Where is your attention focused?

“Should I put the sparkly dice next to the pearly ones?”

The question reveals a microscopic look at one aspect of your store’s operations. It’s one of those decisions that you make all day, every day. Is it a problem? Not by itself, but hold that thought. We’ll get there.

“Where should I put the dice display” indicates a broader thinking. It involves your merchandising decision-making process. If you put the dice next to the RPGs, you might sell more, but you also might lose more due to theft.

“Should I carry RPG accessories like dice?” is a question that indicates a remote, large-scale view of your company’s product offerings and approach to customer service.

Some people worry too much about the sparklies and pearlies too early in the process. At the model-drafting stage, think about the big stuff. As you draft your business plan, zoom in on the detail a level or two. Once you’ve decided that you’ll carry RPG accessories, you can decide how much you’ll spend on them and how and where you’ll display them. Don’t get any closer than that. Don’t worry about which compartment what die goes in until you receive that shipment. Knowing what the big picture looks like helps ensure that you’re ready for the small decisions when you’re actually doing the final setup.

Once you’ve opened, it’s really easy to focus on the stuff that’s close at hand. Handling these small issues is called “putting out small fires.” Covering the store when somebody can’t make it. Playing peacemaker during a tournament. Getting product in when it’s out of stock at your primary distributor. These things require attention now, but they don’t do much to improve your company. The continuous nature of these small fires means that you don’t get a chance to stop and look at the overall state of the store. You might be truckin’ right along, but are you going in the right direction?

It’s important to zoom out once in a while to ask yourself some questions. Let’s look at some topics and assign some zoom levels to different questions.

Marketing

Close: Did I get a good turnout for that last tournament I ran?
Medium: What promotional options besides signs and bag-stuffers do I have for promoting my events?
Top View: What’s my contribution margin on these events, and how much marketing time and dollars can I afford to promote them?

Staffing

Close: Should I give Bob the day off and work until close?
Medium: Does Bob’s evening shift cover the hours I need a second person on staff?
Top View: How do I calculate my labor goal, and how do I write a schedule that’s cost-effective while providing the customer service I need?

Fixtures

Close: Now that this game’s promo is over, can I use this cardboard display for something else, or should I toss it?
Medium: How should I rearrange my shelves to fit this new line of minis?
Top View: Do my fixtures meet my merchandising needs and branding goals? How do I know?

You don’t have to sit down on a schedule and analyze these things on a regular basis, but if that works for you, here’s a suggestion. Make sure you stop to think a little bit bigger than the daily grind at least once a week about a variety of issues. Am I running enough events? Is my focus on CCGs costing me minis players? Is my board game inventory getting out of hand? Am I adjusting my weekly order quantities for the increasing/decreasing sales of the season?

Once per month or so, stop and analyze a major aspect of your business. Location, product mix, fixturing, branding, event management, business format, insurance, vendor accounts and other elements of your company require periodic attention.

The ultimate goal is to regularly zoom in and out between all three levels. As you put out a small fire, zoom out a bit. Most of the time, you’ll find that you’re in good shape. Occasionally, one of these small fires seems a little redundant. Maybe you’ve had to break up one too many fights in the game room. How do you fix that? What’s causing the fights? Is it always one player, is it fuzzy rules, is the competition level of the tournament too high? If so, then a suspension might fix the problem, or including a list of floor rules might help, or offering Best Sportsman prizes might cool things down.

If you’re still in the planning stages, keep your focus broad and don’t get too caught up in the small stuff. Consider these topics

• Where will my business be located, and how will that location help me reach my customers?
• How will I set my marketing budget, and how will I spend it?
• Will I include a game room, and how will I use it?
• How much inventory will I carry, and how does that inventory help me establish the brand I want? How does it meet my customer needs?
• What kind of fixtures will I use, and how will I lay out my floor. What fixtures and layout will help establish the brand I want and create the shopping experience I want?
• What’s my competitive edge, and how do I leverage that to draw in customers?

If you find that you’re in the business planning stage and these aren’t the kinds of questions you’re asking yourself, you should stop and take a larger view. Make sure you build your business in such a way that it meets your larger goals in the first place and avoid either substandard results or having to rebuild it later on.

Opening a Store without Breaking the Bank

Before we even begin, let me point out that I do not recommend this business model for most people who want commercial success. I’m including this model because it’s a perennial topic for discussion. Many people ask if it’s possible. They don’t want to hear that it’s a bad idea or that it’s not very sustainable, or that it carries risks that can cost them everything they own. They just want to know if it can be done.

Assumptions

Usually, the discussion begins when somebody has an unusual opportunity for cheap space. In one case, the individual owned a commercial property and his tenant had moved out. In another, a landlord was willing to lease the space in exchange for upkeep on the property. Sometimes, it’s an adjacent space to an existing business and the owner wants to experiment with games. Other times, an existing business owner is willing to sublet some of his space and allow a friend to experiment. Lastly, the place might simply be a tiny commercial space with very low rental rate.

Whatever the reason, this plan counts on cheap to no rent costs. In fact, the figure used on the spreadsheet is $500. If you don’t have such an opportunity, you’ll find that the cost of rent quickly expands your costs to the point that you have to start looking at a “real” game store model to make things work.

Build-out

You have to do it yourself. You might offer to pay a few friends in games, but you lay the flooring, install the fixture, repair the light fixtures, replace the ballast, paint, fill in holes, add interior walls and doors.

Licenses, Fees & Professional Services

Get a d/b/a according to your local guidelines and operate as a proprietorship. If you already own a corporation, you don’t need to create a new one. Your corporate status allows you to operate any legal business.

You’ll probably need a local business license. On the other hand, you might be able to operate as a club, especially if you’re subletting from a friend. Operating as a club makes it difficult to obtain product, but if you’re sharing space, your friend should be able to open an account and designate you as the person in charge of ordering. Check your local requirements and make sure your business model doesn’t involve anything that would invalidate the club designation.

For a bank account, you can open a separate personal bank account at the bank or credit union you already use. You might have to order checks, but with many expenses being payable electronically these days, you might not.

While we’re being foolish, you’re also operating without commercial insurance. If somebody slips and falls, you pay for it when they sue you. If somebody breaks in and steals all your goods and cash, you’re on your own. Good luck with that.

Signage

The “real” plan calls for spending thousands of dollars on a box or channel can sign, but you can get away with less than $100 for a vinyl banner with grommets that allow you to hang it anywhere. Replace it when it wears out in a year or two, and it’s still cheaper than a wooden sign. Paint your window signage yourself or pay a friend in games (or just get a second vinyl sign when you get the first).

A neon Open sign costs about $100. You can get the old-fashioned kind that says “Open” on one side and “Closed” on the other for a buck or two.

Fixtures & Equipment

You can probably find an old computer around the house, buy one from a friend, or get one from a used computer store for a couple of hundred dollars. When it comes down to it, you don’t need one, but e-mail, looking things up online, and other bonuses make it a great value.

For a potentially lower cost, buy a cash register from your nearest wholesale club for less than $100. Collect some of the loose change in your house and throw it in the drawer for your opening till of about $50.

You can get a soft drink cooler from Coca-Cola or Pepsi for free, as long as you buy your product from them. Because they often require a certain minimum order, you might order only once a month.

Your major cost for this category will be shelving. You can make your own bookshelves while you’re doing your own build-out, but you won’t be able to reduce all your costs. You can’t make your own pegboard pegs and shelves, for example. You probably can’t make your own lit glass display cases. Look for bank auctions, closing businesses in your area, and other opportunities for cheap second-hand fixtures.

Secret: when big-box stores remodel, they sometimes throw away their old fixtures. Make friends with an employee or manager at one of these giant retailers and ask if they’ll give them to you. I’ve seen store owners get several thousand dollars’ worth of fixtures this way.

If you have space for them, install game tables and chairs. They’re cheaper than filling that space with merchandise.

Utilities

Go without the alarm monitoring and pest control. You can probably make do without separate bills for electricity, water and sewage, depending on how you’re getting your free/cheap space.

For utter minimum cost, use your existing cell phone number. You won’t get a phone book listing, but if you have the phone number in your window, it’s worth something.

Labor

You’ll work most or all of the hours yourself. You can do this by reducing your hours of operation so that they coincide with your off-duty hours from your real job. In combination with a partner, you might be able to cover a fuller range of hours, approaching a real store. Otherwise, you might open at 6 PM and keep the store open until 9 or 10 PM. On the weekends, you can work full hours.

Running the store yourself keeps your labor dollars down to zero. Because we’re talking about a shoestring operation and not a real financial bid at success, you don’t take a paycheck. A real business would pay its operator, whether that operator was the owner or a hired employee.

Marketing & Advertising

Word of mouth will be your primary method of new customer acquisition. Free and cheap Internet marketing will help. See the previous columns on Pre-Opening Marketing and Promotion for some discussion on free or low-cost online promotion.

You can get 250 business cards from Vistaprint.com for nothing but the shipping cost.

Local conventions offer another opportunity for letting people know you’re open. Run enough games to get free or minimal-cost entry into the convention as a game master. Talk to the vendors and gamers about your store. Hand out flyers. Sponsor a drawing or give away premium items.

Inventory

Inventory will probably be your largest cost. I recommend going only with the highest-turn items from each category that you want to sell and keeping only one of each in stock. Buy one D&D Player’s Handbook, for example, and one box of the latest Magic boosters. For a store like this, CCGs are one of your best bets; CCGs require a small footprint.

Warhammer 40k or Fantasy Battles is a good bet, too. Although each game requires a lot of space and heavy inventory, customers tend to buy large quantities, and you don’t need to carry every single item. You can carry boxes only (no blisters) to reduce your inventory needs to a minimum.

For collectible miniatures games, I’d start with a case of starters and boosters for a single game. It should require only a tiny section of your wall space and cost less than $150.

To add some diversity to your game selection, concentrate on board and non-collectible card games that are available for less than $25. You can buy enough to fill a section of pegboard for less than $1,000. You can cherry-pick the best titles for $250.

I’d add a selection of accessories to match my investment in each category for every category other than board games. That means sleeves and boxes for CCGs, dice for RPGs and paints and hobby supplies for the Games Workshop games.

You might also want some snacks from the local wholesale club. Keep your selection limited. Offer too many choices and the product will expire before you sell it because you already know that sales volume will be low.

Financials Analysis

My back-of-the-envelope figures for this shoestring store run $10,000 to open. If you have that much in cash, great. If not, adding in the repayment (even if you have to put it on credit cards) costs no more than $400/month. A signature loan, for example, might cost $200/month, based on a 3-year repayment and 8.5% APR. The spreadsheet shows that the store has to sell about $3,000/month, or about $100/day to break even. With the signature loan, it’s $2,500/month. If you have the cash up front, then it drops to $2,000/month.

That figure works fine with the amount of inventory you have on hand. If we spread that sales total out over a more reasonable sales pattern, you can make the bills every month if you do $200 on Friday, $250 on Saturday and $85 each of three other days you’re open. That figure doesn’t even count on the extra 2-3 days in each month.

So in response to the questions, yes, it can be done. I’ve even shopped at stores like this once or twice. However, expecting to bootstrap this type of store into a real financial investment is dangerously alluring. You don’t have a solid infrastructure on which to grow. Your best bet is to expect it to live only as long as you have the free/cheap rent and be ready to let it go when you lose it.

Choose Your Space Carefully

You have two opposing desires when selecting a location: cost and attractiveness. High traffic count is attractive but expensive. Lots of space is an attraction, but you pay for every square foot. On the other hand, you want to keep costs as low as possible so that you can become profitable. Determining how much you should spend on your location is arguably your most important opening decision. Know how to make it.

Commercial Rent Basics

Typical rent rates for retail space range across a broad spectrum of figures. Low-visibility sites on the outskirts of town might be available from $6 per square foot/year or less. Locations in big-city malls can cost $60 per square foot/year or more. For most game store business models, you’ll consider a location ranging from $10 psf to $20 psf, depending on your local market.

Rent usually includes at least two figures: your rental rate and your “extras”, either in the form of a Common Area Maintenance (CAM) or a triple net (NNN). In either case, you pay additional fees. Think of them like the dealer prep and other add-ons that you pay when you buy a car from a dealer; they’re additional costs, but they break them out so that they can advertise a lower price than you’re actually paying.

When you ask about a rate always ask about the CAM or triple net. When you’re comparing your notes for later, you’re comparing the same figures for each of your possible locations. You can also plug the right figures into your financial calculators.

Common rental terms are usually for a short number of years: one to five are common. Obviously, a lower term is better for you, especially for your first lease (more on that later). A one-year term at $2,000 a month commits you to paying only $24,000. A five-year term means that you owe a $120,000 debt. If the business closes six months later, which debt would you rather have?

In less urban areas, you might be able to find a place offering a month-to-month rate, but that’s uncommon.

Expect that your deposit is non-negotiable. It never hurt to try, but landlords expect small business owners to fail. They think that the deposit might be the only money they are guaranteed to get from you. Your deposit is usually framed in terms of rent: “first three months’ rent”, or “first and last months’ rent.”

The Big Three

Your rent rate, your space, and your location are the largest and most important considerations in your decision-making. Your choices usually involve a bigger space in a cheaper property vs. a smaller space in a more attractive property.

The Benefits of Space

A big space gives you more layout options. You can have the luxurious game room you want with private rooms. You can display all your books face out. You have room for signage and wide lanes of traffic. You have room for luxuries like two bathrooms.

Most importantly, you can display more merchandise. If you open in a 900-square-foot location, you won’t be able to fully stock miniatures, role-playing games, board games and have a large game room. With 6,000 square feet, you can carry nearly any product lines you want and still have room for game space.

Each of these things is a competitive edge—a reason for customers to choose your store for their game-buying purchases.

Space Comparison

I maintain a spreadsheet with game store square footage claims. The average game store on my list has about 2,800 total square feet. Of the stores with game space, the average is about 1,000 square feet. About two-thirds of the game stores on my list have game space. For various reasons, I believe the list to be skewed in favor of large stores, however, and that the average store size is smaller than my sampling indicates.

Visibility and Ease of Access

A good location is one that you can give direction to easily. “Take exit 5, turn west and go three blocks” is a good set of directions. You’ll find yourself giving directions on the phone often, and every step is an opportunity to lose a customer who can’t find you. Locations on major streets near highway exits make it easier for customers to find you. Front-facing locations visible from the road are better than suites facing the side.

Spaces that give you pylon sign space are better than those that don’t. Corners are better than in-line suites because you have frontage (and visibility, and space for signage) on two sides.

Wider spaces are often considered more valuable than narrow spaces. Having a wide space visible to the customer is called frontage, and it has a value because it makes the store easier for the customers to find and more visible to the casual shopper.

You can use that trend to your advantage. If you plan to use part of your space for a game room, you don’t need expensive frontage. Sites next door to anchor sites in outdoor shopping centers often have odd-shaped suites adjacent to the anchor—sites without much frontage (and thus unattractive to many potential tenants). You might find that a landlord is eager to negotiate the rent on one of these sites.

Despite all of the industry talk about how gaming stores are destination locations and don’t need a lot of foot traffic, it seems that the stores who place themselves in line with that philosophy fail most often, and stores in more visible locations fare better. While the basic idea might be true, it’s also possible that the other benefits of a good location help the store out. If you’re planning on finding the cheapest retail space possible, no matter where it is, keep in mind this anecdote from Dave Wallace, owner of the Fantasy Shop chain of stores based in Missouri. Dave bought out a failing store and the owner volunteered this gem: “I knew it was in a terrible location, but I couldn’t pass up the rent.” Don’t be that guy.

Other Factors

While the big three often make the decision for you, lesser factors can combine to affect your decision on where to place your store.

Competition

You don’t want to open a store a mile away from a large, established game store. It’s worse if that game store’s strengths are similar to yours (you did a marketplace comparison in your business plan, remember?). Try to place yourself at least five miles away from a stable competitor. If you plan to finish off a failing game store, you want to be closer to that store so that you can recover more of the store’s customers, but keep in mind that this placement is clearly a hostile move and will taint your relationship with that store owner.

Contract Terms

Sometimes your ideal place is impractical not for reasons of rental rate but because of other items in the lease agreement. The term might be too long. A landlord used to national franchises might insist on a 10-year term, for example.

Similarly, the landlord might insist that you’re responsible for replacing the HVAC unit if it fails during your lease. Don’t sign that! At a later date this column will review lease agreement terms in more detail, but for now just consider that there are non-negotiable items in a lease agreement.

Buildout Costs

Commercial suites can be in virtually any condition when you look at them. While most tenants prefer the white box look, which allows them to customize the suite in any direction they want, you want to consider a more “lived-in” look to your suite. You might be able to use existing interior walls, flooring options, and other considerations to your advantage in reducing your build-out costs.

One space that you can customize for $12,000 but costs $40,000 over the course of the lease might be a better deal than a space that leases for $36,000 over the same term but costs $20,000 to build out. Keep in mind that you might not be there for very long. You don’t want to spend much money on a build out only to spend more money in a couple of years when you move.

Parking

You need parking space, and it should be in front of the store. Near my house there’s a store that concentrates on CCGs, toys and collectibles. It has some D&D minis, but few other games. It has changed hands at least three times in recent memory. Its most recent neighbor lasted less than six months. It’s on a corner with a very high traffic count in both directions, but the parking is in the rear, except for about five spaces of parallel parking on a busy street.

You don’t need a large amount of space, and your business benefits by being a primarily after-work hours business, which means you can share some of the parking spaces used by the neighbors in your shopping center. If you can’t count on at least 10-20 parking spaces in close proximity to your front door, you should probably look for another location.

Summary: My Recommendation

Plan to move. Keep your square footage as low as it needs to be to accommodate your business model. Keep your lease term as short as possible. If you succeed and find that you need more room, you should be able to survive moving your store. If you fail, you limit your liability and retain the ability to recover financially afterward.

Weigh your key factors together. Determine which factor most consistently supports your brand. If your brand is “everything in stock, all the time”, then you need more space. You don’t need visibility as much as you need space. If you plan on high-attendance events, then parking becomes more important, and a higher-rent location with simple directions and ample parking becomes your primary goal.

Build Sales While You Build

Set your budget. You should have already assigned a figure to this category when you created your financial statements, but now is the time to decide exactly how you’ll spend that money. If you’ve spent below budget elsewhere in the opening stages, it’s time to spend some of the surplus.

Local Marketing

These actions concentrate on reaching the people in your immediate neighborhood. Draw a 5-mile radius circle around your store on the map. Make that the area of your local marketing focus. In urban markets, most of your customers come from that circle.

Signs

Get signs up as soon as possible. In addition to your storefront sign and pole sign, you might want “Coming Soon” signs in your window. Include your website address on the signs so customers can keep track of your progress. If you have the phone hooked up, include that number, too. You might not be able to sell anything yet, but it’s never too early to create relationships.

Flyers

Create small flyers and hand them out to local businesses. Depending on the business density, you might be able to reach 25-100 addresses per hour of walking and driving around the neighborhood. Be aware that most people resent unwelcome intrusion into their workday, but also be willing to stop and talk to anyone who expresses interest.

Cost: $10-25 (more if you pay someone to do this for you)

School Clubs

Talk to your nearest high school or middle school about starting a game club. Offer to provide some games at your cost and help host the club, showing up once per week to play card games and board games.

For public relations activities like this, I used to hand out reprints of a Reader’s Digest article about the beneficial effects of game playing on brain activity. The impact of a widely circulated mainstream magazine’s endorsement of your store’s products and services is enormous. The image of what you do changes from The Lone Gunmen in the basement to staving off Alzheimer’s. Reprints are reasonably priced and shipped from RD, but I have no experience with ordering reprints from other periodicals (National Geographic has published a similar article more recently).

Cost: $50 to $200

Conventions

If your area has any local conventions, set up a booth. If you have product to sell, great. If not, you can hand out flyers, talk to possible customers and see what the other stores are selling. You might volunteer to run a game, judge a tournament, organize a miniature painting content, or otherwise involve yourself in the con’s activities.

Attend conventions outside of your local marketing circle because people who live in your circle will drive to them.

Cost: $200 (convention table fees, food onsite, gas, and assuming no hotel expense for local cons).

Conventional Media

You might not use radio or TV much while you’re open because of its cost, but I recommend it before opening to generate as much interest as possible early on.

Print Ads

These include the flyers you hand out personally, boxtoppers the pizza place next door might agree to distribute, mailouts you time to coincide with your opening, etc. Depending on your purpose, you might be able to print them out on your computer at home, or you might need to call on a professional. Manufacturers can provide you with high-quality graphics for any color ads you plan to mail out.

Hint: postcards are cheap to make and mail. Design a postcard that includes a coupon of some sort. A free booster pack with purchase of a starter deck is good, as is a jar of paint with any miniatures purchase, or free dice with any RPG.

Cost: $25 to $2,000

Radio

You can run radio ads on short notice, and run as many or as few ads as you like. You can also change your ad on short notice and with little to no cost. You won’t be able to target your geographic market or reach your target demographic very accurately. However, you can cast a very wide net and potentially reach many existing gamers who are buying their products from bookstores, online, or through other outlets.

Because of the high cost, you can’t waste anything on radio. Use it after your soft open but before your grand opening. If you use a remote for your grand opening, you’ll receive some free announcements in advance. You might time your radio advertising to run before that, giving you a month or so of continuous slots.

Cost: $250 to $2,000

Television

Without a store, what do you show on a television commercial? While I’ve seen some answers to that question, I don’t like the value of the solutions. As with radio, you might be able to shoot a commercial after you’re open but before your grand opening.

Cable TV is very affordable, especially in the smaller markets. Also, commercial creation is cheaper than you might have heard. Better yet, you can get the station to comp that cost if you buy enough slots.

Cost: $500 to $2,000 or more

Internet

The Internet offers some excellent marketing opportunities for low or no cost. Whenever possible, link from one site to the others. Some people are interested in podcasts but don’t read blogs. Having both available helps you reach a larger audience.

Facebook

Create a Facebook page for your store and search out gamers in your market. You can post photos, include a map to the store, link to your store site, etc.

Store Website

Your store website should go live before the actual opening. It serves as an online brochure to provide customers with basic information about your store. It should include your address, map, phone number, contact form, and an events listing or calendar. Before you open, include deadlines on your events page, but as you approach that opening date, mention things like game releases and conventions.
Include pictures of the process as you go—installing your sign, laying down carpet or tile, building shelves, etc. New content gives visitors a reason to keep returning.

Cost: $0 to $60/month, not including Internet access

A Blog

Keep interested parties apprised of your store’s progress on a blog. Your blog should have some interesting content and not just mundane stories of licenses and build-outs. Review some games or discuss game strategy with a few local gamers or your partners.

Podcast

A podcast is like a voice blog, except that it’s more versatile. Gamers can take your podcast with them on their iPod and listen on the go or listen as they work. They don’t have to dedicate their full attention to reading. With an RSS feed, they don’t need to remember to check it every day.

YouTube

Shoot short clips of your store’s growth as you prepare and collect them for a video on YouTube (and on your Facebook page while you’re at it).

Meetup.com

Meetup groups for D&D, Magic and other games are always hungry for a venue to play in. Let them know that you’ll be providing one soon, and they’ll keep close tabs on you. On the other hand, don’t be a dirty spammer. Go play a couple of games.

The Grand Opening

Your store’s grand opening event is the culmination of your pre-opening marketing and the beginning of your standard marketing techniques.

Contests and Give-aways

Giving away cool loot at the grand opening is a great way to entice gamers. Instead of handing it over freely to anyone who walks in the door, though, combine it with a demo, a full game, or some sort of interactive event.

One of my favorites give-away combinations is the “you kill it, you keep it” miniatures demo. Use some common D&D minis figs or something else where you can design an interesting board with cheap figures and let anyone sit in at the table and play. Set a time limit or a maximum number of pieces to keep your cost down and let more people have a turn.

You can do raffles at every hour or every two hours. Each entry into the door gets a ticket and customers can buy extra tickets. Raffle prizes should be worth sticking around for–$10 at least. You might be able to defray the prize cost by appealing to manufacturers for aid.

You can set up a table with two gigantic dice and have visitors roll off for loot according to a posted sign. Charge a token $1 entry and have prizes worth $2-15. The crew at Kenzer & Company does something like this for their Knights of the Dinner Table live readings at conventions, with the special incentive that a roll of a 1 on the dice earns the thrower a signed copy of KoDT #1. Yes, that’s a total of 1 on 2d6.

Cost: $100 to $500

Radio Remote

Radio remotes are expensive, but sometimes it’s not about cost but results. Bringing a radio personality to your store and letting them drive listeners to your location can kick-start your grand opening like nothing else.
Cost: $500 to $5,500, depending on the size of your market

Press Releases

Send out a press release announcing your grand opening to the news media in your area. If they decide to write an article about your store or mention you on the air, it’s free advertising. Interesting celebration methods (like a costume contest or a quidditch match) earn their attention.

Mayoral Presence

Good luck with this one if you’re opening in Philadelphia or Chicago, but in smaller cities and towns across the United States, commercial growth is worth the mayor’s personal interest. If you spring for the radio remote and have the mayor there at the same time, you’ll attract a great deal of attention.

A Bizarro Look at Running Your Business

1. Blow off Special Orders

Special orders require paying attention to something else while you’re furiously concentrating on ordering your new items. Those special orders don’t add up to all that much, and that guy might not even come back in to pick it up, leaving you stuck with a $40 game, book, or box of plastic. That’s just too much work for the reward. If you wanted to be a Sears catalog, it would say so on the sign.

2. Hire Rabid Fanboys

People respect the opinions of your employees, and a 3-hour lecture of the evils of D&D’s slavish class/level system is a valuable service they provide your customers. Taking out the trash, receiving inventory, straightening merchandise and all that crap isn’t really as important as it is in a big-box store, where hundreds of people see it every day.

3. Order What You Want

One of the perks of being a game store owner is buying games at cost. I mean, what’s the loss if you order an extra box of minis for yourself, or open up a few boosters for your personal collection. That stuff can’t cost more than $50 or $100 bucks a week. What difference does $5,200 a year make? That’s almost nothing.

4. Keep It on the Shelf. Forever.

Selling something for full price is better than getting half price. You can’t afford to take a loss on anything, not at the prices you pay. People still play Galactic Empires; one of those guys was just in here the other day looking for some Star Frontiers. Give it a little more time. Besides, you know the minute you sell it on eBay, somebody will walk in the store looking for it.

5. If You Build It, They Will Come

Advertising is too expensive. Your store is so awesome that word of mouth will continue to increase sales faster than customers leave the hobby. It worked for the other stores, like that one down the street that closed, and the one that used to be on the other side of town.

6. Just Sign the Stupid Lease and Get it Over With

The likelihood of those clauses concerning non-payment, building destruction, or whatever coming into play is almost zero. That stuff doesn’t matter. If I go out of business, it doesn’t matter how much I owe because they won’t come after me for it; if I’m out of business, they know I’m too poor to take action against. Besides, it’s not like commercial rent’s negotiable or anything, right?

7. My Accountant Handles the Taxes

That’s what I pay him for, right? I don’t need to get involved with that stuff. Nothing I do makes that big a difference, anyway.

8. Games Sell Themselves

If a game doesn’t sell itself, it doesn’t have any place on my shelf. If the manufacturer doesn’t think it’s important enough to spend money on it, then I don’t, either. That volunteer who comes in once a month or so, trash-talks other games, argues over rules, and barely talks to me is good enough for me if he’s good enough for them.

9. First-Come, First-Serve Service Providers

I made all those phone calls for my bank, insurance, and credit card vendors years ago. They’ve been fine all this time. No sense rocking the boat now. Besides, I’m sure everybody’s rates have raised over time.

10. I Have an Exit Strategy—Sell

A lot of my customers want my job. If I can find one with enough money to pay off my debt, I can skate out of here with no loss. What they don’t know won’t hurt me, right?

Margin, margin, margin—retailers talk about it a lot.

Yes, margin is extremely important. Without it, we wouldn’t be here. The difference between cost and sales price—that part we call the gross profit margin (margin, for short)— is what pays for the lights, and keeps the doors open and feeds us yummy Ramen noodles.

So I have a big surprise for some people: there’s more to life than margins.

Let’s be clear on what we’re talking about. Your margin is your profit (in dollars) divided by price, and usually expressed as a percentage. An item that costs you $6 and sells for $10 has a 40% profit margin. Price is inextricably linked to sales velocity, and vice versa. In general, a lower price creates more unit sales, and a higher price reduces the number of units sold.

The way we normally see this relationship expressed is when somebody, usually a nearby competitor, opens up a store with the thought that he can sell the same stuff for lower prices than you do and will therefore make more money. He thinks that he’ll make more money because he’ll sell more copies of his cheap stuff. He’s wrong, and it’s because he hasn’t done the math. Selling for 20% less than you do (assuming he pays the same cost) means that he has to sell about 50% more stuff than you to make the same amount of cash because his profit margin drops to almost nothing. That’s not feasible without additional advertising or some other way of letting customers know about that outstanding discount.

We’ve all heard that speech by now. We know that across-the-board discounting doesn’t work for the traditional game store business model. I’m not suggesting that you deliberately give up margins on items you’re already carrying in an attempt to increase sales.

Neither will I suggest that you don’t seek additional margin when it makes sense. If a new distributor offers you a better price than your old distributor on a product or a product line and it doesn’t come at a cost of service, ship time, or any other hidden cost, you should buy from that distributor.

What I am suggesting is that you look at the total package when deciding to carry a product, and that—under certain circumstances—carrying an item with a shorter margin isn’t a bad thing.

High Margins

When you test a theory, there’s no point testing it on close comparisons. I’m not going to discuss margin differences of 1-2%. Let’s test it at the extreme. If you listened to a publisher pitch a product that you think you’d sell once a year at a 95% margin, would you buy it? Hey, it’s a 95% margin. Of course you’d buy it.

Would you buy two?

Buying two would be stupid. If you’re only selling one a year, you’d never need two. You place a restock order at least once a week. The odds of missing out on a sale because you didn’t have one are low indeed. You’ll be happy spending your $10 to gain $90 at some point during the year. There’s no point in spending $20 when you can spend $10.

What if you could increase that sales rate by lowering that price? What if you could purchase it at $10, sell it for $60, and sell two per year instead of only one? Well, that’s “only” an 80% margin, but you’re netting $100/year in profit instead of $90. Clearly, the lesser margin is the better choice here.

What if you sold it for $50, spent $50 advertising it, and doubled your sales to 4 per year? You’d make $200 for a total investment of $90. That’s an annual gain of $110. Even better! More importantly, I think it makes a point. That “mere” 55% profit margin put more money in your pocket.

Low Margins

Now let’s look in the opposite direction.

Would you carry an item with a 5% margin? I’m sure you wouldn’t. Low margin is the antithesis of retailer wisdom. Nobody in his right mind would carry a product that offered a 5% margin.

What if you could sell 10,000 of them in a year at $4 each? Interested yet?

That’s about 30 whatevers a day. If you are on a two-day ship, you could order by the 100 and spend an initial outlay of $380. That’s right. Your total cash-flow goes down by only $380, and you put $500 in your pocket at the end of the year. Are you still saying “no” to carrying this item?

You might be saying “yes, but not at 5%.” Good for you. What if you raised the price by 10%? Sell them for $4.40 instead of the MSRP of $4. Your initial debt to your distributor is still only $380, but each 100 you sell earns you $440, or nearly a 14% profit margin. Sure, sales might drop. How much, you ask? How much you got, I ask?

How much would sales drop if you raised the price by 10%? 10%? Probably more. 20%? Maybe more. 30%? Maybe that. It depends on how well-informed your buyers are and how competitive the market was.

But sales would have to drop by 2/3—over 65%–before you lost money on your price hike. Lose 30% of those sales and double your profit—all at the exact same $380 initial investment. How does an extra $1,000 per year sound? Better? I like it better than $90/year on that 95% margin item.

Now, I’m willing to bet that most of you understand this concept intuitively, even better than you think you do. Do you carry or plan to carry Games Workshop in your store? Why? At “only” a 45% margin, it’s a weak product. For that matter, why do you carry new games at all? You can make 70-90% margins on used games.

Why stop there? You could buy only Magic commons that you can get in bulk for a price equivalent to $.005/card, sell them for a dime each and make that coveted 95% margin on every sale! Your store would be the best store ever! You’d make millions.

Or not.

A Bigger Picture

You don’t use this crazy business model because you understand two things. One, individual item margin doesn’t make or break your store. It’s your average margin you have to protect. A traditional game store doesn’t work on 5% margin because it doesn’t have the sales velocity for it. You’re not likely to sell 10,000 copies of every single item in your store.

The second thing you obviously understand is that it’s okay to sacrifice margin for sales volume under certain circumstances. You know you won’t pay your bills off of a 95% margin and $1,000 in sales. You can’t generate enough total dollars with the cheap stuff if you’re operating under a traditional game store model. You might sell some 75% margin used games, some 80% margin Magic singles, and some 70% margin hobby knives, but if you want to break $25,000 in sales, you need to add those middle-margin new card games, RPGs, and miniatures. You stock Warmachine at normal margins because it sells pretty well. You stock Games Workshop because you’re pretty sure their massive sales engine will bring customers to your door to the tune of $50,000 to $200,000 per year.

Which brings us to some further points about margins, like the ones you find in the real world, outside of spreadsheets.

The 10,000 widgets you sell at $4 could have a beneficial effect, even with the 5% margin. What if you sold each of those customers a $2.00 bumper sticker at 70% margin? You’d bank an additional $7,000. Using a more realistic upsell rate of 12.5%, or 1 in 8, you’d still make an additional $875 in profit. That almost doubles your total profit for the experiment.

How to Use that Low Margin

Here’s another option. What if you used that short-margin widget to bring people into your store? You pay premium rent to bring people into your store. You might have paid $5,000 for a fancy channel letter sign to bring people into your store. You might run TV commercials to bring people into your store. Where’s the sin in accepting a lower discount to bring people into your store if the result is new long-term customers? If you use your 10,000-widget sale to gain even 10 Warhammer 40k players, you might add $15,000 in downstream revenue to your bank account.

This is exactly the thinking behind a loss leader, or a popular item that you sell at less than cost in order to gain traffic count.

Of course, looking at the big picture brings problems. Nobody tells you in advance how many copies of something you’re going to sell. If you spend your $380 on your widgets, sell 6,000 and then the gravy train ends, you make less than you planned in total profit, add-on sales and in new customers. Part of predicting your price-setting (and consequently your margin goal) is being able to accurately project sales.

Cost

All of this discussion relies on manipulating one element of margin: your selling price. The other element of your margin is your cost. What happens when you mess with that?

Briefly, I mentioned buying goods from a distributor who offers them cheaper. In reality, that decision isn’t so easy. The cheaper distributor might have a higher minimum order, longer ship time, or make more mistakes. Or, you might not sell many copies of the item in question and find that switching your order over for the $.42 you’d save isn’t worthwhile.

There are other alternatives. You could buy directly from the manufacturer. You might save 10% or more that way, giving more weight to the value of price. A slower ship time might be acceptable for a $50 savings. However, will your discount go down as your volume goes down with that distributor? You don’t want to save $50 on one product line and pay an extra $400 across the board. That’s counterproductive.

How about quantity orders? We could be onto something here. While this is more common outside of the gaming industry, you might buy certain items which are cheaper in quantity. You might find your hobby supplies for example, are up to half as expensive if you buy in case quantities. How do you judge whether to buy a single box of hobby knives with a 40% discount or 20 boxes with a 70% discount? The difference is a cost of $20 vs. $288.

Let’s see what you can do with that higher discount.

You could buy the bulk deal at 70% off, keep what you intend to sell over the next 1-2 years, and trade the rest with another game retailer or a hobby supply store. That would give you the benefit of high margin without the liability of too much cash investment. However, it’s risky unless you arrange it first. Maybe nobody else wants any, or they all saw the same ad you did and made the same deal. Then you’re stuck with a closet full of product you won’t sell except at conventions.

What if you didn’t sell the hobby knives? I know it’s crazy talk. We’re retailers. We exist to sell things. But what if your main purpose isn’t to sell them but to drive sales of something else? Look at the rest of your miniatures supplies. What’s not selling? What if you offered a free $1.99 hobby knife with each purchase of any Hot Wire Foam Factory cutting tool? Well, that’s probably too much of a price difference. A free $2 item isn’t much incentive for a $40 item.

How about a tube of putty? Compared to that price, the $2 addition is a fairly significant bonus. Add the free knife to a $17.99 tube of putty, and your profit margin on the total purchase becomes 41.9%. That’s not bad. But what else did this do?

Well, for one, it increased your total profit by a factor of 5.4! Instead of the $1.40 profit you would have earned by selling the knife, you earned $7.50 profit on the combined sale. You might also have encouraged customers who never used putty before to start using it for the sake of the free knife, which means they’ll keep buying it after the promotion is gone.

Conclusion

So, any discussion on margin that just stops at “There’s no way I’m selling anything less than 45% margin in my store” is missing the point. You can’t have a discussion on margin without considering all the attendant factors. Neither a high margin nor a low margin is enough information on which to base a decision. It’s like saying there’s no way you’ll sell a game with a blue cover or a miniature with the weapon in its left hand. No way!

Margin is, after all, just a meter. It’s like a dollar-per-square-foot analysis or a turn rate. You don’t put a margin or a turn rate or a percentage in your bank. You put sales in your bank account, and you put profit in your pocket. Those are the numbers that matter. If you’re going to focus on a mathematically derived formula, focus on those.

Let People Know You’re Opening

Marketing includes more than just advertising. It includes everything you do strategically and tactically to gain and retain customers. That includes setting your pricing policies, how you’ll brand your company to create an impression in the customer’s mind, which products you’ll carry, which customers you’ll seek to reach with your greatest effort, etc.

You must make some decisions early in your planning, because what you plan to do and how you plan to implement it affects your business planning. Ideally, you’ve already made these major decisions:

Pricing

Adopt your pricing strategy before you open. Your pricing strategy affects your cost of goods, so you’ll need to consider this part of marketing before you run your financials. If you choose to discount all of your products 20% off retail, your gross profit margin will run about 25% instead of the healthier 40% or more you’ll attain with SRP pricing. If you choose to charge SRP for most items and a premium rate for certain items, you might attain a gross profit margin of 50%.

You don’t have to set the prices for every item you’ll carry this early in the planning. You do need to have some idea of your pricing strategy—discount, suggested retail price, premium pricing, a combination, or some other concept. You can do the fine-tuning when you install your point-of-sale system or start tagging things with a price gun.

Branding

Do you want to reach the hardcore multi-genre gamers, the family market, female gamers, card-playing teens and pre-teens, or what? Who you plan to reach helps determine how your store presentation and policies help you reach your customers. If you want to reach teenagers, for example, you’ll want to hire a younger staff, use contemporary teen language in your print ads, and plan your events around school hours and social activities. All of these choices help determine your brand.

It’s not an overstatement to say that all of your major business decisions flow from your branding choice—which itself is a marketing decision.

Product Selection

Do you want to establish a reputation for having everything, all the time? It’ll cost you a heavy inventory. Maybe you’re content just to have the best RPG section or the best CCG selection in your area. Choosing product categories was part of initial planning, but you also have to consider how deeply you’ll carry that category and what part it plays in the big scheme. A store that offers 10 board games presents an entirely different impression than one that offers 200 board games. Which one best fits your company’s needs?

Advertising

How will you set your advertising budget? Will it be a flat fee or a percentage of sales? Will it vary by season or month? Will you experiment with a variety of media or concentrate on one channel? How will you measure your advertising success? How will you create urgency in your advertising so that customers respond to it in a reasonable amount of time? Which customer sub-section, if any, will you concentrate on?

Add More Detail

As you approach the opening deadline, make some detail decisions on the broader decisions you’ve already reached. Having made the broad decisions will help you fine-tune these decisions as you approach opening day.

Some Specific Decisions

• Design your uniforms or establish a dress code policy.
• Decide how you and your employees will answer the phone, respond to common questions, and greet customers at the door.
• Where will you display price tags so that customers can price items on the sales floor?
• What products, if any, will you support with events? What events will you run? How often?
• Will you have a website? If so, what type of impression will your graphic design choice create? How interactive will it be? Will you have your own domain name or just create a MySpace page?
• How will you compete locally? Will you bill yourself as having the largest game room, the best prices, the most convenient location, the best staff, or something else entirely? What will you do to make sure your store is the best shopping choice for the customers you’ve chosen to target?
• Choose your store’s graphic design, including a paint color or scheme, an overall theme, and lighting.
• Design a logo or commission a design from a professional.

Separate articles will address the previous concepts in greater detail. For right now, this representative list is designed to encourage you to plan ahead on the details. You should be able to devise a much more comprehensive list on your own.

Countdown Marketing Suggestions

Your options before you open are limited by your lack of a storefront. It’s difficult to make a television ad if you don’t have a place to showcase in the ad. On the plus side, your alternative options are usually low in cost.

Maintain a Blog

If you’re in a market hungry for a new game store (and if you’re not, you shouldn’t be opening), potential customers will watch this blog closely after they encounter it. Keep readers informed about changes to your opening date, share your horrible contractor stories, and get them excited about how awesome the place is going to be.

Manufacturer Message Boards

Most game manufacturers offer message boards for the discussion of their products. Brief, informative and non-spammy messages in an appropriate place on a message board are fine. Substantive, interactive discussion with forum users is better.

Local Conventions

Whether you run a “teaser table”, run games, or just take out an ad, visibility at conventions will create awareness about your store. Local conventions cater to the leadership among your potential customer base. Get their interest, and others will follow.

Other Game Stores

If they’re willing to help you get started, you might run demo games at their stores. It’s a good deal for both of you. You encourage sales in their store, get some sales practice, and meet some potential customers. Talk to the game store owner and do this with his permission and under his guidelines. Don’t be the jerk who comes into a store on the sly to steal customers. The further away you plan to open, the more likely other stores are to help.
You might have a better relationship with stores with overlapping business rather than direct competitors: a comic book store, a bookstore, or a LAN center. Any of these businesses might see a referral to you as a service to their customers. You’ll have more bartering power if you offer the same favor in return.

Signs

A sign in front of the location can attract interest while your build-out is underway. You might buy a freestanding sign, a magnetic sign for your car, or install your shopping center sign ahead of time. A normal billboard might be prohibitively expensive, but a daily billboard might be affordable for a week or two immediately prior to opening.

Radio Ads

Normally, I advise against radio ads for most store purposes because of their high cost. Sometimes cost-effectiveness isn’t your main focus. Your opening might be one of those times. A carefully-plotted radio ad program shortly before you open could increase your early sales, jump-starting your cash flow and improving your chances of long-term success.
Establishing a relationship with the radio station might also give you a better rate on the remote you might want to do for your grand opening. You might even get time in the studio to promote your grand opening on the air.

T-shirts

Make up a batch of t-shirts and hand them out. You can hand them out in front of your shopping mall or arrange for a local radio station to give them to the first 100 callers or so. You might want some available for your grand opening, so order enough to spare.
Your t-shirts don’t have to be t-shirts. You can use any premium item for this: mouse pads, baseball caps, buttons, or whatever you like. T-shirts are popular because they’re seen by many people, not just the owner.

Flyers

Announce the opening through low-budget flyers and distribute them within your primary draw radius. Place them on windshields, ask to leave them on counters at restaurants, and post them on college or military bulletin boards. Flyers are cheap enough that you can use them in addition to almost anything else you do, no matter how expensive your major effort.

Newspaper Article

Your newspaper might be interested in the opening of a new business. In a small town, this might be front-page material, and even in a larger city, the business section might devote a paragraph or two to it, especially if it offers a unique business plan or interesting hook. A game store presented as a warehouse club might be different enough to deserve a column. Call or write to your local paper and find out if they’re interested.

Should You or Shouldn’t You?

The question of whether or not a store should have a game room is highly contentious. Fortunately, both camps are on good terms and no one is likely to persecute you for your decision. In fact, you might develop a serious case of “green grass syndrome” at some point during your store ownership as you consider all of the pros and cons of each side.

Advantages

Adding game space has one primary advantage and several corollaries descending from that advantage. The advantage is marketing opportunities. It does no good, however, if you don’t actively take advantage of it. That’s another article, though, so on with the advantages.

Branding

The game room allows you to present your store as the place to play games, not just the place to buy games. You can use this to shape the image you present to your local market. Market your store as a social gathering place to encourage people to visit and increase the time they spend there.

Competitive Edge

If you’re the only store in your market with a game room, you have a competitive edge against the other store. If you have the largest game room, you have an edge. If you have the best tables, the coolest design, or the most people showing up for your tournaments, each of these is a reason for players to go to your store instead of the competition.

Manufacturer Opportunities

Some manufacturers require a game room for opening a direct account, or for other preferential treatment. Having a game room can entitle you to better discounts on certain product, better availability, or certain direct-to-retailer incentives.

Organized Play

You can leverage the game space to host game leagues and tournaments. Offer prizes from your own inventory or take advantage of game manufacturer-sponsored events. These events often bring new players to your store, increase the amount these players spend, and encourage players to visit more often. Each of these factors increases sales.

Regular events can create very large sales increases, especially if the owner is involved. The owner’s personal interest is a weighty endorsement. Regular play encourages new purchases. Combine the two and you might see sales of a single product line increase by $1,000 a week.

Disadvantages

The disadvantages are numerous and range from problem behaviors to purely financial reasons. They range from minor to serious in their value, and individual store owners apply different weight to each of these issues. If you plan to have a game room regardless of these problems, you should be prepared to handle them before you open.

Pollution of the Player Pool

Once gamers start getting together, they share information. Some of that information is good. One Warhammer 40k player shows up for the game with his army laid out in Army Builder format, and his opponent compares the nice clean printout with his scribbles on spiral-bound notebook paper. Before the day is over, you’ve sold yet another copy of Army Builder.

Some of that information-sharing is bad. The CCG crowd is particularly notorious for this—they share the concept of buying their cards from online discounters, and your box sales begin to decrease with each new set. Some players advise others to download books from file-sharing sites instead of buying them from your shelf 12 feet away. Players from a competitor’s store might encourage the new players you created at great investment of time to go play elsewhere.

Gamers might also get together to form a club. It sounds exciting and fun, but the club’s first organized action is often asking for a discount. They feel if there’s no benefit to joining the club, that nobody will join. Do you give the discount and reduce how much money your biggest spenders spend, or do you risk alienating the club members?

Mess

Drinks, food, loose cards, CCG wrappers, miniature sprues, spilled paint, glue—if you sell it intact in your store, you can probably find pieces of it in your game room at the end of the day. Over the course of the day, cleaning up after this mess or hounding the gamers to do it themselves can take a heavy investment in your time (or the time of the people you’re paying an hourly wage).

Theft

You know people will steal from you at some point during your career. You might not have thought that they would steal from each other. Do you kick somebody out when you suspect he’s stealing? What if you’re wrong? No matter what you do, you’ll lose customers over it.

Similar to theft is the concept of “trade rape.” You know the crowd. These are the competitive players of CCGs (or now CMGs) who trade their commons or uncommons for “money rares” from the new or younger players. I’ve heard a player cheer “I just made $70 off that guy!” moments after the new player left the store. At some point, those players wise up and you have a customer who probably won’t return and might tell his horror story to his friends.

Cheating

If you run tournaments, you’ll encounter a variety of cheating methods that will make you cringe. Players not marking off damage to their ‘mechs in Battletech. The Magic player the others call “Howling Mine” because he keeps drawing extra cards when he thinks he can get away with it. Mis-marked or loaded dice. Marked sleeves. The cheater chases off other players and leaves people with a bad impression of your store.

Liability

How much insurance do you have? Care to find out the hard way? Wait until a player in the game room leans back on a chair and falls, or somebody has a bad problem with a hobby knife, or a fight breaks out over a tournament ruling. If these people were playing at home, the problem might still have happened, but at least you wouldn’t be on the hook for it.

Cost

The game room costs money. You pay rent for your space, and whatever space you devote to your game room costs a certain amount. If you pay a total of $15 per square foot per year (after adding your rent, CAM and any other charges) for your 2,000 square feet, and you devote half of that to your game room, you spend $15,000 so that gamers can have the privilege of playing games in your store.

The game room also has hidden costs. Who’s running those events? If it’s you, then you presumably pay somebody to run the counter. If it’s an employee, you pay his wage. If you’re giving customers a discount, it still costs money. You can get volunteers to run some events, but volunteers can’t do all of it.

Better Alternatives

This thought is the main point of contention with the game room. What else could you do with the $15,000+ it costs to maintain that game room each year? If you think you can make it more productive with an aggressive TV commercial campaign, then you should rent a smaller location and spend that $15,000 in advertising.

A more common approach is to spend that money on inventory to fill that other 1,000 square feet. Another $15,000 in inventory could earn $45,000 in annual sales over and over again without all the hassles that come with the game room. New product lines or deeper stocking of current product lines can earn be as much of a competitive edge as the game room.

This list doesn’t include all the points on either side, but it does represent the major arguments. At least one list has identified about 30 complaints against, for example, most of them falling under the broad category of “unwelcome behavior.” Comments and questions are always welcome in the forum.