Don’t Fret Over an Empty Store. Profit!

Conventions offer you a great opportunity to make new customers, clear out unproductive inventory , and take a break from the normal routine. They’re exciting, high-energy concentrations of gaming and fandom that recharge both you and your alpha gamers. Done right, they can put bucks in your pocket.

Attend the Right Convention

Asking around the gaming community is a good way to find some conventions. Internet searches work, too. Finding a large company and tracking their con plans is another method. Conventions often have a “free stuff” table or bulletin board where other con organizers advertise. Check for that.

Go to a convention where the attendees will be your customers. If you sell anime and manga, an anime convention will be good for you. If 70% of your volume comes from Magic, then a con with no Magic in the program book probably isn’t your best bet. If you sell a good mix of games but only games, then a fandom convention with costume contests and late-night parties probably won’t be very fruitful.

Start small. Go to a local convention first. The risk is small, and you’ll need a place to experiment with minimal risk. If your can keep your out-of-pocket expenses to less than $200, then even if you sell nothing you don’t endanger everything you’ve built so far. Risking all your cash and closing your store for the weekend to attend GenCon for your first convention attempt is a disaster.

Plan Your Presence

If you’ve never been to a convention, attend one. It’s $30 or $40 well spent. Walk around, check out the spaces, talk to the dealers. Watch the ebb and flow of traffic (tip: vendor activity takes place between game sessions).

Advertise your intentions for the convention ahead of time among your customer base. An ad in the program book might be worthwhile at the right price. Don’t spend much; most customers will discover you by seeing your booth or sign.

Make a schedule for the store and for the convention. Take enough people for the expected activity. You might manage a small local con yourself. For a small , you might need 2 people (or you might want 2 at all times anyway, just to cover breaks). For one of the biggest conventions, take everybody you can get in with your passes and extras as needed (you typically get two passes with each booth/table space you buy).

You want a sign. You can order vinyl signs online starting at about $20. You can get much larger sizes for bigger and better impact, but scale your expenses according to the scale of the event. If you’re a new store without much appropriate inventory, and you’re going to a con with fewer than 300 expected gamers, don’t spend $2,000 on a sign.

You need a way to collect payments. Cash is good. For handling cash you can use an old cash register. Your POS might offer multi-station or offsite use. A box with change works fine for the lowest budgets.

For credit card payments, you can take a knuckle-buster, but there’s a better way. Squareup.com offers a free smart phone app and free hardware that let you accept credit card payments anywhere you can get a phone signal. It’s painless, free, and instant. The transaction fee is only 2.75%–comparable to your normal credit card fees.

How will you track sales? If you’re using an extension of your POS, you can do it just like in the store. You might use a laptop or tablet to record sales as they occur. Writing it down on paper works; just enter sales into the POS when you get back.

Plan how you’ll set up your area. You typically have one or more tables in your space, but you’re free to set up your space any way you want. You can remove the tables, put them on the sides, or position them how you like. Some people find it more comfortable without a table between them and the customers. If you go this route, you can wear a pocketed apron for making change. There’s no “off-limits” space, which means you can merchandise your entire area.

Set Up

Box your administrative stuff together—cash, business cards, etc. Box your inventory by where you’re going to set it up. Put the table-top stuff together, anything going on a shelf goes together. If you put stuff out in boxes on the floor, keep that together—all this minimizes your setup time and lets you start selling sooner.

Packing everything in similar containers makes things easier. Some people use plastic bins from the dollar store. Some owners like milk crates. Similar shapes makes stacking easier and allows you to consolidated boxes as things sell through.

Part II

Part II discusses what sells and what doesn’t. It has a small section on fine-tuning your procedures based one experience and a nice crunchy discussion of the finances, including inventory levels, costs, and expected sales.

How do you get it?

I’ve heard it said from people who come to the gaming industry from other industries that we enjoy more support from our manufacturers than in any other industry. The collective aid of manufacturers in terms of demo volunteers, POP advertising materials, retailer locators and other benefits is an enormous marketing and advertising aid.

One of the most popular forms of this support is free merchandise. Manufacturers set aside a part of their print/production run for free distribution. Some of these copies go to reviewers. Some goes to freelancers. Some goes to conventions as prize support. Some goes to you.

The thinking is rational. There’s a lot of game material out there. If you bought one of everything and planned to re-order what sold (which is what new manufacturers expect), you’d be broke in about 6 weeks as the huge supply of gaming material outpaced demand. Often, stores rely on feedback from other stores or from their distributors regarding what’s selling when making their purchasing decisions.

Putting products in your face gives a prospective purchase visibility above 90% of its competition. You can check out its production values, the content, the price point, and other factors that help you decide whether or not you can sell it. If you pass, the cost to the manufacturer is low: one copy of a book that might not have sold anyway, plus a little shipping. If you decide to buy into the game, your purchases will pay them back for that investment many times over.

Your goal is to make sure you’re one of the stores that gets this stuff.

The GAMA Trade Show

GAMA has formalized a long-standing tradition of the show. Instead of manufacturers handing out stuff one at a time to attendees, and leaving the attendees with the problem of getting the loot back to their stores, GAMA collected all the promo material from the exhibitors and arranged to ship it all after the show. Retailers could walk around and listen to sales pitches without a straining arm or backpack urging them to get it over with. Exhibitors knew that there would be some control over “swag hounds”, or customers who went “representing” a store specifically so that they could get free stuff for themselves.

This package this year came to about $1,100 worth of free games. Sure, attending the convention could be expensive, but if you’re thinking about going anyway for the content, the free merchandise is a bonus. A big bonus.

Incentives

Some game makers offer bonuses if you buy a certain amount of their games. Buy 4, 5 or 6 of whatever it is they’re offering, and you can get a free copy. Naturally, you don’t want to be as aggressive with this “free” product as you are with the truly free, no-risk offers, but it’s not unreasonable to expect $300 per year worth of incentives through these programs. If you actively search for these offers, you could find twice that much.

Demo Material

Many manufacturers are content with you putting their box or book on a shelf and restocking it when it sells. That’s a little simplistic and short-sighted, but it happens. For many products, that’s an appropriate level of support. You can’t give everything a full-court press.

The best manufacturers provide some sort of support after their game goes on a shelf. They offers organized play options to help you sell their stuff—leagues, tournaments, or whatever. Their games are not just fire-and-forget. Some combined effort from you and the manufacturer can increase sales tremendously.

Upon request, these companies offer demo copies of their games. Sometimes these games are marked “demo copy” so you can’t resell them. Sometimes they come without the packaging—all the components are just shipped in a bag. Often, it’s a normal copy of a game.

Without being abusive, I estimate that you can get $500 worth of games each year through programs like this.

Special Events

If your store is just opening or changing hands, you might throw yourself on the mercy of manufacturers and ask for promotional material for a grand opening. You might get flyers, brochures, or premium items like buttons and t-shirts. A few generous manufacturers will offer gratis copies of their games or books. You can give them away in drawings, use them for demos, offer them as prizes in mini-games (a big game-show style wheel of prizes is popular) or whatever.

Selling these items makes you a real jerk. Their value in generating goodwill and word-of-mouth advertising for an event like this can be worth far more than the one-time cash benefit.

You won’t do one of these events every year, and when the economy is tight, manufacturers are very reluctant to hand out freebies for these events. The quantity you can receive varies with your size, overall spending and effort. You might expect $200 worth of material but hope for $500 worth.

Spam

Ideally, manufacturers will call you or e-mail you to find out if you’re interested in their goodies. Some don’t. They blanket mail everybody whose name they can find. While some of this stuff is junk not even worth giving away, you can get some real gems on occasion. The quantity varies from year to year and depends on your overall visibility within the industry, but this product comes to about $200 worth each year.

Opening Stores on Somebody Else’s Dime

Franchising your business requires finding a tricky balance. You must offer a service worth paying for. You have to charge the right amount for it. You have to provide enough value to your customers (your franchisors, not the end-users) so that they are better off opening one of your stores than opening one of their own. And you have to do it without spending more than you take in.

Things You Ask For

Primarily, you ask for money. Franchises charge an up-front franchise fee and ongoing royalties.

The Franchise Fee

The franchise fee is a per-unit or per-market fee paid for the rights to develop in that area. You might sell the rights to Wisconsin to one person but might divide Michigan up between 5 different franchisees. The rates vary, but they should take into consideration a couple of things.

One is the value of the package you’re offering. Including $10,000 worth of inventory creates a finite minimum for your fee. If your software cost $50,000 to develop, you might feel the need to charge at least $2,500 per franchise sold until you pay for it.

Planned growth rate is the second factor. You might charge $5,000 when the whole country is wide open and raise your rates to $10,000 after you’ve covered a large area and finally to $20,000 per store when you’ve entered most major markets.

You can reduce rates for multiple licenses. You might price your rights less for subsequent stores. The fee might be $20,000 for a single store, $30,000 for two stores and $10,000 each for 3 or more stores.

Lastly, franchise rates should be relative to the initial capital expenses. If somebody is considering opening an independent store and could open a single store for $40,000 or open one of your stores for $40,000 in inventory plus $45,000 in franchise fees, you’ll have a hard time selling franchises unless you can somehow demonstrate huge sales potential (which is tricky, because the FTC regulates what you can and can’t say about your sales).

Royalties

Ongoing rates vary, also. Some rates are as low as 2%, while others are exceed 10%. Similar factors apply to setting rates: perceived value vs. cost. If you invest more labor and effort in making your franchises successful than you earn in royalties, you’re going to fail. You have to offer enough value–profitably enough—-to keep selling franchises or to maintain the infrastructure you have.

You could ask for the royalties as a fixed rate or a more complicated rate structure if you wished. I think most franchise systems—including game stores—are best served by a fixed percentage.

Compliance

You have to have some way to ensure that franchisees are compliant with your policies. Each one might hate it, but the others appreciate it. That’s you or a hired liaison. You have to monitor

• compliance with policies
• payment of royalties due
• performance

Values You Might Provide

A franchise isn’t a one-way service, with you collecting free money from your franchisees. You have to provide enough value to the franchisees that they don’t abandon your system for richer pastures in the world of independent ownership. You have to consider what you possess that you can offer to share.

Your Brand

Your brand includes several factors, including your store’s physical presentation, the interior image, your services offered, and larger issues, like marketing position. Consider these two nearly identical game stores.

Bill’s Game Store carries rpgs, minis, ccgs, and board games. His fixtures are pegboard, his shelving units are homemade, and his signage is “what’s on sale at Office Depot”. He thinks his floor plan is perfect, so he never changes it. His storefront is “the cheapest rent”, which resulted in a traffic count of 5,000 or less.

William’s Prestige Games carries the same inventory. It uses a few pieces of slatwall for certain product lines, with Lozier shelving units for most of the store. His signage follows a uniform design style, with departments being identified by colored plasticard signs hanging from the drop ceiling or fixed to the walls above the shelves. William’s employees rotate merchandise regularly according to Planograms, they’re expected to follow. Finally, the store faces the road and over 30,000 drivers per day.

Bill’s employees wear concert t-shirts and tattoos. At William’s, they wear bright uniform shirts and aren’t allowed to display tattoos. In BGS, when a light goes out, Bill replaces it when he can. At WPG, the manager on duty is obligated to replace it within 24 hours, in compliance with his Operations Manual (even if it’s William working). William’s place is clean. Bill’s, not so much.

One of these stores attracts potential franchisees. The other does not. Even if their sales were similar (although it’s not really likely, is it?), William’s Prestige Games would be more likely to sell a franchise.

So, checklist of benefits to provide so far

• image standards for employees and cleanliness
• written procedures and policies
• cohesive and attractive visual brand elements—signs, uniforms, store layout

Now for the harder stuff.

Unique Product

If you just order what Alliance has to offer, you won’t have a unique selection. Anybody can get that stuff. You have to seek out products available outside of Alliance and usually outside of other distributors. Other products include

• products you buy directly from smaller publishers
• products you buy through mass-market channels
• products you publish or produce yourself

Consolidated Ordering

Ideally, you’ll establish your own distribution system. If you’re going to offer unique products, you can buy/produce those in-house and then distribute them from your warehouse. When franchises order from you, you get to keep the distributor’s share, too, for extra profit. Buying at distributor cost allows your corporate stores (if any) to earn a larger share per item, too.

Setting up internal distribution cools any relationship you have with your distributor, so setting this up isn’t something to do automatically.

Proprietary Software

A single system that handles sales, customer tracking, ordering, and royalty sales reporting would be nice. Selling one to each franchisee would be a bonus.

Systems

Having a prepared list of established procedures for every task in the company is the heart of the franchise system. If a new hire can come in, read a page of instruction or participate in a 15-minute lesson and perform nearly any task in the company, then you have a system worthy of a franchise. If you run your business by the seat of your pants and lack the ability to teach other people to mimic your success, you would fare poorly as a franchisor.

Some procedures appropriate for a game store could include

• Inventory receiving
• tournament formats and procedures (advertising, registration, reporting, structure, floor rules, etc.)
• demo and upsell scripts
• managing rewards club (recruiting, record-keeping, providing benefits, etc.)
• opening and closing procedures (turning on sign, cleaning, fronting & filling merchandise, etc.)
• buying policies and procedures (products bought, condition, method of payment, etc.)
• minimum paperwork or record-keeping procedures (sales, discounts, purchases, etc.)
• safety and security procedures (deposit frequency, cash drawer maximums, use of a time-delay safe, etc.)

You’re expected to provide these systems in the form of an Operations Manual, which requires lots and lots of writing.

This “offer” is a must-have. It’s an integral part of the franchisor-franchisee relationship.

Success

Nothing encourages franchise sales like walloping EBITDA. The more successful your single store or chain of corporate stores, the easier it becomes to sell franchises. Work first to make your store the best it can be.

What’s the Catch?

If the above hasn’t clued you in, offering franchises is expensive to initiate and maintain.

FDD

Franchising is federally regulated and regulated further in most states. You have to maintain an FDD, or Franchise Disclosure Document, and keep the Federal Trade Commission updated regarding significant changes to the document.

Each FDD printed kills a tree. The documents are massive in the case of a large company, and the minimum requirements make even startups hefty. They involve lawyers, and the combination of specialized franchise lawyers and War-and-Peace-sized documents can cost more than a full wall of Warhammer 40k.

Staffing

Managing a game store is a tough job. Add on top of that evaluating prospective franchisees to make sure they’re good candidates, monitoring their progress, visiting their locations—some of them possibly distant—and you have a work overload. You can hire somebody to manage the game store or manage the franchising, but either position will cost much more than minimum wage.

Benefits

The benefits you provide usually come with a cost. Your own POS program has an obvious cost—the development of that application—but they might come with not-so-obvious costs, like support for the system, upgrades, and additions demanded by changes in the marketplace.

Miscellaneous

If you have franchisees outside of your state, add travel to the list of expenses. If your state’s big enough, travel within the state might be a factor, too.

If you’re wise, you’ll increase your insurance coverage—a lot. Franchisees who fail might sue you. Franchisees who disagree with your policies might sue you. Customers who slip and fall in a franchise location might sue you. Vendors stiffed by a franchisee…you get the idea.

How To Do It

Start now. Develop systems. Write things down. Establish your brand and a local reputation. Set aside at least $50,000. Plan to start in your own state if possible—crossing state lines complicates things because of different regulations. Know your P&L inside and out; know where your company is stronger than others so that you can demonstrate that strength to potential franchisees.

Conclusion

Choosing to franchise is one growth option for a successful store, but it’s not the only one. It’s a complicated subject best discussed with an attorney who specializes in franchising. The whole shebang is way more complicated than I can do anything other than outline here.

Your Path to Riches One Dime At a Time

One of the things you do when you open your store is price a whole bunch of stuff. Like many things, it’s both easier and harder than it seems.

Pricing and cost go hand in hand. You can’t buy something for $2 and sell it for $1.80. (Normally. Yes, I know you’re all gamers and you can come up with exceptions when I make blanket statements like that. Focus, Daniel-san!). In the Big Margin Discussion we discussed some elements of the issue of pricing and cost.

Manufacturer’s Suggested Retail Price

Selling things with an MSRP can be a relief in some ways. You don’t need to worry about margins or competitor pricing. You just tag everything in line with its MSRP and think about the next thing on your list of things to pay attention to.

Most of the time. Short-discount items might merit an upcharge. Things you buy in bulk at a special price might deserve a discount to increase the number of items you sell. Outside of those unusual circumstances, pricing MSRP items at that MSRP is not just easy, it’s usually smart.

The good news is that most people will pay MSRP or something close to it. You have a good feel for price acceptance right away. You don’t lose out on the sales of something new by having to experiment.

The advantage to not having an MSRP is that you fare better if you charge more. People are very unwilling to pay more than the listed price for something, especially if they know what it is. Books, for example, have the SRP listed in the bar code. Many people know that. If the bar code reads $14.99, you’ll lose a lot of sales by listing the item at $19.99—more than enough to make up for the extra profit you make on the ones you do sell.

Say you buy a bag of widgets at $1.00 each. Without that MSRP you can choose your own price, gauging price acceptance based on similar items or the buying habits of your customers. If 75% of your customers came in with a coupon you mailed to them, you might have to price them lower (or higher, but include them on your coupons). If the item is something of obvious value to your customers, you might be able to get more money. An MSRP of $2.00 would obviously destroy any attempt to sell them for $3.00 or $4.00. The customers know it’s not worth their time to get in the car and drive across town to buy them from somebody else to save a quarter. Or maybe even a dollar.

Things With an MSRP

• RPGs
• CCG boosters and starters
• Board Games
• Battlemats

Things Without MSRP

• CCG singles
• Used miniatures/armies
• Used board games
• Used rpgs
• Single collectible minis

Things That Are Either

• Dice sets
• Single dice
• Hobby Supplies

Things that you buy outside of the distribution tier are less likely to have a listed MSRP. Indie RPGs usually do, but hobby supplies you buy directly from Excel don’t.

Tiered Pricing

It’s not plausible to have a store full of like-priced items. You can’t have a dollar-store format for a game store. You need a variety of prices to appeal to different customers and meet different needs.

Low-Priced Items

You want low-price items. Use these items as upsell items or impulse items. They bulk up tickets, but people don’t normally come in just for these things. Display the upsell items near the main items they support. Stock dice near RPGs, for example. Impulse items should be near the register or on the path back to the register, visible to the customer as he walks by—not at a 90 degree angle from his path.

These items turn a $20 purchase into a $25 purchase. They turn browsers into customers.

Medium-Price Items

You need a lot of middle-range prices. These are the staple items that make up most of your sales. I count booster packs here because people don’t normally come in and buy a single booster. They buy a number designed to fit a pre-conceived unit of spending. A customer comes in with the intention of buying $10 worth of cards or $20 worth of cards.

High-Priced Items

You need a certain number of big-ticket items. When somebody has a bonus check, income tax return, Christmas money or some other minor windfall in his pocket, you want to be able to sell him something. These items might be big bundles of things at a savings (like a Warhammer army box) or a prestige item, like a limited-edition printing of an RPG, an expensive dice set, or a giant-sized miniature (if there can be any such thing).

Huge-Priced Items

You do not need these items. They can, however, be a part of your image. These items make your week. This category usually means high-end collectibles, like very rare Magic cards, rare printings of certain D&D titles, or oddball stuff that doesn’t fit any category (like that life-sized statue of Anakin). The adjective “wood-grain” might fit in here.

The Physical Process

Now that you know what to price and how do you price it, then what?

Price Gun

You can get a price gun for anything from $20 to $200, with most models being under $100. The tags come by the bazillion for a low price. Customers hate not being able to find things (so says shopping genius Paco Underhill, and he’s right). Place the tag where people can find it. Don’t be tricky about it.

Bar Codes

Your POS system is there to help you find the prices of things with bar codes, even if the tags fall off or there isn’t one. For odd-shaped items with no place for a tag, like individual dice or CCG singles, create a dummy code and attach all the relevant information to that. You can keep a physical binder of codes by the register to help ring those things up.

This system also allows you to tag things too expensive to put on the floor. Put a mockup or display piece out on the floor so that customers can pick it up and bring to you. A copy of the bar code is on the mockup.

Shelf Tags

Tags come in a variety of flavors and sizes. They include shelf chips for Lozier-style shelving, shelf-talkers, string tags, etc. They should also have a bar code available. They’re more expensive than price gun labels, but they keep sticky gunk from getting on your products. They also keep tags from being rearranged by customers to defraud you out of your hard-earned money.

A Partnership Formed and Dissolved

A while ago, a prospective store owner contacted me about advice. That happens all the time, especially right after each column goes up. What made this contact noteworthy was that it was somebody local. We quickly arranged a personal meeting and discussed her plans for opening a store.

The Partner

I was impressed. She was high-energy, with a personality that would draw customers in and keep them there. She owned her own business already, and had people and procedures in place for it to continue without her full attention for a while. We can call her Vicky, because I just Googled a random name generator and that’s what it gave me. Vicky had done some homework already.

When she mentioned that she had to go to look at a potential location for the store, I offered to go with her. She welcomed the help. We met there, I brought up some helpful points, and we had a productive meeting with the landlord.

In other words, the first meeting went over very well.

The business Vicky proposed looked at lot like how I would do things if I were starting from scratch. She wasn’t scared of the numbers involved and seemed to have reasonable expectations of sales.

On the down side, she wasn’t familiar with gaming overall. She played D&D, but she wasn’t familiar with other product lines, even those that supported D&D. She had never heard of KoDT, for example. No biggie. I didn’t have much broader experience when I started.

By the second meeting, I had prepared an offer of partnership—my experience, sweat equity, and network for a share of ownership. I prepared a 28-point bullet list of things I brought to the partnership and clearly outlined what I offered and what I expected in terms of salary and profits. Vicky’s dialogue during this meeting suggested that she would be amenable to such a proposal. Sure enough, before we were done, she flat-out asked what it would take for me to join the partnership. I outlined the points and e-mailed her the complete list. We had an agreement.

During that meeting, I had referred back to this column, asking if she’d read it. She hadn’t. I had specifically pointed out during our previous meeting that the column answered a lot of the questions she was asking. No problem. We talked over most of the necessary items.

The Plan

I did mention to her that the plan we were discussing was not something I’d recommend to most people. The inventory was too light, and the location choices we were considering were too low in visibility and traffic count. I was counting on a connection to the gaming community to be able to recover customers from my previous store, and a higher budget spent on advertising to make up the difference. Inventory management would be crucial—that would be one of my primary jobs. Marketing and advertising would be one that we discussed together, but I expected some leeway with strategic direction.

The plan was to attract investors for financing. I had opening costs down to a mere $43,000. [Stop right there! Do not use that for your own figures. It’s insanely low for most start-ups.] Private investors look at the people involved with a business plan and their track record. With Vicky’s personality and my experience, we’d be a shoe-in for private funding. Back to that figure in a minute.

What we were discussing required our unique situation. It required experience. It required a way to overcome some of the common obstacles. It also needed at least two years of reinvesting capital, mostly into building inventory to a sustainable level (or a very persuasive person continuing to gain investments after opening). She and I could do that because we both have outside sources of income. Our job duties allowed us to continue earning that income while helping the store grow.

Say What?

Vicky never realized what I wasn’t offering—cash. My clearly-delineated terms were apparently not as clear as I’d thought. Or, more likely, unread. When she finally brought up the question of how much cash I was putting in, I had to point out that it wasn’t part of our agreement. That she had agreed to. Already.

I mentioned that with her as majority partner, she could indebt the company (and me) without my approval or even knowledge, and that there was no way I was going to allow that kind of power with anybody who had never even worked in a game store before. I didn’t know if she’d ever been in a game store. She certainly hadn’t been a customer of mine.

The lack of cash contribution was why I was asking for a fractional ownership instead of half or more. The only things she brought to the table were sweat equity, personality, and a small amount of cash. Any fair distribution of ownership—assuming we split the cash outlay–would have put me at 75% or more.

She wasn’t amenable to that. In her mind, partnership = cash. I made arguments—none of which she could deny—but the result never changed. She said she could do most of the things I planned to do. I said she could, but there would still be a learning curve, and while she did that, she couldn’t be out of the store building sales, which was going to be her main job in the partnership. I asked her which would be more beneficial to the company: a $20,000 cash investment, but a loss of $20,000 annually due to inefficiency, or no cash up front and an improvement in profitability each year? She seemed to get the point, but her predisposition wouldn’t let her change her stance.

So it fizzled.

As an aside, we did not have a written agreement yet. I was still drafting that. Things were going very quickly. However, it wouldn’t have worked out any better if we did. As the majority owner, she could just buy me out—any formula for the value of the company would have been zero before we actually opened.

I was a little miffed. I had already invested a great deal of time and advice. I had a business plan in, checklists, vendor lists, a timeline—essentially a step-by-step guideline on how to open a game store. I had mentioned how to obtain vendor aid, how to contact volunteers, etc. If she took the advice I gave her during our tour of the commercial suite we visited, I saved her several thousand dollars—things that she exclaimed at the time that she never would have thought of. I wrote an article for this column about choosing partners, and the readers agreed with me on all counts: choose partners for their skills. People with cash only should be investors, not partners.

Vicky Goes on Alone

Sometime around here, Vicky mentioned that she had taken out a small personal loan. I immediately thought “What?” We had discussed the liabilities of taking out multiple loans already. If you borrow $2,000 here and $5,000 there, then you have multiple payments over a shorter term. Instead of one payment amortized over 5-7 years, you might have 5 payments due over 1-2 years. A monthly repayment of $1,042 turns into $3,442. The difference can strangle you.

Also, incurring a new debt would skew her debt-to-income ratio, making it harder to get other loans. While we had planned on going with investors anyway, this slashing reduction in options was confusing.

Before I could figure that one out, she announced that she had a location.

Wow!

That’s…extraordinary. One of two things happened. Either a) she came up with $43,000+ in about three weeks, or b) she signed a commercial lease without full capitalization. If a)’s the case, no number of mistakes could faze her. She can always generate more cash to compensate for any deficiency in sales or profitability. We had already determined that she didn’t have enough personal credit to launch the store by herself, and banks wouldn’t touch a venture like this as an unsecured loan. I can’t even consider that she got a bank loan for this amount that quickly.

If b) happened, then I don’t even want to contemplate how foolish that is, and I could not have gotten away fast enough. Given that the store’s Facebook page has not announced the acquisition of any loans or financing, I had to wonder.

Next Stages

I’m not sure what’s going to happen next. I provided her with a lot of tools. Startup sales figures for other stores. Floor plans. Fixture and display suggestions. An initial inventory outline. An exact dialogue for requesting aid from vendors. Convention strategies. /sigh.

Vicky could survive, despite her errors to date. She’ll do well at keeping the customers she gets. She might be able to hang on long enough to repay initial investors. However, I’m afraid she won’t be able to bootstrap the business to the point where it’ll pay her a salary.

Relate This to Me and Wrap It Up, Brown

If you consider a partnership, look for a partner with complementary skills. If you have never worked retail before, you might choose a partner who has experience in merchandising and creating displays. If you know D&D and Magic well, you might look for somebody who plays Games Workshop games.

Make sure these points are clear:

• Duties and obligations. Include a number of hours worked and chores that need to be done.
• Cash and asset contribution. Cash has a value, but it’s not the only thing of worth. A good credit rating has value. Skill and experience have value. A Level II Magic judge who brings in 100 weekly tournament players has value.
• Goals. What does each partner expect out of the store? If one wants to work the store as long as he lives and another wants to expand all across the state, you have a conflict.
• Payment. Whether reimbursement is hourly, salaried or a strict divided payout, make it clear to all parties.
• A buyout formula in case things go wrong. Make it fair—you don’t know which side you might be on.

Write it Into Your Business Plan

Last month we discussed the benefits of marketing your business from a service-focused approach. Independent retailers often have the ability to gain this advantage against large chains and mass market retailers, but not all of them take full advantage of this edge. If you want more information about how to leverage this advantage for more sales, this is it.

The Real Basics

These things are so fundamental that they almost don’t need to be written down. Almost.

• Have change on hand. You don’t want to lose a lot of money if you get robbed or burglarized, but you want to be able to make change for the customers who use cash.
• Take credit cards. With probably 75% of your transactions being electronic, it’s safe to say you need to take credit cards. It’s no longer optional. Take the full range.
• Greet customers at the door. Even if you’re busy helping another customer, something as simple as “Hello. I’ll be right with you” goes a long way.
• Prices. Customers hate two special things in stores. One is not being able to find prices. You’ll prepare for that by pricing your products where people can find them. Price books on the front instead of the back. Use signs to make it easier. If you carry dice singles, label their prices clearly.
• Ring up quickly when there’s a line. The second thing people don’t want to do in a store is wait in line. Set your POS up so that you can enter information quickly and accurately. Go through your upsell dialogue while you’re ringing things up rather than waiting for the popup you know is coming.
• Finally, say “yes.” Whenever you can. My rule of thumb is that if it’s not a safety or security issue, then comply with any oddball requests you get from customers.

Hours of Operations

Staying open late and opening earlier costs more in labor, but it allows you to reach customers whose odd work hours don’t allow them any other time to visit. It’s a service that allows you a broader reach.

Consistent Contact

Customers tend to shop on the same days of the week, and if you have a different clerk running the register each time, you won’t get a chance to make that personal connection with the customer. Schedule Bob the Board Gamer on Tuesday nights when you run Board Game Night. Schedule Chris the Card Gamer on Friday night when you run Friday Night Magic.

POS Cheaters

If you have a decent POS system, you can set up upsell reminders, often as popups when certain items are rung up. For example, if you ring up a World of Darkness game, you can have the system remind the clerk to suggest 10-sided dice. Here are some other suggestions

• Magic boosters → Card sleeves
• Starter army box → Army rulebook
• Starter paint set → Primer and sealer
• RPG Core rulebook → Dice
• GM’s Book → GM Screen

Your system should also create reports showing the percentages of each upsell. You can track by employee to see who’s following through on it and who isn’t. You can track by item to see if you’ve made a good connection.

Customer Records

You might be able to remember every detail about a customer, but not everyone on your staff will. Anything that you can record for other people’s use is good. You might set up a record of a customer’s games played, games sold back to you, nights of the week he plays, who else he plays with, how long he’s been playing, etc.

Your sales records already show you some other information, like his average purchase, his total purchases, how often he makes purchases, and other data. Keeping more detailed records can provide you with opportunities to make a bond with that person. When he comes in the door, you can ask him how his job interview last week went—-if you remember, or if you wrote it down when he mentioned it. You’ll repay that investment in time by encouraging that customer to return to your store more often and remaining in the hobby for a longer period of time.

Product Knowledge

You don’t have to know everything about every game. What should you know? This list covers probably 80% of the questions you’ll field in the store.

• Coming releases. You should know without reference the next release date for the next Magic set, the next Warhammer rules revision and other major releases. You might want to keep a schedule for releases of lesser importance so that you can refer to it at need.
• Compatibility. Is this 40k blister pack usable with the current rules? If you steer a customer wrong, it’ll cost you credibility. Don’t guess—find out.
• Core titles. What does a gamer need to play Pathfinder or GURPS? Have a short list ready at hand when somebody asks.
• Tournament formats and allowed card sets. What expansions are allowed in Standard right now? Which cards are banned in Vintage? Know the legal and disallowed sets for your most popular card games and the general tournament guidelines for any other games you support.
• Dice. Learn your major games: D&D and Pathfinder use the standard 7-die set, World of Darkness uses d10s, Hero system uses d6s, and Games Workshop’s minis all use buckets of d6s. Look at the first few pages of whatever else sells well for you or ask somebody who plays it and be ready.

It’s a bonus if you’re proficient in the rules for one of the popular game system, because you will get questions about rules, too.

Special Orders

If you use multiple distributors (and you should), you might place orders several days a week. That gives you the advantage of being able to place a special order for a customer with one of those distributors on several occasions. If a customer asks for something on Monday and calls back to check up on it Friday and there’s been no movement, you didn’t impress him. If you can say you’ve already placed the order, and it should arrive later that day, then that’s a little better.

Best would be ordering daily from a distributor a one-day ship away and having it for him by Tuesday, then calling or e-mailing that customer when it arrives. It’s great when you can fill special requests within 24 hours.

Outline your special order policy ahead of time. How do you track who ordered what? How do you track these items when a delivery comes in?

Some distributors allow you to place an order immediately online. They’ll hold that item in a shopping cart until your next scheduled order. If so, you can do that right away when the customer asks for it at the counter. With this system, nobody forgets to order it later.

You can use paper or a spreadsheet to track special orders. I’ve seen a list form that identifies the product, the person ordering it, and the customer’s contact information. I used a pad of paper I had printed for a couple of cents a sheet that included the same information. The list is easier for comparing to a delivery when it comes in; the individual sheets are good for taping to the product to track it until the customer picks it up. They’re also good for writing in individual items you want to promote. Stick a special order form into each bag with the name of the product you want to promote written in ahead of time. Include a release date. Customers then simply write in their name and contact information and hand it back to you.

Rewards Program

Last month we discussed the broad strokes of a customer rewards program. Let’s develop it in more detail.

Base plan: 1 credit for each $10 in purchases. When you reach 12 credits, you can turn them in for a single purchase of $10 or less.

Fair enough. Simple enough. What questions could arise?

Are credits transferable? Can families combine credit? How do keep track of it?

Let’s look again and make it better. Instead of earning generic “credits”, call them something specific to your store. If the majority of your sales come from role-playing games, call them experience points. If it’s cards, call them “sideboard points.” Credits are transferable and families can combine credits. You track purchases automatically through your POS, marking off credits as they’re used in your customer notes field.

This tracking requires you to track customers. You can track them by name or by unique number, like a phone number. Phone numbers change, though, so names are best. Make up a dummy name so that you can ring up people who refuse to give you one.

You can also outsource this work. You can get plastic cards for customers like Best Buy or other large companies do. Expect to pay $500 or more for these plans. I also don’t recommend them for starting companies because they put the burden on tracking on the customer. That means cash for you, because it means that fewer of your credits will be redeemed. If you want to offer customer service, remove that work of tracking the credits from the customer when you can. In the early stages of the company’s development—and possibly as long as you own it—the value of the gain in customer purchase frequency should exceed the value of the cash spent in redeeming these credits.

Avoid flat discounts, even if you plan to recoup part of the loss of income with a fee. Games Workshop has stated that their customers spend an average of 5 years in the hobby and spend $1,500 over the course of their game play. At $300/year, if you give somebody a 10% discount, you’re losing money unless you charge a $30 fee—-which nobody will pay. Flat discounts are the easy way to set up a rewards program, but they’re lethal cash killers.

One thing you might want to do is periodically post your Top 10 customers. Encouraging competition among these people for amount spent can be extraordinary. It’s not a good idea to post the actual figures, though—some people become very self-conscious over how much they spend, and if you let them know what the figure is, they cut back their spending.

Game Room Management

Having game space is not enough. You need to manage it. The game room is a marketing tool. You don’t let your customers design your print ads for you. You don’t let them set your prices for you. You don’t let them determine what goes on in your game room. Otherwise, you’re under-utilizing one of the most expensive marketing tools you’re paying for.

That’s not to say that you choose who plays what. Managing your game space is all about filling it with gaming opportunities. In previous articles I described three main game room activities that form your basic toolbox: tournaments, leagues and demos. Focus on those.

To sum up that material, here’s the quick version. Find or recruit product champions. Schedule events. Encourage participation in those events. Get feedback from everyone, and in turn give your feedback to the vendor who provided the volunteers to help make the process better for everyone.

For open play, set policies that encourage maximum attendance and lots of play. You might require that your staff anyone who wants in to join their game. Structure your game room rules to convince people to stay, join in the fun, and spend money.

Special Programs

For a while, I experimented with a program called the In-Stock Guarantee. I offered a discount if somebody wanted to purchase certain core items but I was out of stock. “Never a wasted trip” was the slogan I used to go with it. The point was to encourage gamers to come into the store for a game they wanted rather than calling and asking about it or holding off until their next planned visit. I dropped it because I wasn’t following through on it very well with updates and maintaining my signs, but that’s the sort of program that gives your customers a reason to come in.

The cost was minor. I stocked a little more deeply on items that sold frequently anyway. I had a distributor on one-day ship, so I was rarely out of anything more than a few hours. I think I gave away $3 in total discounts.