Paul is tremendously well-grounded in realism and approached this topic in pure pragmatism; the store he bought was tabletop first and he forged ground into video games and ended up having them perform their way into being a primary category. My desire to sell video games was less based in rational evaluation. I have loved video games since early childhood and simply want to be in the category forever. In terms of raw volume, DSG is Magic first, other TCG-related accessories and games second, and then there's a bit of a logjam with video games, D&D, and Warhammer. Board games are in their offseason right now but will poke back into the top tier once we get past Halloween. Minor categories that don't sustain the store themselves include comics, LCGs, apparel, toys and figures, and art. So my rationale doesn't fully hold video games to the same level of scrutiny as Paul's did. Paul's approach is better.
I had something of an epiphany the other day while reading the Facebook retailer groups generally, and that has caused me to reverse course on video games and recommending them as a category. For most tabletop stores, they should stay away.
1. Volume? What volume? I hope you weren't a fan of having volume.
A dirty secret that is masked by video games having great net margins is that video-game-focused stores tend to be at much lower revenue levels overall and can often only support an owner and perhaps a couple of part-timers, if that. Increasingly in the video game retailer groups online we hear stores bemoan $10k months at the till, which is why so many of them are tiny in square footage, they cannot possibly afford higher occupancy expenses. (For perspective, I pay more than that every week in bills.) There are tabletop stores for whom $10k is a subpar Friday, and we're sniffing that ballpark on better release frames. The limitation, of course, stems from stock. A pure used video game store can only buy what used games walk in the door, and new accessories and supplies. There's some pittance from liquidations of one another, convention activity, and low-margin new titles, but the main hay is trade-ins. There's no distributor sitting on stacks of CIB SNES Chrono Triggers ready to ship them by the carton. The activity level for Magic singles is far greater on a per-store basis, despite being smaller in aggregate than the video game market. And tabletop stores can get brand new merch from distribution every day. A high-octane engine needs fuel.
2. Baloney sandwiches are considered sufficiently nourishing for many gamers' diets.
You think counterfeit Magic and Pokemon cards and bootleg Chinese Warhammer recasts are a problem, you have no idea. Counterfeit video games are far more prevalent, and more crucially, the bootlegs are good enough for most players because there's no sanctioning entity that cares. They have no collectible value obviously, but the assortment of sources pushing X-in-1 knockoffs of the NES Classic or modded Xboxes or various flash-ROM carts are providing sufficient play functionality that plenty of players are ponying up the dough that way rather than on authentic goods. We recently had to pull an otherwise good product from the shelf, the previously discussed EON GCHD adapter, because its packaging resembled a bootleg mini Gamecube, and it was actively upsetting customers to see it and then be disappointed that it was not, in fact, a bootleg mini Gamecube. For an instant they were super excited that they could spend ~$100 and play Super Mario Sunshine and Metroid Prime and PN03 and Zelda Twilight Princess and twenty or so more of their favorites. Never mind that such a thing doesn't exist, seeing something that resembled it and then being denied that consummation was a psychological dealbreaker. Note that they were ready in a blind instant to buy bogus if it meant playing for cheap. That's how pervasive the recognition of bootleg video games has become. And I haven't even addressed piracy or emulation, which stores mostly should just ignore but does have a suppressive effect.
3. Returns are reality, and many of them are fraudulent but you have to eat the loss anyway.
In the tabletop-only world, you can put up a sign that says ALL SALES FINAL and probably have it make about zero percent negative impact on your sales. For pure Magic-based or TCG-based shops, they could not possibly do it any other way. Market pricing on singles, after all. In the video game world, nobody will buy from you if they fear being stuck with non-working gear, and unfortunately, some people are dishonest, and will break or damage or mess up the gear themselves and bring it back for a refund claiming it didn't work when they bought it. (Do they seriously think we don't test the systems? Sigh.) This takes a bite out of those otherwise appealing video game margins. Fortunately, if you can achieve some volume (see #1 above), returns aren't a big problem. But until you can wash out those costs in the law of large numbers, it will seem like you're getting big returns on the regular and each one will hurt like a kick in the crotch. But if you try to move away from a customer-friendly return policy, sales plummet.
4. You have to do handstands to beat shoplifters, and it works against the tabletop best practices of hands-on demos and accessible merchandising.
There is shrinkage in tabletop but it's not serious. Most stores keep the most pocketable stuff backcounter, such as singles and booster packs. The board game hobby just doesn't have a whole lot of people trying to five-finger-discount the product. Video games are an order of magnitude larger market, and shoplifting is absolutely ubiquitous. Which is why you can't just have the product, you have to put the disc media (and in our case the manuals!) backcounter with a retrieval process in place, and the displays out on the floor, ultimately more than doubling the square footage sunk into the product due to accessibility and logistics. Cartridges can be under glass (okay visibility, no shrinkage, not as much sales), on the racks (best visibility and shoppability but tons of theft), or put away backcounter like discs with proxy display cases on the racks, for best shoppability and security, but it's a bunch of extra work and cost. We've had people steal five-dollar AC cords off the rack. It's discouraging. Provided you can make your store somewhat scumproof, you'll do okay, but this is another one of those things that eats into those appealing margins.
5.
Digital delivery isn't killing the market, though that's a popular pundit line. Video games are in a boom cycle right now and the current generation leader, the Playstation 4, made its hay on a day-zero promise that players would still get physical discs as the primary delivery media for content. There's a sunset coming, much as there is with comic books, but we're not close to it yet. I just wanted to dispose of that talking point here. Variants and rare items are a bigger problem. You know how it takes some teaching before a staffer who isn't versed in Magic can buy singles without getting rolled by sharps? While the video game catalog across all of history is much smaller than Magic or Pokemon or Yugioh, it is easier to lose money when a sharp presents a common variant or version as a rare one (and that's assuming it's authentic; see #2 above). You have to really love and immerse in video games to be able to catch this stuff. Magic-heavy stores: You know how your first reaction goes when some board-games-first store says they're going to get into Magic singles and asks the Facebook retailer group for pointers? And how big the gulf is between what you know and what they know and how much of an uphill climb it's going to be for them and you can hardly articulate the magnitude of it? Yeah, that. Except for video games, the greenhorn is you. You can master all the common stuff but you're going to take literally years to know all the corner cases, and meanwhile the sharps in town will roll you over and over. I've been a video gamer for literally forty years and they still get us sometimes when I'm looking the other way. Yes, I am old.
6. Dumpers are everywhere and distributors have no control over them.
The major publishers like Nintendo don't do a lot of distribution in the sense we know it from the tabletop side, and when they do, margins are close to nonexistent. However, the accessory-and-supply distributors like Hyperkin, Innex, Vast, Video Game Advantage, and so on, are used to selling to garage or convention vendors in addition to brick-and-mortar stores. It's just a reality of the category, there's no Leegin or Wizards Play Network or Otter Screening here. And there are a ton of those scrapper dealers who are willing to buy Retrons or Cirkas or Old Skool merch and flip it for a nickel over wholesale out of the trunk of their car, because they don't value their time or labor and they generally commit sales tax fraud and the usual rack of reasons. The saving grace in-store is that most buyers are skeptical of flea-market-esque sourcing, because those flippers don't tend to stand behind the product (see #3 above), but when they dump on Amazon and eBay, the buyer protection covers that. Long story short, these products are still safe to resell if you're already in the video game category, and you'll make good money on them, and the quality is perfectly acceptable, but understand that you aren't going to make money selling it online or at swap meets or anything because you'll be undercut heavily, and if you ever close up shop, you're not going to recoup on it, and you may as well push it all into a lake.
7. Machamp = Madden and Here Come the Feelbads, also meth is a scourge.
I hope you like bad reviews, because just like every millennial who brings in the same childhood Ash binder full of heavily played Base Jungle Fossil cards missing the Charizard and is crushed to learn you won't be providing them a down payment on the house they're trying to buy before the baby comes, you're going to get castigated by every broheim with a stack of worthless previous-gen sports titles who can't believe you refuse to pay them half of original retail. It's not quite as bad as that, I suppose, but it's a far cry from the world of Magic singles trades where everyone basically knows how it all works and most stacks of cards get processed with barely a shrug out of the customer and we all move on happily with our day. The secondary thing is that it's relatively rare for the swarf and dross of humanity to walk in the door with actual Magic cards to sell, but I guaran-damn-tee you the toothless meth-head who smells like an open grave will gladly plop a filthy broken PS3 that they found in a dumpster right onto your countertop and a roach will crawl out the vent. Sometimes a roach colony. Also they'll be pissed you won't pay them at least $100 cash for it. It's a video game thingy, it's obviously worth that much.
8. Operational software isn't much better on the video game side and in fact a lot of it is the same software.
Part of the tabletop store reality is accepting the fact that our industry doesn't have enough money in it to get us access to the best point-of-sale and inventory management software. Branching into video games offers a few minor upgrades, but they're not wow-good and they won't have you jumping ship with vigor from whatever you're running now. In some cases it's the same thing you're already running.
9. The future growth subcategory in video games is repairs and video mods and controller mods and vintage restoration and other custom value-adds. If you aren't already competent at electronics and engineering, the category is going to get worse for you over time.
Yeah, that. Also to get a decent disc resurfacer you're gonna be out four figures minimum, and yes you do need one.
Nine reasons is good. I don't think I have to go much further right now, and that's not touching on some of the minor obstacles, such as video games not generally being copacetic with Meeple-esque branding, or the human septic tank that is Smash Bros organized play, or the major YouTube personalities and tastemakers being in some cases virulently anti-store. I could go on all night. Tip your waitress and try the veal.
So with all that, why should any tabletop store ever get into video games? What's the counterargument? Why is my store in the category, and in it to stay, for that matter? Am I just being hypocritical?
I'm in video games for as long as I remain in commercial retail, because I love video games and I am willing to immerse to the Nth degree to know and recognize all the goods and the rares and the variants and make the repairs and service the thingies and do the mods and so on. It's the market I personally want to be in. I'd sacrifice everything else in the business if it made business sense to do so (rest assured right now it would not make sense to do so) and if I had to reboot from the brink of disaster into some build-it-again scenario, I'd be in Magic and video games and possibly D&D and that's it. Other stuff might come along in time, or might not. Or I guess if I got bought out of the tabletop side of things, there we go. It's partly a lifestyle choice and partly an acknowledgment that as I grow older, I can no longer do everything in the business myself, and certain components of it have grown beyond my everyday attention capacity, and that may not always be the case.
If you aren't similarly devoted and focused on making video games as a retail category work for your tabletop game store... don't try. Much like comics, it's a category that punishes dabblers. You'll be throwing money away.
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