Advice on Running a Successful Videogame Store?

xlilacx asks: "The video game industry is worth $25 billion, and predicted to rival the global music industry in the next 10 years. Even Grandma is joining in on the fun. My husband and I bought three video game retail stores two months ago, and so far sales are dismal (down 25% from last year's sales), which seems to be an industry trend. I've noticed a few things that are contibuting to our lack of profits: the people who weren't able to get an XBox 360 have decided they will wait to get one (which most likely will be after Christmas), and they will not buy any games for their old systems in the meantime; people are automatically conditioned to go to the EB-Games and GameStop stores at the malls, even if they give less in trade-ins and have horrible customer servicr; lastly, kids come in with piles of junk games (Madden 2001, etc..), and get enough store credit to buy the latest greatest game that we only mark up like 5%-10%. I'd like to ask Slashdot readers if these observations are a good reflection of the mentality of video-game buyers everywhere, and what suggestions they have for a small ma-and-pa video game store. With all the huge retailers in the video-game market and the EB/GameStop merger, is there a place left for the local game store?"

Comments

Used games

[basscomm]

In my area, the only Mom & Pop game stores left are the ones that specialize in used games, typically the NES-era through about 2000ish, but a few current generation games pop in on occasion. Of course they also offer the used books/cds/dvds/etc. which can't hurt (especially since they want $100 for Chrono Trigger with or without the box).

My advice

[NanoGator]

Have you ever heard of Funcoland? (they were bought up by GameStop I think...) They had a thriving business. They did several things right:

1. They dealt with used as well as new games. Sounds like you're doing that so you're already on good ground there. One of the reasons I liked shopping there was that it was easy to say "Well, I've only got $10, I wonder what Funcoland has today."

2. They had a wonderful warranty system. If you bought a cleaning kit for the system, you got a one year warranty regardless of if it was new or used. I honestly would never have cared for that until Sony hit the market. As a plus, the cleaning kit was great to have around. (as opposed to just handing over some cash just for a piece of paper with 'warranty' written on it.)

3. Funcoland also had a club card. I think this is fairly common these days. Buy the card for $10, get 10% off every used game you buy for a year. Plus it came with a subscription to a magazine. It was definitely a good deal for the customers because it didn't take long to make that $10 back. Again, that encouraged me to come.

4. Funco also had stations set up so people could try the game before they buy them.

5. I don't know if you can pull this off, but I'll mention it anyway: Funco had a number of stores, so it was usually possible to get what you want. They'd make calls for you to find and hold what you're looking for so you can go pick it up. This seems unlikely for you for now, so I have an alternative suggestion: Are there other ma and pop stores nearby? If you are willing to call them and say "do you have this game I don't have?" for the customer, you'll encourage them to make your place the one-stop shop. I know it seems funny to send business other people's way, but customer service is a big bonus. The Funco I frequented had friends over at the local E.B. They'd send business back and forth between them. I liked both those stores a lot because the people were willing to help.

The only thing I'd really ding Funco for was making it hard to tell what games they had in stock. I can't say it was necessarily their fault, but they often had most of their games in drawers. If you can do something to display what you've got, bonus.

Good luck. :)

Sales vs Last Year

[jxa00]

A small point regarding:

"so far sales are dismal (down 25% from last year's sales"

I kind of think last year was a bit special as far big name releases. You had Half Life 2, Doom 3, WoW, Metroid Prime 2, GTA San Andreas, Halo 2, and perhaps Rome Total War so I think all of those maybe contributed to 2004 being a stellar year for game sales.

(Say what you want about the actual games themselves but they were all hugely anticipated...)

In my area (Wichita KS)...

[jayhawk88]

...the only non-corporate stores that seem to be doing anything are the "vintage" type stores. They generally have a decent selection of newer games, but it's obvious they rely solely on trade-ins for them.

Given what kind of prices and built-in customer base the chains have, I really think this is your best bet. A lot of us 30+ gamers are out there thinking it would be great fun to go pick up a used NES and play some Dragon Warrior or what not.

A better experience

[Intellectual Elitist]

I buy a lot of games, and I often wind up getting them from GameSpot or some similar chain store because I usually like to pick them up on the release date. I've gone to mom & pop shops on occasion, but they've always turned me off for various reasons. Still, the chain stores have some major problems, and I'd happily go to a mom & pop shop if it offered me a better experience.

Here's what I'd suggest. Note that this is purely from a customer's perspective, so it may not jibe with best business practices.

1. Have a clean, uncramped, well-ventilated store. Walk into a chain store in a mall these days and it's so overpacked that you can barely move when you're in there. This really shouldn't be happening when you can use mostly wall space and some sanely placed racks for your product. And ventilation is more important than you might think -- many mom & pop shops have sent me packing because they've consistently smelled like rotting B.O.

2. Have an engaged, knowledgeable, and non-disgusting work force. Hire people with an active interest in games across multiple systems who actually pay attention to what's out and what's coming up, and who can make meaningful recommendations to people. No hypemongers or rabid single-system fanboys, please. And no planetoids with poor hygiene, either. As I mentioned above, if visiting the store becomes an assault on the senses, people won't come back.

3. Don't give me the hard sell. No, I don't want the fucking strategy guide. And don't argue with me when I say I want a new copy instead of a used one. If I come up to the counter and ask for something, just sell it to me without the extra push.

4. Let me try before I buy. Have multiple kiosks for each system and let people try out any game in the store. Have the latest demo discs available too, so people can try out upcoming games.

5. Sell new releases as soon as possible. I don't know the mechanics of this, but occasionally the chain stores will let pre-orderers pick up their game a day early, or they'll sell a huge new release at midnight the night before it would usually be on sale. Most hardcore gamers like to get their new stuff as soon as they can, and whoever can get it in their hands first at a fair price will get their business.

6. Have review information available in-store. This could be as simple as having a public web kiosk that points to Metacritic.com or something similar. You might even be able to convince them to contribute some money toward the kiosk since you'd be driving traffic to their site. Anyway, I mention this because I'll often spot an obscure title in a store and have no way of knowing if it's any good or not. The store employees usually aren't much help (and even good employees can't be familiar with every game out there), so having on-site access to a range of reviews for every game could help close a sale that might not otherwise happen.

7. Have a frequent buyer program with real benefits. Reward loyalty with periodic unrestricted discounts and game-related goodies (e.g. that promotional Prince Of Persia soundtrack CD that came with preorders of POP:T2T at some stores). And give people a one-time discount when they refer a friend to your store.

8. Keep your prices reasonable. Most people understand that mom & pop shops need to bump up their margin a little compared to chain stores, but if you're more than about 5% above the competition you probably won't keep any customers. And even the people who are willing to pay a little extra are only going to do it if they're getting added value from shopping at your store instead of a chain.

You might also consider hosting and/or sponsoring gaming events to get your name out there and build up good will. Even hosting a little weekly Madden tournament in your store with a $20 store credit purse would draw in a decent number of younger customers.

Good luck...

Is there room for you?

[Jerf]

Is there room for the local gaming store?

My answer: "...sales are dismal (down 25% from last year's sales), which seems to be an industry trend..."

Seriously, sell now while you can still get something out of it, if this isn't a hobby. If you're in business for real, you're going to be slaughtered.

This isn't cynicism, this is realism. The industry is growing leaps and bounds, sure, but the brick retail market is not going to grow with it, and will probably continue to decline. (Note how it's already started to.)

Most of the advice I saw before I started writing this is that it boils down to "Cater to the hard core gamer". But the reason there aren't stores that already "cater to the hard core gamer" is that there isn't enough money in it, period, end of line. That's not an option, really.

Sell the stores to one of the people who think catering to hard core gamers will save the business, let them eat the losses.

Advice from someone who has been there

[supabeast!]

I spent several years in video game retail. Given that was all back in the 1990s, but aside from Microsoft coming into the picture, things haven't changed much. Right of the bat, the best advice I have is to get the hell out before you lose your shirt. Video game profit margins are pathetic - most big retailers treat games as the would any other loss leader, picking up their profits on items like generic controllers and memory cards that sell at a 500% to 900% markup, and if a big game actually sells well enough for them to profit from the cost of keeping it in the store, it's a fluke.

That said, if you really want to make money, here are some tips:
1. Don't try to make profits selling games. Sell acessories, like new controllers and memory cards. Don't let a single customer leave without pushing him or her to buy a memory card or strategy guide. The easiest people to sell to are people who play sports and racing games, because they build up collections of saved games for every year of their favorite EA games as well as replays for racing games.
2. Jump on the used game bandwagon. There's a lot of profit to be made buying a game for $5.00 and selling it for $15.00, especially since you aren't even paying distributors to ship them. If a game sits around too long, dump it on eBay for a tiny profit and charge the sucker who buys it $5.00 for shipping, mail it media mail for under $2.00 and keep the other $3.00.
3. Sell niche items. Keep weird stuff like Playstation-to-Dreamcast adapters, everything-to-USB adapters, and high-end joysticks from Hori and MAS Systems in stock. When you aren't busy with customers, sell these items on eBay.
4. If there is a local market, start importing hot Japanese releases.
5. Try to build up a business selling board games, RPGs, and CCGs. Just be careful not to invest too much money up front, because you don't want to get stuck with a backstock.

Again, good luck. There's little place left for independent game retailers, so if you plan to survive, find a niche, start expanding, and hope to get bought out by Gamestop or a similar company that just doesn't want to bother competing to wipe you out, because that's really the only good option an independent retailer has anymore.

Re:Acts of Gord

[Wog]

Yes!

I worked at a GameXchange for three years in high school. This made us laugh until we cried.

To the OP:

As someone else said, screw new releases for the most part. They won't make you any money. The REAL money is in used older games. Take in a playstation game, give store credit. Clean it, test it, and turn around and charge 150 to 200 percent of that. You've got to be up-front about your customers about the fact that you must be selective in order to survive. Be honest and pay well for the good stuff, and not well for the crap that won't sell.

You've got to know your games. The two or three guys that ran the store with me knew what they were doing, and liked the history and trivia of the stuff, so they had background when someone asked them a technical question. We also had our preferences and warned customers about them. "Me? Oh, I dunno man, I suck at the newer console FPS games. You need to talk to Ryan over there. Ryan! Get your pasty butt over here!"

Get used to explaining to parents with young kids about ESRB ratings and make sure they understand full well that GTA isn't okay for their second graders. Be ready with some age-appropriate but not sucky alternatives. They'll love you for it.

Play upbeat but not "offensive" music and keep the place well-lit and clean. You can carry a store on hardcore gamers, but just barely and you have to hit the right market. Nothing worse for a casual gamer than the grungy, dark place with obscure games and shady employees.

If you have a regular that seems to be a decent kid, hire him and treat him right. Your good employees will earn their pay many times over, and love you for giving them an awesome college or high school job. A little store credit sprinkled here and there can do good things for you... most of the really enthusiastic ones will save it for the rare stuff that only comes in so often anyway...

As far as help goes, you're going to either be hiring students or people who are failures at life. I'm sorry, but that's the way it is. You need to BE THERE to be a good influence on the business. Remember the great guys I worked with? They moved on with life and I was the only one left when the new crop got trained in. I didn't want to manage the store because I wanted to keep my grades up. The owner came in for 20 minutes every two weeks, being so stretched thin trying to open new stores that he let mediocre employees drive his business into the ground through incompetence and theft.

He hired a "mid-level guy" to manage three of the stores. We pegged him as a crook as soon as we met him. I went over his head when my pay had been shorted two periods in a row, and he retaliated by claiming missing inventory and deposits. I was fired the week before I was going to leave for college anyway. When I came home for Christmas, I found out that the guy had emptied a $10k bank account and split.

Anyway, rant off. I've got lots of little tidbits from general management to inventory proceedures that I've seen work well, so send a message if you want any help...

I'll tell you this: There were about 12 months of really good times with good co-workers. We made 3x the profits of the other two years and I would have done the work for, well, not for free, but I was a happy guy when I was coming in to work. Don't screw it up. :)

Nope

[briancnorton]

IMHO, you got in a bit too late in the game. There is no place now for a local video game store, and your situation is only going to get worse unless you improvise, adapt and overcome.

Your biggest problem is that electronic distributio is now a matter of "when" and not "if." All the majors are going to cut out the middlemen and start selling games music and movies direct via broadband. Sony has already said that this is an important part of it's strategy for years to come, nd nintendo has promised it in THIS generation of games.

Your next problem is that the bit retailers have better profit margins and vendor relations. If the distributor has to choose between you getting your new Xboxes and Best buy getting them, you WILL lose.

Is it all bleak? Certainly not. Consider value-added services. Cyber-cafes make money, lots of it. You have people come in and use computers/games for $???/hr and you have a "pro shop" where they can buy their own to take home. Make it something akin to a bar where people can hang out and spend money, paying for the "ambiance." Retail is hard, and getting harder. Best of luck

Re:Some thoughts...

[sesshomaru]

5. Since you can't compete with the big stores on price, you have to have some sort of differentiator that make people come to your store instead. Arcades might be a solution, I dunno. I actually think the idea of an "Adults Only" section is worth a try; you can stock it with a bunch of Japanese adult "dating sim" titles and charge high prices for them.

Well, be careful, as this may be illegal depending on how your local government feels about it, (Supreme Court Denies Castillo Appeal). The Castillo case was actually in Texas, so you might be safe in a more liberal part of the country:

Fund board member Neil Gaiman says, "I think the hardest thing to believe is that Jesus was found guilty of selling an adult comic, from the adult section of the store, to an adult police officer, and convicted because the DA convinced the jury that all comics are really intended for children. I can't imagine a world in which the same argument would have worked for books or for films -- and I'm afraid that highlights why comics retailers (and artists and writers and publishers) still need a Defense Fund, and still need to be defended."

Now, I realize that the was a comic book case, over the manga Legend of the Overfiend if anyone is interested. But the Japanese H-Dating Sims are about the same as far as adult content. I could see a DA doing the same thing with a video game, "I don't care what type of evidence or what type of testimony is out there, use your rationality, use your common sense. Comic books [replace with Video Games -- ed.], traditionally what we think of, are for kids. This is in a store directly across from an elementary school and it is put in a medium, in a forum, to directly appeal to kids. That is why we are here, ladies and gentlemen. ... We're here to get this off the shelf."

The Supreme Court let this stand, so the First Amendment doesn't apply to comic books anymore and I'd imagine by extension to any medium that is seen as "for kids." The video games rating system might offer protection but I'd still think twice about it.

Suggestions

[BenjyD]

I can offer some suggestions based on what my father discovered running his successful shop. The shop failed soon after he sold it off, due to the lack of imagination of the new owners. This is a fishmongers in the UK, but a lot of the advice is universal:

1) Publicity: get your shop noticed. Run wacky competitions, do promotions on holidays. Try to get in local press/TV news/radio. Example - my dad paid someone to dress up as a mermaid and sit on the counter welcoming customers and giving out prizes for a competition one holiday, which got a picture in the local paper, the kind of advertising you can't buy.
2) Offer service beyond what your competitors can. Become an expert in games, offer advice. My father would give out cooking ideas and advice, which helped boost return custom.
3) Sell add-ons and related goods. For fish it was white wine, Japanese seaweed etc, I'm sure there are equivalents in gaming.
4) Decor: Make the store stand out so that it's clearly not an EB. Install model castles, make the game racks look like giant consoles, whatever, but differentiate yourself.

Re:In-Store Games?

[SuiteSisterMary]

One thing I saw at a local store was a 'gift registry' sort of thing; a kid with a birthday or whatever coming up would get a big bucket. The bucket would be placed somewhere in the store. The kid would put, into this bucket, stuff they wanted. People shopping for the kid could then come in, grab something from the bucket, and buy it for the kid.

Otherwise, go read http://www.actsofgord.com/ and learn from the Master.