Business of Gaming Retail #1: An Introduction to Game Retail



Business of Gaming Retail

Greetings! Regular rpg.net readers might know me from Freelancing is Not for Free , a column for role-playing game freelancers. Last month, I ended that column to address a regular question that pops up at least once a month here on RPG.net:

"I want to open a game store. Can anyone help me?"

The answer is "yes."

What Kind of Help?

Here's a list of some of the topics I intend to address first:

Calculating Startup Capital

Getting a Loan

Buying vs. Opening

Deciding What to Carry

Finding Suppliers

Fixtures & Equipment

The Pros & Cons of a Game Room

Pre-Opening Marketing

Finding Capital

These topics are important to the decision-making and planning process. You must make them before you open. They take priority because of their urgency to people who want information

Later on, I'll address topics of great importance that focus on decisions later in the process, like

Merchandising Skills

Marketing & Advertising

Professional Organizations

Paperwork & Forms

Lease Negotiation

Planning Store Layout

You use these skills once you're already open or preparing to open, but in some cases (especially M&A), knowing how youll do them later affects your early decisions.

Why Me?

My management experience began in 1987 with Domino's Pizza. Domino's at the time was still expanding strongly. Its management program was designed to teach walk-ins how to run a half-million-dollar a year business within six months and train them to buy their own franchise. The corporate training was intense. It involved paperwork, training classes, videos, tests, weekly supervisory review, and much practice. The average manager age at the time was 19, and the average 7-store supervisor was 21.

My market at the time, which included my trainers and the people I trained into management positions, led the nation in profitability.

A dozen years later, I had an opportunity to buy a game store. One of my favorite hangouts was on the block. The owner claimed he wanted out mostly to spite his soon-to-be-ex-, and Im sure there was much truth to that.

I suspect he also thought the industry was declining. His sales were down, although he didn't have very clear sales records to help identify where the problem was. That was in 1999. Pokemon was already on the market, but nobody had any. We signed paperwork and I traded money for the keys in May.

Within weeks, Wizards came through with the Pokemon. After that, I had ready cash to cover any errors I made. The timing was partly luck, and partly good decisions on my part.

From the first, I had good advice. You see, the owner who sold to me already had an offer on the table. He even told me what it was and let me see the offer. After much discussion with a friend (another Domino's veteran and now owner of a $1+ million a year courier service), I offered less.

Yes, I bought the store with a lower offer than an already existing offer. That worked for me because the owner was in a hurry to sell, and I offered him more money sooner. It wasn't a question of what was the better financial decision in the long run. It was a matter of what he wanted most. Later on, when he offered to buy out the rest of the payments (he held the note, saving me from having to secure financing), I saved another $5,000 because he was spending money faster than he anticipated.

So I'm in the industry. One of the things I learned at Domino's was to identify what I needed to learn about a business. I set out to find a network of peers and any publications I could find to help me in my education. I'll tell you about all of those in another article, but let's just say that they were priceless. It quickened my education and saved me thousands of dollars in errors.

At Domino's we had the three "key indicators," or "keys" in company jargon. Keep those numbers low and profits go up. What are the keys in gaming? Product cost and labor. I'll address each of those topics in separate articles.

Sales rose continuously. I tracked Pokemon separately even before I installed a point-of-sale system, and non-Pokemon sales climbed. While I was happy to put the Pokemon money in the bank, I really didn't consider it indicative of my management skill. It was, in a way, free money to anyone with a WotC account. The numbers I was most interested in tracking for purposes of feedback were my sales by category. As long as all of those were growing, or the sum total was growing, then I must be doing something right.

They did.

Sales kept going up for every category but historical miniatures. I tried at first because it was a legacy of my store, and I didn't want to disappoint the guys who had shopped there before I bought it. When I finally stopped trying, several other categories increased more than the loss. I hated disappointing the old customers, but I had bills to pay, and I had other customers who wanted to give me their money.

Leaving the Industry

The plan when I bought the place was to run it about 50 hours per week and write for about 30 hours a week (yes, I'm quite comfortable working 80 hours a week or more). I thought that being around gamers all of the time would help my writing. The stories, the new perspectives, the playtesters, the rules arguments--would all help. On that part, I was right.

In reality, the store took far more than 50 hours per week. Worse, I wasn't very productive with my remaining time because the store needed regular attention even in my absence. The store was not the path to where I wanted to be. Once I realized that, I prepared a sales package that included all the information necessary for due diligence and shopped it around. I finally sold the store to one of my employees, who took sales even higher next year and then beat that record again the next year.

And Here We Are

Since I sold my store, I've written business plans professionally and counseled other would-be store owners. Ive written a book on gaming retail, which is with a publisher now. I've begun working with other would-be business owners in my area, potential franchisors nationwide, and other people planning to start their own business.

These articles should create a slew of follow-up questions because their brevity will force incompleteness on my part. Naturally, I can't discuss how to adapt each article to every gaming business model. I'll have the answers for some of those in articles planned for later, but I'm willing to address them immediately in the forum. I'm always available for specific discussion relevant to your situation. If at any time you would prefer discuss your issues privately instead of sharing your plans on the forum, you can e-mail me at Lloyd@lloydwrites.com. I'm here for you.

Lloyd

www.lloydwrites.com