Sticky Post

Independent Video Game Store: What it costs to run it?

February 20, 2019

Since 1985, 45 video game stores have started. Calling each Video Game Exchange, he approaches them like a reality series — out a location is found by him, fixes it up, stocks it has got the business operating smoothly and then when the right deal comes along possesses it.

“Whenever somebody calls in, we visit the warehouse and also dig out an inventory and we start another store,” he says, originally taking my phone in the back of his shop, away from clients, because he thinks I might want to buy it. The plan has worked well for him, letting him reside across the U.S. and kickstart heaps of small companies. He retains a warehouse enough stock to open 15 stores tomorrow when the situation presents itself, he states.

But lately, he has seen less demand from people looking to buy him out. He’s been for more than seven years at one of his current locations. The calls have become less frequent.

It is a classic story at this point — internet sales and large companies have made it harder for smaller stores to compete, and the sports business adds its own challenges. Back in 2015, even mainstream retail series GameStop has been struggling to keep up as an increasing number of players purchase games online.

The owner, who eventually plans to double back on online sales as an exit program, provides his retail company five to 10 years. “I’m not sure that I think that it’s going be about in 15 or 25 years,” he says. “I really don’t.”

The proprietor of Trade N Games in Fenton, Mo., gives the Exact 10-to-15-year timeframe. “I don’t think this industry, in retail, is left in 15 years,” he states.” … Not at all the least little bit. I mean, there will be a few collectibles, but paying two employees working full time and paying a few thousand in a lease. No way. Not an Opportunity.”

To break down why some feel that this way we stumbled into the particular costs of running an independent game shop in the U.S. and spoke to over 20 store owners and managers concerning the process. From telling tales of Amazon selling matches for under wholesale vendors, to opening their books and revealing that the expenses of everything from insurance to paper towels they paint an image of an industry doing its best to keep its head above water.

Some disagree with the 10-to-15-year predictions and state they hope to be around for the long haul, so pointing to faithful clients and a recent upswing in collectors, but most agree it’s a difficult business with ever-growing struggles in making the math work.

WHOLESALE COSTS
One of the first lessons many shop owners learn is they aren’t a part of the sports industry. They exist on its fringes, also they will be humored by it game publishers hold the cards. If stores want to play, they play by publishers’ principles.

Case in point: brand new game earnings.

From the late’90s, a store owner could purchase an NES game for around $30 wholesale in a distributor and sell it to get, in some cases, $65. Today that would mean a gain of just, accounting for inflation.

Within our research on wholesale prices available to small shops in 2015 (such as best wholesale suppliers for eBay, Shopify, and Amazon FBA in USA, UK, & Europe), the cheapest price we saw — to get a new match that sells at $45 — has been 35. The maximum was $60, and many dropped between $51 and $59. In a hypothetical utopia, a shop could earn $15 per purchase. However, there are barriers that prevent them from earning even that much.
“I HAVE A WHOLE SHOWCASE FULL OF GAMES WE’RE SELLING ONLINE RIGHT NOW, OF GAMES I PROBABLY PAID $55 FOR AND I’M SELLING FOR $20 AND $15.”

Generally, they cover more a copy — of those shops, we talked to, only one has gotten a $49 rate in the last several years, and that came with purchasing a few hundred copies at one time, which many shops cannot handle. Shops also need to factor in shipping prices (or gas should they utilize a local distributor), taxation and credit card processing fees, along with rent, payroll as well as the overall expenses of conducting business.

Excluding broader store outlays, many places end up making $10 or $12 per purchase, and that’s if they market every copy they earn. From there, things get more complicated when game developers decide to lower the game’s official purchase price in front of a store sells throughout the stock it purchased in the initial rate.

It creates for a bet as stores have to guess how many copies they could sell prior to a game drops in cost.
Nearly everyone we spoke to for this narrative praised Nintendo as a writer which generally doesn’t drop the retail cost on its games, but some stage to the 2015 fall lineup too particularly tough for cost drops from other publishers, calling out games such as Battleborn and Call of Duty: Infinite Warfare that fell quicker than anticipated.

These types of numbers are why many independent stores have avoided new game earnings, focusing on employed games and other providers.

Brassard in Trade N Games stopped carrying new games years ago. He says the main issue isn’t that he would get rid of money if he stocked them that it would tie up funds he would put to better use elsewhere. Brassard says he was able to gut the cut margins on new matches because they encouraged clients to trade in more used games to be able to pay for the newest ones, however in the very long term, it wasn’t worthwhile.

“SOMETIMES YOU JUST KIND OF HAVE TO EAT IT. … YOU JUST DO THAT, JUST HOPING, ‘WELL I HOPE THEY’LL REMEMBER THIS. I HOPE THAT THEY’LL COME BACK.'”

“We have done the math,” he states.” … It’d be a $30,000 investment in new releases merely to help keep it flowing in and out. Minimum.”

STREET DATES
For shops which take new matches, yet a second challenge comes with sometimes having to market lesser variants of those matches. While GameStop, Amazon, and many others carry enough cash to attack deals with game publishers to get exclusive pre-order bonuses some games, little stores are usually stuck with vanilla duplicates.

As a way to give themselves the advantage, some tiny stores decide to sell games before their official launch dates — a movement that helps them market through fresh stock quickly but comes with a certain quantity of risk.

Like the difficult margins, this isn’t new. Game publishers have been cracking down on shops that violate street dates for years, sifting out undependable retailers and sellers. And vendors often have formal processes in place — many consider away the option from stores by providing games under a day before launch or forcing shops to pick matches up in person should they want them daily. In addition, they typically make stores sign contracts with large penalties if those shops get caught breaking dates.

“THE THING ABOUT THIS BUSINESS WHICH Is Quite DIFFICULT IS THERE’S NO EXCLUSIVITY.”

Total in Box must register a new arrangement with supplier D&H every fall, for instance, particularly mentioning that it won’t sell Activision merchandise early. The kinds of agreements vary by distributor and publisher.

“There have been places around here who have done it on purpose, selling stuff premature,” says the owner of Compete at Box, “and Activision will visit D&H and be like,’What’s up?’ And D&H will go,’Well, we’re dropping them’ And that is huge. Because say if we were dropped… it’s like,’Oh man, we just have a couple more choices.’ Or we have got to worry about sending them out of super far away or whatever the case is.”

The CEO of supplier Alliance says he has had to cut stores off for breaking street dates in the past, “when we were trusting,” but he doesn’t see violations often these days.

Alliance funnels game to a wide range of consumers, from separate stores to leading retail chains such as GameStop and Burlington Coat Factory, and assists with fulfillment orders from websites like Walmart.com and Target.com. And Gelman states that over the 14 years Alliance has been operating, he’s seen publishers (“vendors”) get a lot more aggressive about finding which matches end up where.

“The best thing about this business which is very difficult is there is no exclusivity,” he says. “So the same retailer could purchase the exact identical match from me and buy it from a few of my competitors, and when my competitor is less attentive, that merchant might split the street date once I had nothing related to that crime. That’s where the vendors have become considerably better. They have identified that a good deal more and I would say have weeded out specific distributors that were difficulties when it came to road dates.”

Despite this, some shops still work around the system.

When Garcia started World 8 Los Angeles, he declares that he broke road dates. At the store’s first year or two, he was buying in little amounts and did not have agreements in place with larger distributors, so he’d often find means of getting games without signing contracts. When he did, he guessed selling these games would provide World 8 an edge.

“WE COULD DO IT, BUT THERE’S NO LOYALTY THERE. THESE GUYS ARE … JUST GOING TO GO TO EVERY STORE UNTIL THEY GET IT.”

“The thing is, it is not technically a law,” he says. “There is no law stating you can not. It’s just a contract thing.”
He says he got into trouble, but when his store grew and signed with larger distributors, he noticed they’d more formal procedures set up and decided it was not worth the hassle and danger.

“My most despised release of every year is that the 3Ks,” he says. “When NBA 3K or even Madden, or some other 3K actually, comes out, people go nuts. And they’re willing to pay $300, and they’ll show up to the store and they will say,’Oh hey, do you have this match?’ And we’ll say,’No, it will be out a week.’ And they’ll say,’I know you’ve got it. I’ll provide you an additional hundred dollars,’ blah blah blah. There’s no loyalty there, although we can do it. When they purchase a game, these men aren’t going to think of us. They are just going to attend each store till they get it.”

Another store owner, who requested anonymity so match publishers won’t hassle him says he frequently breaks street dates because it creates loyal clients, noting that selling a game even an hour can make a major difference to people.

He states he has been selling games early for decades and isn’t overly worried since he does not sign contracts i.e. when he has captured, his distributor is the one to get in trouble, not him. He is cautious about what he sells if anybody comes around asking questions and which makes certain not to provide receipts that are obsolete on these sales, he denies the sales occurred.

Financially, he says that he does not find a significant upside from these earnings; he does not charge more for them. He thinks it’s fair because of how hard game publishers create it for small stores to gain on sports earnings differently.

USED GAMES
With all the challenges connected to new sports sales, the large money for smaller stores has come out of cutting out the middleman and selling used games. And that is where managers and shop owners waver on the health of the organization.
On a base level, the margins work far more in their favor. Many owners and managers talk proudly about providing clients more money or credit for their games compared to GameStop and selling back games to customers for under GameStop while earning larger margins than they do on new games. They state are if promotions are offered by GameStop.

The margins fluctuate tremendously depending on the shop and game. At Core Gambling in Salem, N.H., Matt Hickey states that they generally indicate games 80% above what they pay for them to cancel a huge inventory and showroom. At 4JAYS in Antioch, CA, Jody De Amaral states that they generally mark a $2 game up 90 percent but scale down out there now, getting down to 20 to 30% since the game becomes worth around $60. Some shops skew bigger, and their clients feel gouged. Other individuals skew lower and try to compose the difference in volume.

A handful of stores also point to a”retro flourish” within the previous five years, imagining considerably increased interest in matches over 15 years old.

At Digital Press at Clifton, N.J., the owner says that within the past three decades, he has seen five rival retro game shops open over 40 minutes. And he’s seen a number of retro trends that the shop has been in a position to ride from an enormous uptick at NES collecting in 2015 to, “from nowhere,” PSPs selling super quickly in overdue 2015.

Multiple stores point out how they’re ideally positioned to jump on trends like these, overstocking Pokémon matches if Pokémon Go funneled customers their manner and advertisements alternatives to Nintendo’s NES Classic when it sold out.
The reverses list runs long, though, mostly revolving around the inevitable online contest and how players can purchase and sell online using an almost infinite crowd. This problem has been hanging around since eBay took off in the, and shops say it has gotten worse in recent years.

For 4JAYS, this means that they see much fewer rare games and large deliveries from clients. In the store’s early days in the late ’90s,” De Amaral states they regularly took in precious collections, in part because they had been one of the only stores nearby purchasing games in the general public. She remembers a time a customer drove a van of Atari and Commodore computers up from Los Angeles — about a six-hour drive — only to get rid of them for a buck a piece. Or other times, customers would invite 4JAYS personnel to their houses to help clean out garages full of games.

“We would just be getting into carloads full of things as people did not want it,” says the owner. “They didn’t know just exactly what to do with it .”

Today, De Amaral states, those kinds of collections don’t fall in their laps nearly as frequently. And several stores point out that when clients sell matches, they are usually much pickier about assessing prices online. They aren’t hurting for options.
“Should you only speak Craigslist, certain,” says Trade N Games’ Brassard, “but let us just talk Facebook sale pages. Let’s talk Let Go. Let us speak Flip It. Let’s talk to these other outlets… people can take obligations and swipe on their mobiles if they meet in a parking lot, or they can just shoot PayPal now verbally, etc. It used to be they’d need to visit a store if they had cash fast, but now a lot of folks don’t even see money ”

HIDDEN COSTS
Any time a shop deals with buying games in the general public, it must consider varying factors as well — for example theft, vendor scams and a broad assortment of consumer tricks.

The majority of shops we talked to say they encounter minor issues with customers attempting to sell pirated or stolen matches, and that people have narrowed down over the years.

“The majority of the time we receive pirated stuff in, it’s not on purpose,” says Alejandro Ramirez in The Gaming Zone in Tempe, Ariz.”It is like,’Oh I have this pile of burnt games. Can you guys want it now?’ And we are like ‘No.'”
“I understand how to spot a fake Pokémon game a mile away,” says Bond at Stateline.

When customers arrive with stolen games or consoles, shops get equally careful because of the financial risk. Policies range by store, with some requiring fingerprints that move into a database, but a lot of them say they often decline to buy anything they even suspect may be stolen. It isn’t worth the chance of the police seizing it, they say, leaving the store out whatever it’s paid.

“When a man comes in and attempts to sell you a PlayStation to get 15, 25 dollars, you know that it’s stolen,” says the proprietor of World 8. “But you realize, it’s a challenging business so the majority of folks would just go,’Yeah that is fine. Whatever.’ Since they don’t expect anyone to follow through with trying to get an old system. Nonetheless, it happens”
Stoner in Cap’n Games remembers a recent incident where a man called the store before closing time, even asking for it to remain open so he could sell a PlayStation 4 Guru. Stoner’s wife stayed and the man came, offering the console for $70 while his buddy went around the remainder of the store yanking things off the shelves. Stoner called the police, who ended up arresting the duo and saw the incident. Stoner later discovered the two had a back.

Stoner says it is a running joke amongst his workers that he’s always listening via cameras placed around the store, even if he is not there. There are”lots of things set up just to cover my ass if something bad happens,” he says.

He points to issues competing with those selling games at flea markets. He says he’s run into a group of people who will sell their titles at a local flea market, subsequently bring whatever they can’t promote to his shop to exchange for bigger name titles like”my own Marios, my Pokémons, my Zeldas” they can sell the next week.

“Obviously, I have gotten wise to it,” he says. “I ended up offering a dime with this and a nickel for that. They come back. [Laughs] Because in the event that it can’t move, you can’t move it. You just sit on it .”

STORE BREAKDOWN
As with any retail business, the product is simply a little part of what it’s to keep things running.

Every store’s position differs. Some have bigger square footage and so need to add workers, or pay more to get insurance when they have enough glass on their outside. Some pay for health insurance to their employees. Some lease warehouses or storage area off-site to put away games. Some set up booths at conventions to market games.

Gamers Anonymous in Albuquerque, N.M. requires a comparatively straightforward approach. It doesn’t branch out into related areas such as movies or comics and sells new and used matches. A product is sold by it, but it makes the majority of its gains on used games.

Owner bought the shop in 2008 and says that he was motivated by Japan-based series Super Potato to flip it into something that celebrated matches with infrequent items and marketing materials across the shop. With this narrative, he opened the shop’s books to provide Polygon a breakdown of all of the money which goes into operating it.

To maintain Gamers Anonymous going on an ordinary month, costs include $2,500 for payroll, $1,500 for rent, $678 for taxation, $300 to get a miscellaneous bucket of minor expenses such as cleaning supplies out of Walmart, $200 for a point of sale program, $175 for credit card processing, $250 for electricity, $250 for insurance, $250 for net and phone, $250 for a accountant, $200 for advertising, $200 for a FiveStars customer rewards program, $50 for gasoline and $8 to internet hosting.

To inventory the shelves, Sakura spends roughly $2,500 a month on a brand new game and peripheral orders from vendors, as well as an additional $2,500 to purchase used games from clients. That amount fluctuates but based on which clients earn, and if they need cash or store credit. (As part of a recent deal, a customer sold Gamers Anonymous a massive set for $20,000, projecting off the store’s monthly averages.)

Extra up, that includes $10,637 in a specified month, which the store has generally been in a position to return using a little buffer to keep things moving, selling, normally, just under 1,000 of the shop’s 4,500 games per month for around $12,000 in revenue. The numbers fluctuate through the year, though, slowing down in October and revved upward from November to February.

“There’s a misperception, sort of how a business must make its money,” says Sakura. “You know, it’s quite easy to walk around someplace and say,’Oh, well they only need to rip you off. They simply want your money.’ Which, sure, if you are a company, certainly we do [want your money]. But we like to do it not through high-volume earnings or high-profit margins but to set a fantastic relationship with our customers. …

Trade N Games’ numbers look relatively similar, with high payroll ($4,000), lease ($3,000) and cost of games ($6,500) to pay a larger, 2,000-square foot, space with overall costs adding around $16,530 monthly.
“If we [make] $20,000 to $28,000 in earnings for the month, then that is only enough,” says Brassard. “That is just barely enough.”

The numbers are tight enough for many that regional differences like minimum wage and lease prices can make or break up an internet shop. In San Francisco, we found zero game shops in our research for this story where rents are large. Forty-five miles away in the suburb of Antioch, 4JAYS makes the math work by staying in an inexpensive place that has low foot traffic and”Drug-Free Zone” signs scattered across the roads out.

“Mainly, we determined we needed it to be affordable for people to buy video games,” says 4JAYS’ De Amaral.” … [We wanted to] keep our overhead low so we did not need to, you know, be just like another GameStop or a number of our opponents which are a fairly substantial ticket on their items.”

And there is no lower overhead than eliminating retail area entirely, as many selling only via Amazon and eBay have.
“That would be the long run,” says Brassard. “That would be no requirement to cover workers or pay rent. Just do it all from the home and write off everything it’s — 20 or even 25 percent of the home and roll it up. My rent is $69.25 a month for my website, not $4,000.”

Prior to starting the store in 2012, he proposed to partner with a friend. The two started selling friends their games, then ramped up to conducting flea market sales and had gone to college. Everything was going well, and he states his family has been”shocked” at how much money they have been making.

But shortly before opening the retail store, his friend got into an auto accident, moved into a coma and later died. Hicks recalls purchasing him a copy of Earthbound because of the going-home-from-the-hospital present; he had an opportunity.
“It was very tough to attempt to proceed without him,” Hicks says, but he keeps certain items around the shop as a type of memorial, like a favorite Yu-Gi-Oh! Counter.

 

 

“THAT’S ALL I Enjoy DOING, JUST SEEING PEOPLE WALK IN AND WALK OUT WITH WHATEVER IT WAS THEY WERE LOOKING FOR.”

“So that is like he’s got a piece of himself at this store.”

For Stoner at Cap’n Games, it is about being able to settle down.

He grew up with parents he explains as”passing minded,” so he moved a great deal and fell out of school at 15 to work with them in the woods. He then carried that strategy to his early career, frequently opening small game stores, selling them for inexpensive (“anything they had, basically”) and moving somewhere else to start over.

In the’90s, that made he sold shops for approximately $7,000.

“Then I got married, I’d kids, and for whatever reason, my wife was like,’No, I do not want to move every year,'” he says with a laugh.”

Now he has grown comfortable and says that he turned into a $200,000 deal for his current company and might need an offer over $300,000 to consider” selling, even despite lately elevated rents forcing him to relocate to a set of nearby locations.

“I don’t intend on moving,” he says.
For the owner of Gamers Anonymous and several others we spoke to with this story, it boils down to only enjoying being about games all day.

The afternoon prior to the interview for this story, his shop got broken into.
“I walked in this morning and saw my front window smashed,” he says. “I took a whole lot of pictures and was just like, “Man, this really is kind of dumb.'”

Considering it for an instant, though he says the shop is well worth the trouble. He reminds himself of another job he had conducting Gamers Anonymous — working at a TiVo call center — and claims it was tough to feel excited about going to work because he wasn’t excited about the item.

Selling matches changed his outlook.

“You understand, this is all I’ve wanted,” he states. “I worked in video game retail for so long prior to this. Video games are known by me. I can give people responses that are honest, and I can help them find just what they need. And that is all I enjoy doing, just seeing people walk and walk out with whatever it was that they were searching for.”