[Musings of a Game Store Owner] Like A Boss Part 2

Last week, I entertained several questions from Emperor Laeroth. He has been hinting about wanting to open a store for a long time, and it seems like he’s looking at it seriously this time.

The Mighty Emperor has called me, and I answer his demands. I have outlined my responses to his questions, but he discerns that I could answer further. Those replies are below.

Question 1- Money (Continued)
For anyone starting from scratch, I would say you need no LESS than 6 months, if not more. If you are getting a bank loan, try for a HELOC of $25K or so. I’ll talk about why in another installment.

Why do you need so much money? There are a multitude of reasons. You might open your doors and no one comes. Not just on the first day, but not in the first week or first month. You might have hundreds or thousands of dollars invested in a lease and stocks, and without sales, you have a big problem. You can’t pay your power bill, or your trash bill, or cable/phone- or pay your employees (if you have them). Not only don’t you have a way to pay your bills; you have almost definitely signed a contract with all of these service providers promising so many months or years of payment. But you don’t have any money, and those people want payment. It gets sticky quickly. Having savings helps you pay those bills.

Savings also show banks that you are serious about your business. [Full disclosure: I currently work at a bank and sell loans on a regular basis. I have these conversations with people all the time.] When you go to get a loan, if you have SOMETHING to show the bank that you are invested in your business, the bank takes you more seriously. If you just go in the bank and say “hey give me some money” but don’t have anything to let them know that you’re in it for the long haul, the bank is much less likely to give you money.

Generally, personal loans are going to be very hard to come by for a business. Banks are usually going to want some kind of collateral, such as a home or real estate that they can use to hold onto as assurance of payment. That’s why I suggested a HELOC – if you own a home, you have a pretty good option to get a set amount of money. $10-$25K is a pretty standard amount for a home equity loan. The bank may try to sell you more, but I wouldn’t borrow more than that for a game store.  It’s very easy to overspend right away- and really, you want to buy as little as possible at first and grow into your business as it tells you what you need. (All of this assumes you have a home, with equity available to use towards a store.)

Outside of bank loans, an important thing I want to talk about includes credit terms. Credit terms are the way that distributors can “help” you get products into your store without spending a crapton of money. Effectively, they sell you products with little or no cash up front, based on the idea that you will pay them back when you sell them.

Some stores are super happy with these terms and make many dollars using this model. We have never used credit terms and never will. The reason? When you go under, your distributor has first rights to your stock. If you  go out of business, you can’t even have a fire sale because you don’t own your merchandise. Not only that, but they take your stock back at a discount against what you paid for it. [ENTIRELY HYPOTHETICAL SITUATION AHEAD] Say you bought Settlers on credit for an agreed price of $20. You go out of business and need to sell your product back to the distributor. They buy it back from you for $15 and apply that to your debt. You still have to pay that other $5. Too bad, so sad.

Question 2- Amount (Continued) <snip> In your situation, I would say 10-20 grand isn’t too far from the mark. Again, I will get to why later.

Why this range? You’ve told me your geographic region (which I haven’t included in the answers right yet) and I happen to know that there is more than one store in that area. You are going to have to spend some money just to start up if you want to compete.

You will need basic but nice amenities to get people in the door to begin with. Something many store owners overlook is the quality of their fixtures. While I am not advising super high end stuff, I am saying that to get people in the door, you should look like you know what you are doing. Cheapo Sauder bookshelves will not offer that impression; especially not against some of the stores in your area. Fixtures mean things like shelves to hold stock, glass display cases for smalls (dice, CCG material etc), tables and chairs for play space and so forth. I would suggest going to Sam’s club and just writing down the very basic costs of the space you mentally want to fill to give you an idea of what you will spend on things like the ones I mention. Those costs are the very minimum you want to spend- and if you want to look like a “real business” you may have to spend some more to make it look nice.

These look much nicer than white plastic banquet tables. 

Outside of fixtures, you want stock. That means board games and CCGS at a minimum, and maybe miniatures. You don’t have to spend a lot on board games right away, but you don’t want to cheap out. A small but good variety is a great way to get started. Miniatures are easy to spend a LOT of money on- many of the display kits cost 2-3K right off the bat. CCGs are not cheap either; depending on which one you buy. MtG isn’t super expensive for Standard rotation (that’s about to change),  but if you want older stuff, Modern has driven the costs of boxes up tremendously. It’s not unusual to spend upwards of $200 on a box of Innistrad or even more for something in the Zendikar block. The older or more popular a set is, the harder it is to get and the more you will spend. (This also means that you will have to charge more on the product to make any kind of money. We’ve found that $9 is the most a player really wants to pay for a sealed pack unless it is super rare. YMMV.)

Boxes are bought directly through distributors and singles are bought through the secondary market. If you want to do MtG, I would say singles are a must at SOME point in your business. It’s extremely easy to spend $10k on singles all by themselves. I wouldn’t suggest it to start out, but it’s more than a little possible to do.

These will certainly cost you a pretty penny. 

This is the basic stuff, and assumes you won’t have to do ANY work to the space you intend to occupy. That may not be true. If you want to put up slatwall; make sure your building walls support that. (Note: you need studs to hang slatwall. If none exist, you need to find another option for merchandise displays.) If you want to install lights, make sure the wiring can handle the load you expect to draw. (Also be sure there are plugs available for customer use.) There may be weird rules about how many bathrooms you need- be certain your space complies. If you need to add a bathroom, that will be a lot of your money right up front. You will want a LOCKING office, and probably a safe. If they don’t exist in your space, you may have to pay to add them.  (A floor safe can easily be purchased. It’s the locking office that can get tricky.) The list of things that can or could go wrong when opening is pretty big- this is just an overview.

In short, 2-3K for your building: deposit on the lease and a few months’ rent paid in advance and insurance (don’t forget insurance), plus any labor needed to make it nice. 2-3K for fixtures and “stuff” like a computer, POS, inventory tracking, office supplies etc. 2-3K is pretty easy to spend on stock, and a little extra “just in case”.  (These ranges are my advice on what you should realistically expect to spend. It could be more.)

Question 3: I’m exploring different options for my store.  I want to do something a little different from most stores, as a way to draw attention to my store over others.  The area I’ll be going has a few stores already (though I’ll be looking at placement in an area of the Twin Cities were there are no stores), so being unique is going to be important.  Initially, I’m looking at a sort of a hybrid store.  Possibly a cafe/small-scale kitchen that is tailored to gamers/nerds and then have the store itself in another part of the store.  Is this advised?  I’m also looking at the pros and cons of carrying different types of items.  Would you suggest being more diverse?  Or being more focused on specific products?

Do you have any restaurant/cafe experience? If the answer is no, then don’t do this. But if you are considering food of ANY kind, increase your starting funding range by at least two fold (ie instead of 10k, expect 20.) First off, any time you are doing anything with food, you will want a lawyer on retainer. That is going to be easily a grand, and  if you need the lawyer for any reason, you will have to fill the retainer again.

On top of that, the number of licenses, permits, regulations and bureaucracy you will have to deal with in order to serve food is tremendous. Your insurance costs will be MUCH higher as well. Depending on how picky your health department is, you may spend over $10k trying to meet their requirements before you EVER OPEN YOUR DOORS. (Commercial grade kitchens are NOT CHEAP to furnish.)

Then, there’s food. In a nutshell; food is expensive and perishable. You have to buy enough to serve for a few days buy not too much; and you had better be prepared to lose money to “shrink”; which is food that didn’t sell. Either it got tossed due to spoilage, the cook decided to eat something and not mark it, customer got the wrong order and you can’t serve that food to any one else so you have to toss it- it doesn’t matter. Food will “disappear” and you will pay for it anyway.

You will have to come up with an absolutely idiot proof way of keeping the food away from the games- because no one will buy a copy of Carcassone that has grease drippings all over it. Food and games seem like a great idea, but they have to be executed well or you are in trouble. What will your policies be on outside food? What about eating in the play space? Will you have something to offer to people on weird diets?  How will you handle “campers”? (Campers are people that sit at a table LOOOOOOOOOOOONG after their food is gone, chatting instead of leaving so you can serve someone else.)

On the other front: the more diverse your product line the more work you have- at least on a product knowledge front. You also have to work harder to find people to REGULARLY BUY those diverse products. Once you have those customers, you have to make them happy. Pleasing 100 people that all like Magic is hard enough. When you need to please 10 guys that like Anime, and 10 that like strategic games, and then 10 that like casual board games; you get to a point where you wonder if the work is worth it. These people all want something different, and it’s very rare that any of them think to thank you or appreciate that the time you are putting in trying to make them happy is worth something.

Question 4:  To go with that, if you don’t mind me asking, what products sell the best for you?  I imagine you do well with Magic (as most stores do), but I’m particularly interested in your comic book business (if you carry them), table-top games, board games, etc.  And how do you handle the situation where gamers simply come into the store to play and don’t buy anything?

No comics (as explained before). Magic is big for us as you guessed. Board games are a very large part of our business. Miniatures and RPGs do well. We have great luck with small “party” games like Fluxx and Nuts! as well. We have a little bit of everything (Magic, RPGs, miniatures, paints and supplies, card/party/family games,  and board games.)

Handling people that come in to play but don’t buy is something I think I need to address separately. It involves a lot of deep conversation and requires you to really examine what you are after in a store. I hope to include that with my thoughts next week.

Question 5: Do you offer types of discounts to your customers?  Punch cards, discount memberships, straight discounts, 2 for 1 deals, etc.  If you do, does it help business?  If not, why don’t you?

We do not have any standing, regular discount programs. We do offer a flat percentage rate discount to certain groups of customers (examples might be teachers or paramedics); but that discount is not advertised or part of our larger marketing scheme.

Our decision not to include discounts is based on several factors. The first is math. If you consistently give away something, it will cost you something. For us, the cost of a discount outweighed any amount of income we would gain from sales.  The second factor was tracking. When we started out, we had very old systems and no real money to improve them. Keeping track of punch cards, 2 for 1s or memberships was a lot more work than we were willing to do.

New POS systems make tracking these kinds of discounts or programs very easy these days. We now own a POS that will help us if we ever decide to use any kind of customer rewards or discount tracking system. We just didn’t have a good POS for a long time and that formed our decisions based on its abilities.

The third factor was other store experience. TheDude (aka my husband) interacts with tons of store owners across the country, He is on a couple of boards and forums with them and has had many chances to ask them about how things work for them. The experiences they share have helped him make many decisions about our business, including the choice not to include discounts.

Something very people understand is what a discount does to the perceived value of your product. When you offer a discount, there can be a sense that something is wrong with what you offer, or that you are desperate to sell your items under any circumstances. This is a very complicated idea, but it’s worth contemplating.

I will get to your last question next week as well. Again, I invite people to ask further questions, make comments and generally offer advice as they see appropriate. We do want to please the Emperor, right?

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