewarm. The fire sale price of Magic is probably about half of the market price. Since we were already losing money, I didn't really want to just make a bonfire in the parking lot.

Then Wizards of the Coast announced a consolidation, a combining of Draft and Set booster packs into Play boosters. For stores, there are far too many SKUs and too many chances to get things wrong. This is just one small example, but it did promise to take two confusing, similar products, and combine them into one. Here's the important part, the Play boosters will likely be priced like Set boosters. Why does this matter? This inflationary move makes older product look more attractive.

If the going rate for a booster pack is now $5-6, Magic draft boosters, especially, have just become about 20% more attractive in the long run. It will take some time for this to be noticed, and time is what these COVID era sets need to regain some value. We'll start seeing Play boosters next year. 

My decision this week was to be informed by market prices, but not driven by them. I went through, and with the exception of Commander Masters and some truly dead Jumpstart releases, set my Magic prices at a margin I was comfortable with. My goal was around 30-35% and I mostly achieved that. A lot of sets didn't change, but the deep discounted COVID sets had an overnight price increase that was pretty substantial.

Two things happened. First, I started selling boxes at that new price and second, I was accused, by others, of price gouging. Yes, if you have been following market prices, selling at a loss and hoping to making it up in volume, there will be those who accuse you of gauging for attempting to get 30-35% off a product. It's not that they have even the foggiest idea of what I paid for it, only that it was cheap before and now it's not. They could have bought me out, but they were happy to make micro purchases well into the future.

To be clear, I don't expect these now sustainably priced packs to sell well, or maybe even at all. I am willing to relegate them to museum product. You can see them up on the shelf, perhaps buy a pack or two out of curiosity, but I generally don't care if it takes years to sell them, provided I have stability in my numbers. There's probably $15,000 worth of product like this, down by about 40% from the beginning of the year. 

I fully expect my dead product to return to the grave and show up like a zombie on my inventory reports. I have resolved that this is my fate. I am buried in the manure of COVID era Magic, and only time will convert that product into rich soil. With the help of inflation through WOTC, of course. Customers will be happy to buy your Magic at below cost (on their schedule), up until the day they chain up your front door.

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