Occasionally on discussion fora, somebody asks existing store owners “What mistakes did you make when you started”, or “What would you have done differently”?
These topics usually receive good input from the community, so I don’t always participate, but I will share my thoughts here.
Friendly Local Game Store
FLGS was nearly perfect. With $10,000 initial investment, I bought an existing game store (financing most of it over a year’s purchase), paid my first month’s rent and a deposit (using more than half my cash) and used the rest as operating capital to buy some critical merchandise—mostly Magic and core D&D. I concentrated on high-turn stuff so that we could get cash to replenish what we sold and reinvest in the company. We were cash-positive within a month, and everything went swimmingly.
With such little cash available, I turned a lot of time rather than money into sales. For example, I sorted the comics alphabetically—28 long boxes. It was tedious, but it increased back-issue sales. I also went from a flat price across the board for back issues to a price that scaled with demand. I didn’t sell many more comics because of that, but I earned more profit from the same number of sales.
However, since I’m optimizing the experience, let’s see what could have been even better.
- I would have brought in a person with a better comics background. The guy I had the longest did not have much experience. He was a good salesman, but he talked too much and could have been more focused on tasks. He might have deterred as much sales as he earned, which is a problem.
- I would have put more safeguards against internal theft into place sooner.
- I would have switched from Square to a more conventional payment processing system sooner. That would have saved me about $1,500/year when I first initiated it, and it would have been over $6,000/year by 2022, when I finally started the process.
- I would have switched from the paid loyalty plan we used to an in-house system supported by our POS. That would have saved me nearly $5,000/year by the end of 2022.
- I would have taken Pat Fuge’s advice regarding directing as much traffic as possible toward our own website more seriously from the beginning.
- I would have pursued our game publishing division full time from mid-2019.
- I would have pursued hosting our own convention more aggressively. A previous attempt in 2012 had five investors—4 of whom agreed on everything, and one dissenter who caused the effort to fall apart. I now believe I could have removed him from the group and continued to pursue the effort without any permanent ill will.
However, this is really fine-tuning stuff that is already working. For examples of more serious errors, I should go back to my first store, War Dogs Game Center, back in 1999.
- I should have charged market price instead of SRP on Pokemon. Yes, I know. It’s embarrassing. I thought I would create loyalty in my customers by sticking to SRP and I would keep those customers as players of other games afterward. I planned to turn them all into Magic or L5R customers (my main game at the time). I was 100% wrong. This mistake cost me at least $50,000 and the downstream missed revenues were more than $100,000.
- I should have written a “right of first refusal” clause in case the owner sold the building, or at least a survivor clause that obligated a new owner to honor the duration of the lease. I lost that suite when the owner sold half the building to the restaurant next door, and the new owner kicked me right out. The emergency move was very costly and damaging.
- For nearly 3 years I tried to service historical gamers with whom I had no interests in common and who were not very big spenders. Don’t get me wrong—I love history. I’ve played miniatures games. Playing historical minis games is not in my Top 10 favorite activities. Overall sales increased when I finally cleared out that category and utilized that space for other merchandise.
- My predecessor used a simple method for pricing used games: buy at 25% of cover, sell at 50% of cover. That works great for some products, but it leaves on the table a lot of collector value. I fixed this in time, but it should have happened sooner.
- My (at the time) wife should never have been behind the counter. She resented any time spent there and didn’t have much product knowledge to share with the customers. The wages saved with her sweat equity were not worth the lost sales. I should have had an enthusiastic gamer who would have contributed more than their labor cost to the bottom line.
- Likewise, I should have communicated better with my first employee. Our work relationship soured, and it was all my fault. I am sorry, Ed.
When you read these stories on a page like Opening a Tabletop Game Store or Game Store Retailer, you’re seeing stories from people who survived their mistakes.
When you’re reading about my thoughts and Rob Placer’s thoughts and Pat Fuge’s thoughts, you’re reading about survivable errors. They’ll help you optimize a successful store, but they won’t show you what to avoid that will kill your store. You’re getting survivorship bias. These failures are survivable. You need to avoid the mistakes that have destroyed other stores.
When a store closes, you can’t tell from the outside what happened. It could be that sales fell to unsustainable levels. It could have been that the owner had a medical diagnosis that prevented him or her from continuing. It could have been destructive internal theft. I know a great many stores that have closed, and I don’t always know what happened. I’ll share a few stories where I’ve been able to confirm fatal errors by communication with the owner or (better yet) actual analysis of the books.
One owner had trouble managing short-term debt. High-interest loans like the ones Square offers all the time will crush you more than the late fees you’re trying to avoid and prevent you from growing so that you can repay the terms.
One store I know of had a partnership fall apart, and the division cost him part of his customer base—too much to recover from.
I’ve seen a store die from neglect. The owner tried to operate it remotely, and sales fell more than 80%. It was unsustainable. They had a suite of problems stemming from this one core issue.
The most curious store I’ve seen had a terminal assortment problems. Here’s an example of their “math.”
- Step one: have a Magic draft below cost (losing money)
- Step two: buy back singles from the draft at 100% (nominally a break-even but losing money on card processing on some of these sales)
- Step three: sell the singles on TCGplayer for the same price they paid in store (nominally a break-even, except for the time and labor spent on the listing, and the roughly 20% lost from fees, payment processing, errors, returns, etc).
If anyone can explain how that’s supposed to make money, please point it out to me. Besides their loss leader/loss follower combo, they had a tiny and understocked store, were openly antagonistic toward neighboring stores (who stands a sign waver across the street from a competitor?) and generally underpriced themselves. Also, an app that provides traffic count information shows “Nothing found at this location” for their street address. I estimated it to be less than 1,000 cars/day. We can sum this up as “making the worst choice over every issue.”
What’s Your Story?
I would love to hear from stores that have closed or sold a store to avoid debt. What went wrong for you? I’ll be happy to keep your identity private and share the general terms for the benefit of others.