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Monday, June 27, 2016

FATCQ: Fast Answers to Customer Questions Volume 2

As I discussed last week, I'm answering customer questions submitted during a Derium's CCGs Let's Talk and challenging myself to do it within five lines on the Google Composer editor.  If you'd like to see your question answered in the next installment, feel free to submit it!  I will try to answer all questions that are not disingenuous and that do not ask for confidential information.

Let's continue!

Q: Which trading card game gives you the most profit, Magic, Pokemon, or Yu-Gi-Oh?
A: Magic, by every possible metric.  While smaller, Pokemon is healthy sale-by-sale.

Q: What's the worst type of shopper in your store?
A: Thieves!

Q: How much does a store make in profit each Friday night?
A: Retail profit isn't really tracked that way.  I could run a report to show me the cost total for each SKU item sold, and compare that to the gross.  But that wouldn't tell me the net for Magic singles, for example, which are bought at varying prices.  And it wouldn't count overhead.  A small retail store's take-home profit net of everything is 3% to 7% of gross sales.  Customers think it's much more, on the order of ~36%, but try it and you'll be amazed at how costs just bombard you from everywhere.

Q: What's the biggest game item you've ever bought from a customer?
A: Arcade full-size Dance Dance Revolution SuperNOVA video game.

Q: What online sales channels have you utilized?
A: We run Crystal Commerce and sell on eBay.  We've used TCGPlayer and Amazon in the past but we found that you lose money moving sand from one pile to another and paying fees, all in a race to the bottom price.  Amazon's addressable audience is huge but their fee structure is punishing and you get crushed on spurious returns.

Q: What daily problems do you face?  Any solutions?
A: There isn't enough time in the day to do all the things I would like to do to make DSG better.  The answer ultimately comes from developing better processes, one day at a time, and making steady, incremental progress on long-term projects.  It's frustrating when I run out of time to complete a project that is going to save time, labor, or money, and in the meanwhile that cost keeps right on adding up.

Q: Would you rather run a bad store or just close?
A: I would run a bad store, because as long as you can survive, you can eventually make it better.  The Business Motto of 2016: "Must be present to win."

Q: Do you open booster boxes for singles?
A: Only when the set is brand new or the EV (expected value) of the box is at least $100 before foils, at current market pricing.  Less than that, and it's not worth the time and labor to break the boxes down, and I just buy cards over the counter from the public instead.

Q: How do you deal with foreign-language product in your store and what is demand like?
A: We have some.  Far less than English-language product.  We don't do anything special with it.  I have believed for a while that there is a vast untapped market in the Phoenix area for Spanish-language product.  But I have only sources unrelated to this industry to go by.  It's something I might be able to move on at some point.  There are good sourcing options for Spanish-language HeroClix and Magic: the Gathering.  I speak very little Spanish and would have to hire bilingual employees.

Q: What is the biggest hidden expense of your store that customers may not be aware of?
A: In terms of costs you don't see?  Rent is a big one.  Our wholesale cost on merchandise is not as good as customers usually think it is.  Payroll addenda cost a lot.  People assume if a staffer makes $10 per hour that our cost is $10 per hour.  In reality it costs more like $15 per hour when all the taxes, admin, fees, and logistics are added up.  Other big cost buckets: Summer utilities, advertising, store supplies, replacing furniture due to wear and tear, and taxes.  Always taxes.

Q: Would you consider banning a player who never buys anything?
A: Not for just that.  For the most part, to earn a ban from DSG, you have to do something malicious or significantly damaging to the business.  I think the staff would quickly learn not to spend a lot of time servicing a customer who never buys, but that customer would remain welcome as long as he or she did not interfere with other customers' enjoyment of the store.

Q: How much animosity is there between store owners?
A: Most of us get along.  Some of us don't.  It's much like any other peer group.  We talk all the time. There are private local, regional, national, and worldwide Facebook groups for retailers.  Some permit publishers or distributors, some do not.  When one store discovers a collection thief, all the other store owners cooperate to nail the bastard.

Q: What were some of the unexpected expenses/problems that came up in the business?
A: We expected most of it.  The biggest unexpected expenses have been the costs of buying out partners.  Nothing comes close to that.  In distant second, third, etc, place: Taxes have been pretty brutal.  Payroll is always heavy.  You get hit hard some weeks with a lot of new releases and you don't want to pay that big invoice but you can't be failing to bring in the goods or your customers will go somewhere else.

Q: When pricing booster packs, do you compare to nearby shops or go based on cost to run the business?
A: Something you should understand is that booster packs, especially Magic, pretty much always sell out and very easily, at MSRP ($3.99).  There is no need for any store to charge less unless they want to offer a box discount.  Usually when you see stores doing packs $3 for $10 and like such, they are cash-flow starved and just frantically cycling product.  Their customer base also gets used to that price and will usually leave if the store tries to raise it back to MSRP.  It's bad for business.

Q: What exactly do I need to open my own card shop.  Location, education, money, etc.
A: If you have to ask this question, you shouldn't be doing it.  You clearly have not done even the most basic research.  You're going to do it anyway, though, so I'll just say this: Get a cheap lease.

Q: Are there items that sell a lot but bring poor returns?
A: I assume you mean low-margin.  Of course.  New video game consoles have almost no margin at all, but they are very easy to sell and there is essentially zero danger of being "stuck" with that inventory.

Q: What percentage of your sale do you have to pay your distributor?
A: This was a new one for me.  Apparently many people think game stores "split the take" with distributors, and anything that doesn't sell can just be sent back.  Nope.  We buy our inventory and we own it.  (This is not common in mainstream retail.)  That's why most game stores don't discount much, if at all.  Short-margin items are especially bad, because if it doesn't sell, that money is already spent and can't be recouped.

Q: Are you happy to sell bulk or is it a waste of time?
A: I am absolutely happy to sell bulk.  Many stores vastly overstock on low-demand cards just to be able to say they have a huge inventory.  Anything that's not turning is tied-up liquidity.  For TCG singles you kind of have to stock it all, but there's no reason you need 99+ Chimney Imps like half the sellers on TCGPlayer.  Stocking ten or so is more than enough, and the rest can be sold off in bulk lots and turn back into money.  You can play pauper or build card houses, I'm cool either way.

Q: What can you do to start a website and put it above the giants like Star City Games, Channel Fireball, etc, in terms of sales and players using your buylist?
A: Nothing.  That market space is closed out.  You have to understand this: They have already developed an infrastructure, asset base, staff, customer market, and business operations that are millions of dollars and many years ahead of any start-up newcomer, and they are continuing to make those things better, extending their lead faster than any newcomer can catch up.  The best a newcomer can hope for is to be profitable, which is possible with careful planning and capital.

Q: Would you do it all again if you had to start from scratch today with just your initial money?
A: Yes and no.  Yes, for sure, I would do a much better job of it with all the knowledge I have gained from doing it.  I would build an amazing store and nothing would go to waste.  No, on the other hand, I can do almost anything else with that money and it will be less work and more profitable.  I would probably open a coffee shop instead, or a business installing cabinets or air conditioners.  Boring, but far more lucrative and stable.  Then I could buy all the cards and games I wanted.

That's all I have for now!  Send your questions!  E-mail, comment, or Facebook.

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