Help me start a retail video game store

mrzubblewump · Post by **mrzubblewump** » Mon May 02, 2005 3:23 pm

I know that many of you guys have experience in the retail end of video game stores (EB Games, GameStop, etc.) I am presently thinking about starting my own retail store and a game/DVD store is one possibility. This store will probably be located somewhere in the Knoxville TN area.

While I've been a gamer for about 25 years my knowledge of how the retail business works is limited. Do any of you have any information or know a source for information about retail gaming? I'm looking for info on how distrubuters work, profit margins etc.

Any info would be greatly appreciated and not forgotten.

ChrisGrenard · Post by **ChrisGrenard** » Mon May 02, 2005 3:46 pm

I would say that starting an independent store is a recipe for disaster. You just cannot compete in video game retail against the big guys.

That said, you should discuss with major retailers the possibility of starting your own franchise store. I'm not sure if they do this, but maybe you could start your own EB Games or Rhino store.

Dirt · Post by **Dirt** » Mon May 02, 2005 3:55 pm

Yeah, it's tough to beat the prices and reach of Best Buys and CompUSA.

Pyperkub · Post by **Pyperkub** » Mon May 02, 2005 4:00 pm

ChrisGrenard wrote:I would say that starting an independent store is a recipe for disaster. You just cannot compete in video game retail against the big guys.

That said, you should discuss with major retailers the possibility of starting your own franchise store. I'm not sure if they do this, but maybe you could start your own EB Games or Rhino store.

It really is a disaster waiting to happen -look at Valve's decision over vivendi recently. By this time next year you probably won't be able to find Half Life 2 in a store.

Online distribution is the wave for PC games, and with the nextgen consoles it could become a reality for them too. add-on packs are also part of that mix right now.

Comcast is ramping up their delivery of movies over cable on demand, and incorporating TiVo.

I'm sure that xBox 360 will have some sort of software subscription rental program within 2 years, with everything delivered over the net and billed to your Live account.

It (retail electronic gaming) is most definitely not a business to get into now.

Kasey Chang · Post by **Kasey Chang** » Mon May 02, 2005 4:00 pm

Yeah, the big boys will kill you on price. The smaller stores can't offer the selection either. Unless you offer only unique stuff like Japanese games and Anime movies only or something you can't compete.

Try something else instead. I know you think you know the market, but you really don't.

Maybe get into PC repair business or something. An A+ cert is pretty much all it needs.

Padre · Post by **Padre** » Mon May 02, 2005 4:12 pm

You'd probably do better doing rental - here in the UK, the big stores don't do rental on videogames. Not sure about the states, but I'm guessing rental stores for games are much harder to come by than retail ones.

It'd take some thought - you'd want to have a collection agency you work with to deal with the assholes who rent stuff and don't return it.

EDIT: Realised now that a lot of the places that do movie rentals probably do games too. Not sure to what extent you could compete with them - I'd have to research how good the average selection is and so on. I still reckon you'd have a better shot with rental then you would with straight retail. At the very least rental should be part of your business.

Other than that, as others have said, you'd have to specialise in obscure stuff, like imports and the like.

edosan · Post by **edosan** » Mon May 02, 2005 4:14 pm

Short answer: Are you nuts?

Longer answer: There are a lot of industries that the "little guy" is totally pushed out of the picture. This is one of them. Others in this field include: independant bookstores, hardware stores, etc etc. (you can probably add coffee shops to this list in a couple of years once Starbucks' domination is complete).

I cannot see how any independant store is going to compete against the big box stores (Best Buy, CompUSA) and the mall chains (EB Games) either on price or on selection.

Padre wrote:Not sure about the states, but I'm guessing rental stores for games are much harder to come by than retail ones...Do Blockbuster et al. do games? I've honestly never tried to find out.... hmmm...

Between Blockbuster, Hollywood Video, and whoever else is in the game, there's a rental store almost every 1,000 feet in the metropolitan (and suburban) U.S.

Padre · Post by **Padre** » Mon May 02, 2005 4:21 pm

edosan wrote:
Padre wrote:Not sure about the states, but I'm guessing rental stores for games are much harder to come by than retail ones...Do Blockbuster et al. do games? I've honestly never tried to find out.... hmmm...
Between Blockbuster, Hollywood Video, and whoever else is in the game, there's a rental store almost every 1,000 feet in the metropolitan (and suburban) U.S.

Well, that's bad news for the rental idea. Some questions would need to be examined then:

For the usual big rental stores, especially in the local area: How good is their video game coverage, generally? Do they stock just the big titles? Do they cater to all platforms? Do they also rent consoles and controllers and other hardware themselves?

There may be room for competition somewhere. But, if their coverage is pretty good, you'll struggle to compete.

Pyperkub · Post by **Pyperkub** » Mon May 02, 2005 4:31 pm

More evidence of the move online:

Turner licenses Games for rental over online delivery

Turner Broadcasting Systems has hit on a novel approach to making money in games (also covered here), an approach that builds on Ted Turner's own experience with Turner Classic Movies. TBS has licensed over 300 PC gaming titles from 17 different publishers, and will offer them via a download services called GameTap. The idea is that you subscribe to GameTap for a flat fee, download games, and play them until you either get bored or your subscription runs out.

And in other news, MMORPG's are also siphoning money from retail gaming.

qp · Post by qp » Mon May 02, 2005 4:53 pm

Yeah i really don't see how someone could make money with a game store these days. Maybe you could build a very loyal client base, but I don't see how you could get margins. Used games, possibly retro games might be workable, but it'd be a tightrope.

Now one thing you might be able to offer is a LAN game area or something - get a bunch of equipment and give people a place to play - it would depend on how much $ per square foot versus how much you could actually charge and how many people you'd have etc. You'd definitely have to have alternate sources of revenue - snacks or something if possible (but then your equipment could get messed up).

A straight store selling games in standard retail space? I can't see it working!

mrzubblewump · Post by **mrzubblewump** » Mon May 02, 2005 6:57 pm

I have often been called crazy and I consider it a compliment.

Now that GameStop has purchased EB there isreally only one true retail gaming store. I don't see these stores closing because of lack of business but instead they seem to be multiplying rapidly BestBuy and Walmart are big monsters but also are somewhat contained in this area. They sell new console games at the same price as everyone else and they do not sell used games.

Yes the industry could change to a download delivery system within the next 5 to 10 years. We know that Microsoft and Sony are not going to offer this service with the next generation of consoles. So this is not a major threat for at least 3 years down the road. It's true that the music industry has already impacted heavily by the download trend. Starbucks is now offering the ability to download music and burn CD's. I suppose a similiar service could be offered for games if the industry does shift in that direction.

Besides the cost of inventory, the cost of running a store like this is relatively cheap. A store requires a handfull of employees and those employees are earning little over minimum wage. My understanding is that inventory that does not move is returned to the distributer so even the inventory risk is low.

I appreciate that it seems like a risky venture. The truth is everything is a risk and nothing is certain. I'm certainly not dead set on this idea but I don't want to give up on it simply because the industry might change or because competing against the big boys can't be done. Like I said before, I see a constant stream of sales at my local EB so why is there no room for competition?

Jeff V · Post by **Jeff V** » Mon May 02, 2005 7:26 pm

It seems like every year we have to stomp on someone's misplaced ambition.

As others have mentioned, you will be squashed by the Borgs of the planet. The primary problem is Best Buy and Walmart will sell games for below your cost. Do the math: you won't make any money.

Perhaps Lord Gek will chime in with his own experience. Unlike large stores, you won't be able to send back stock that doesn't sell or get credit allowing you to sell it profitably at shovelware prices. You'll wind up trying to sell old games for full price, or take a huge bath liquidating them.

I can't offer any specific anecdotes regarding the video business because I haven't patronized a video store since switching to Netflix about 7 years ago. Oh wait, I suppose that is an anecdote. I suppose to have a chance you need to offer movies that Blockbuster doesn't carry - like lots and lots of hard core porn. If you don't have nearby porn palaces, then you might bring in a certain crowd. Not sure if they are much interested in games though (although judging from the crowd here, maybe so).

Blackhawk · Post by **Blackhawk** » Mon May 02, 2005 8:46 pm

I really doubt you could compete directly. You would absolutely have to offer a service that isn't competing with the bigger stores that can afford to take a loss to kill competition. Just a vanilla retail store won't do that. I don't think that retail is a good option for PC games anymore, either.

Perhaps:

~A console store focused on used games and trade-ins. I've seen this done before.
~A store that provides a variety of 'try before you buy' systems, perhaps a half-dozen of each console with comfy chairs so that buyers can try out the game of their choice. Add in a monthly tournament with prizes to bring in regular customers.
~A store that includes non-mainstream products - perhaps previous-generation consoles and games, or older PC games.

Actually, if you think about it, you could combine all three options for something that the retail chains just aren't equipped to compete with. Create new ground rather than face them on theirs. The only thing I see is that you'd have to have fantastic business sense to manage things into a regular profit.

SlapBone · Post by **SlapBone** » Mon May 02, 2005 9:44 pm

Start a bar or a club. Drinking and dancing are things that will never be successful online.

Put an Xbox w/ sports games or shooters behind the back bar or maybe even a little cyber-cafe action yourself.

Padre · Post by **Padre** » Mon May 02, 2005 10:14 pm

A strip LAN cafe!

Naked ladies AND deathmatch Quake!

I'd go.

edosan · Post by **edosan** » Mon May 02, 2005 10:19 pm

mrzubblewump wrote:I have often been called crazy and I consider it a compliment....

If you have that much money that you can start up a business with a virtually 100% guaranteed chance to tank, please send me some.

Really.

JonathanStrange · Post by **JonathanStrange** » Mon May 02, 2005 11:31 pm

Why not seach out independent videogame retailers in your area first to see what they are doing to survive? If there are none, is that a warning or an opportunity?

It wouldn't hurt to create some sort of business model to attempt to quantify your costs and projected revenue. Maybe you'll be pleasantly surprised or (more likely, I'm sorry) shocked at how much sales you'll need.

Just saying "everything's risky" is not enough, you need more data. I understand your point though. Many of major businesses, or actors, or fads, or bestsellers, are the results of someone taking a risk. I admire your willingness to try.

CSL · Post by **CSL** » Tue May 03, 2005 12:31 am

Padre wrote:A strip LAN cafe!

Naked ladies AND deathmatch Quake!

I'd go.

Go? We'd never leave!

Kasey Chang · Post by **Kasey Chang** » Tue May 03, 2005 3:02 am

LAN Cafe may be more survivable, but LAN cafe attracts a very different audience than the pure gamer.

A LAN cafe attracts those who who have disposable income, but does not want to buy a computer or broadband. Not all cities have that sorta audience. It's like having a safe place to hang-out for geeks.

mrzubblewump · Post by **mrzubblewump** » Tue May 03, 2005 7:47 am

My avatar has changed in honor of you guys and this thread.

I had thought about a LAN party type environment and I have seen it work in my area. This was about 5 years ago when the internet boom was still around however. It may still work but if I offer alchohol then my liability will sky rocket.

My concern is that there is an obvious assumption that it can't be done with little reason as to why. It's ironic that for years on GoneGold many people would complain about how EB sucked and they wished there was more competition. I currently do own my own small business and am very successfull at it. My competition takes in about 50 million dollars annually and I kick their ass in capability and sevice. I't not impossible to take on a Goliath and win.

My thought is that the cost of actually producing a game is very low (probably under $1). I'm not talking about the development cost but the cost of the raw materials that go on the shelf. The distributer really should not have any problem taking product back if it does not sell no matter if they are dealing with BestBuy or myself. They are in a business to put products on the shelf and from what I understand getting shelf space for games is very competitive now. I could be wrong about this and if so then this would be a deal breaker.

I had hoped that a forum like this would have people who have managed an EB that could give me more inside information. I need to know if I am correct about how the whole distribution process works. On average how many sales do they make in a day etc. I could do a survey in my local area but I doubt that the local managers would be very honest or receptive about giving out that kind of info.

morlac · Post by **morlac** » Tue May 03, 2005 9:09 am

There are 3 lcoally owned game stores within 20 miles of my house. 2 owned by the same guy. One store deals in console only and has a ton of imports/anime/card game stuff. The other 2 deal in mostly consoles but have a small pc section. The 2 also rent both console and pc games and take trades(the rental selection at Hollywood/BlockB is dismal). Basically you can buy anyhting you can rent and rent anything you can buy. All the stores seem to have very loyal customers. They have appealed to the soccer moms and the 'cool' dads in their areas. I find it very refreshing when I go there because the employees are knowledgable, honest, and best of all not pushy. They might not have as many sales as the big boys but the trade ins are better and for $10 you can rent 2 games for a week. The2 rental stores also have a back room for you can rent out for birthday parties for the kids etc.

So to all you naysayers, yes you can compete with the big boys you just have to find the right location and offer something the big biys can't; good customer service, great trade in prices, rentals , etc.

Padre · Post by **Padre** » Tue May 03, 2005 9:19 am

morlac wrote:There are 3 lcoally owned game stores within 20 miles of my house. 2 owned by the same guy. One store deals in console only and has a ton of imports/anime/card game stuff. The other 2 deal in mostly consoles but have a small pc section. The 2 also rent both console and pc games and take trades(the rental selection at Hollywood/BlockB is dismal). Basically you can buy anyhting you can rent and rent anything you can buy. All the stores seem to have very loyal customers. They have appealed to the soccer moms and the 'cool' dads in their areas. I find it very refreshing when I go there because the employees are knowledgable, honest, and best of all not pushy. They might not have as many sales as the big boys but the trade ins are better and for $10 you can rent 2 games for a week. The2 rental stores also have a back room for you can rent out for birthday parties for the kids etc.

So to all you naysayers, yes you can compete with the big boys you just have to find the right location and offer something the big biys can't; good customer service, great trade in prices, rentals , etc.

See, this is what I thought - rental is where it's at. EB and Gamestop don't touch rental, Blockbuster and their ilk do it poorly. A major opening there if you're willing to take on the risk (and by the sounds of it, mrzubblewump definitely is).

I still agree with the majority here that if you're going for straight retail, even with great customer service, you'll have an incredibly tough time competing with the big companies. So I'd be looking to emphasise rentals, used games, trades; that kind of thing works better on a personal level.

mrzubblewump · Post by **mrzubblewump** » Tue May 03, 2005 10:48 am

There is a franchise available named "Play & Trade". Not sure if anybody has every been to one of the their stores. I hate the name and they want a good chunk of change to get started ($100,000). I might try to pump them for info and see where that gets me.

I agree that rental/trade is where some money can still be made. Customer loyality/location are key parts to making this work.

LawBeefaroni · Post by **LawBeefaroni** » Tue May 03, 2005 10:56 am

Look at it this way. EB/Gamestop, BestBuy, etc place orders for tens of thousands of copies of each release. Hundreds for the big releases like GTA. The independent store orders 15. Who do you think gets the bigger discount on wholesale price? Everyone sells for MSRP. Will they even bother to fill your order?

Kasey Chang · Post by **Kasey Chang** » Tue May 03, 2005 11:01 am

mrzubblewump wrote: I had thought about a LAN party type environment and I have seen it work in my area. This was about 5 years ago when the internet boom was still around however. It may still work but if I offer alchohol then my liability will sky rocket.

Oh, no, no alcohol anywhere NEAR the premise, esp. not to minors. Closest you get is Guarana or whatever that energy drink is called.

My concern is that there is an obvious assumption that it can't be done with little reason as to why. It's ironic that for years on GoneGold many people would complain about how EB sucked and they wished there was more competition. I currently do own my own small business and am very successfull at it. My competition takes in about 50 million dollars annually and I kick their ass in capability and sevice. I't not impossible to take on a Goliath and win.

I think you and I have a different definition of "win". If you have more market share than he does in town, then yes you are winning. Just have better customer reviews is not winning (yet).

My thought is that the cost of actually producing a game is very low (probably under $1). I'm not talking about the development cost but the cost of the raw materials that go on the shelf. The distributer really should not have any problem taking product back if it does not sell no matter if they are dealing with BestBuy or myself. They are in a business to put products on the shelf and from what I understand getting shelf space for games is very competitive now. I could be wrong about this and if so then this would be a deal breaker.

From what I understand about the market, the "raw materails" is roughly in the $3-5 range, that includes the cartons and stuff. The light boxes (i.e. no manual) may be as low as 1.50 and jewelcase/sleeve would be down to $1 or so.

I had hoped that a forum like this would have people who have managed an EB that could give me more inside information. I need to know if I am correct about how the whole distribution process works. On average how many sales do they make in a day etc. I could do a survey in my local area but I doubt that the local managers would be very honest or receptive about giving out that kind of info.

I think one reason you aren't getting any answers is because the "managers" at your local EB do NOT see these figures. EB's are NOT independent franchises. They are wholly owned company stores. The managers simply receive a couple Fedex boxes every couple days, stock the shelves, and tend the cash register like every other grunt. And do an inventory check/ realignment every week or two. (and compile shrinkage reports and such) They see sales figures, but they don't see the actual cost of getting the games and/or returning them. If I am wrong, someone please tell me.

And the market is STILL aligned toward the big boys. Publishers have marketing incentives they pay to big chains like EB, CompUSA, BestBuy, and so on for displays in strategic spots in the stores. Where do you think those special aisle-end displays or those square displays touting Activision or Doom3 or whatever came from? Those are PAID by the publisher for strategic spos in the store. Would YOUR store be big enough to fit a couple of these? Doubt it. Thus, you won't get the extra funds they pay out, reducing your bottom line.

Let's not forget Walmart. Care to guess what Walmart did to the game market? Walmart REFUSED to buy from bazillion different distributors (that's why initially Walmart's selection was incredibly poor). Walmart forced GT software into the distribution business because Walmart refused to deal with anybody else! And since Walmart buys in such big volume, every body blinked and say "Yessir". Thus, Walmart WILL buy cheaper than you, and thus they CAN sell cheaper than you.

I am not too sharp on the "return to distributor" situation. I hope someone else has more pertinent info.

Kraken · Post by **Kraken** » Tue May 03, 2005 11:28 am

One more naysayer piling on here. I, too, am thinking of opening a retail store of my own. The two commodities that I know best -- games and books -- are both dying at retail, killed by monolithic chains and online availability. The independent bookstore business is almost completely gone, except for a handful of well-established shops and a lot of very marginal used or special interest niches. I can't remember the last time I saw an independent software store, never mind games. I can imagine including games in a more general-interest type of hobby shop (which is my current best idea). For an independent game store to thrive, or even just survive, you have to offer something unique that will draw destination shoppers while paying its own way. You can't compete on price, and probably can't afford a prime high-traffic location that delivers impulse sales.

If you figure out a way around those objections, I would really love to hear it.

(Edit) I managed a failed LAN center a couple of years ago. Without being able to serve alcohol, they attract mostly children. We discovered an avid market for overnight LAN parties. We also discovered that you can't get much turnout for one more than every six weeks or so -- they need to be an event, not an everyday thing. The logistics are difficult, as most kids want to bring their own shuttle PCs. I think our best take was about $800 one night, nearly half of which came from selling sugar and caffeine. There is a market there selling network access, babysitting services and snacks. Our one attempt at an adults-only LAN party (BYO alcohol) was a failure.

The Preacher · Post by **The Preacher** » Tue May 03, 2005 11:29 am

Well, there are couple of areas that I think there are possibilities, even if the deck is stacked against you. Here are some possibilities. I don't know what defines an adequate ROI for you but I can't imagine this will be a very high one. Anyhow, here are some positive options:

First is customer service. Some people will pay extra for a game if they can return it without hassle (at least people say they will). This is obviously a big risk because you could end up eating a lot of cost on this one. If you could carefully monitor people's activity and limit some risk, then you might be ok.

Second is the opportunity for imports. It's probably a small market but it's one where you can charge a premium. I have no idea how much it will cost you to import the games though. Personally, I'd love to see Championship Manager (for example) on the shelf.

Third, similar to 2, is selection, especially for PC. In my area at least, PC games get very little shelf space. Include a good selection of rentals, used, and new as well as secondary materials (guides, action figures, some game peripherals) and you may have a great niche.

Fourth, game cafe and LAN hosting. Someone here ran one (was it Blackhawk?) for a bit and they may have more insights about the feasibility. Offer HL2, WoW, EQ2, Battlefields, etc., some food and drink, and the opportunity to host reserved LAN parties (allowing people to bring in their own eqpt may be tricky but probably well worth it). Maybe try to get locals to start a guild/clan and schedule routine matches and practices. The start up costs are much higher (obviously) but you need to give people a reason to stop by your store more than they do Best Buy. Perhaps this is it.

Above all, no matter what you do, you must have good marketing. I stumbled upon a game/card shop by where I have worked for the past 5 years. Never knew about it and it's just down the street from BB. Maybe find a local gaming con and advertise there (bring your store on the road). Find a local list that you buy/rent and can mail postcard offers to (don't know if a PC Gamer rents their list or not but you should ask them to do so within your 50 zip codes or whatever). Something. Whatever you expect your initial capital outlay to be, double it and spend it on marketing.

Good luck.

mrzubblewump · Post by **mrzubblewump** » Tue May 03, 2005 11:33 am

Let's not forget Walmart. Care to guess what Walmart did to the game market? Walmart REFUSED to buy from bazillion different distributors (that's why initially Walmart's selection was incredibly poor). Walmart forced GT software into the distribution business because Walmart refused to deal with anybody else! And since Walmart buys in such big volume, every body blinked and say "Yessir". Thus, Walmart WILL buy cheaper than you, and thus they CAN sell cheaper than you

I agree that Walmart and BestBuy will make more of a profit per unit sold. I have no doubt that because they purchase in higher volumes than I ever will be able to that they willl receive substantial discounts. The fact that I won't make as much profit as Walmart does not bother me. If I can make enough profit to pay for my lease space and employees while leaving something worthwhile for myself does interest/bother me. I may be wrong but most of the new release titles (for consoles) are still selling for $50 regardless of where I shop (Walmart, BestBuy or the mom/pop shop down the street). I am under the impression that new release prices are fixed by the publisher and cannot be lowered significantly by the big boys.

I also agree with you that I won't be able to carry the same amount of inventory as the big boys. Unless I have the same amount of traffic in my store (a problem that I would love to have) then that is not a problem. If I am selling out of titles then for the most part that is a good problem.

What I am saying is that I don't see Walmart as a problem as long as there is enough business to go around and they cannot make drastic price cuts and run me out of business.

Arkon · Post by **Arkon** » Tue May 03, 2005 11:43 am

I managed an EB for almost 2 years. We weren't privy to a ton of information... however...your average console system makes the store no money. The profit margin on your average video game is rougly 4-8% after figuring in the price to purchase from the distributor as well as shipping the games to your location etc...Where EB made most of it's money was on accessories such as controllers, memory cards, strategy guides and the such. Most of these were closer to a 50-60% profit margin. The other big source of income was preowned games and service plans. On most titles EB uses preorders to gauge how many units to buy, as well as potentially doing same day shipping which puts the product in the store for sale the evening before other retailers.

LawBeefaroni · Post by **LawBeefaroni** » Tue May 03, 2005 11:47 am

mrzubblewump wrote: What I am saying is that I don't see Walmart as a problem as long as there is enough business to go around and they cannot make drastic price cuts and run me out of business.

Well, they can. Eventually (set time after release) they can sell titles at a discounted price. Because they pay less, they can discount more and still make a profit. Because they have profits in other areas, they can even sell for a loss. You can't attempt beat them on service for retail sales. People no longer expect anything more the courtesy at the register and easy to find product. If it's a difference of $5, they'll save the $5. You want to take returns? Then you're just loaning out games and take a loss on each one. Even if you put a 2 return limit or something in place, that's 3 games for the price of one.

What is your market like? Would you expect to sell 20 titles in a day? 50? 100? Then what is the cost per title? Your lease?

If you're serious, you need a market analysis and business plan. If you do that well enough, the picture should be clear. I assume asking here is the first step towards putting that together. Who knows, maybe you'll find a viable niche.

Carpet_pissr · Post by **Carpet_pissr** » Tue May 03, 2005 11:48 am

On the other side, let me offer this:

Home Depot and Lowe's are the two largest home improvement stores in the US. They are HUGE (literally and financially).

One of the local Home Depot's whereI live has an "old timey" hardware store right across the street. Both have coexisted on that block for many years. AND, there is a Lowe's about 3 blocks away from both of them.

Someone is competing with the "big boys" in this case. Are they actually making money is a different question, but at least they have not closed.

Also, you should consider two points:

1. do you want to do this because you love games, being around them, and would like to somehow introduce them into a career?
OR
2. do you want to do this because you think you can make some money by filling a perceived niche - ie you perceive it as a good business opportunity?

If for number 2., I think you may get disappointed for reasons listed in other posts here. But if for number one, GO FOR IT.

There are still locally owned coffee shops around long after Starbucks has moved next door. There are still hardware stores around (across the street!) even with a Home Depot and Lowe's, and there are still CD stores (granted, much less in this case, and maybe the most comparable to the video games issue) around even with Best Buy in the picture.

Point: I think yes, it's feasible to do something like you are talking about, but I would not expect it to make a lot of money.

In my opinion:

You will need a niche product or service, something different (like a LANPARTY setup as mentioned)

You should have a network of people/friends that you know would rather come (and BUY - most impt!) to your store than say an EB or Best Buy - BEFORE you open.

You should be financially prepared to lose money for a long time.

Carpet_pissr · Post by **Carpet_pissr** » Tue May 03, 2005 11:55 am

"If I am selling out of titles then for the most part that is a good problem"

I have to disagree with that - most people that you would be attracting imo would be the harder core gamers...people that would actively search out a computer or video games specific store. Mainstream will always hit the Best Buys and Targets, Wal Marts, etc.

With that in mind...think about just the people here, talking about pre-ordering, excited as hell about games that come out on the first day, can't wait to get off work to buy game X, etc. If that guy comes into your store and can't find Half Life 2 the day it comes out, he is going to 1. be pissed off 2. will go across the street and buy it at Best Buy, which has a shelf full.

The Preacher · Post by **The Preacher** » Tue May 03, 2005 11:56 am

Let me add one more thing to my thoughts (didn't want to edit since it's not particularly "positive").

I would think you need to be the only employee for the foreseeable future after start-up. I can't see how you would be able to see what's happening with the register and stock or be able to afford the labor costs initially or want to deal with the woes of part time help.

Not sure if that's part of your plan or not.

Shkspr · Post by **Shkspr** » Tue May 03, 2005 2:37 pm

Seven dollars.

Every copy of GTA, or Halo 2, or Madden 2K6 you sell will net you seven dollars after you pay for it to get on your shelf. That seven dollars goes for your rent, your labor, your fixturing, your advertising.

The next big wave of hardware sales is coming, though - maybe you can make it up by selling hardware. Your profit, for example, on an XBox 360 is likely to be somewhere in the range of three dollars.

Well, maybe that won't be where you make money.

The traditional route for retailers to try to recoup some of the margin that doesn't exist in the gaming market is to get into the used market. Gamestop doesn't give people very much for their used games; maybe you can give people more money for trade-ins and resell the games for a few bucks less than Gamestop.

Only problem is that paying 3 bucks for a game they're going to resell for 30 is the only way they keep the damn lights on.

Put it this way - if you go ahead and open up such a shop in the Knoxvile area, make sure you get names and addresses of each of your customers - your competitors would love to buy those lists from you for a few hundred bucks when you're done with the dream.

LawBeefaroni · Post by **LawBeefaroni** » Tue May 03, 2005 2:44 pm

Jeff V wrote:I suppose to have a chance you need to offer movies that Blockbuster doesn't carry - like lots and lots of hard core porn. If you don't have nearby porn palaces, then you might bring in a certain crowd. Not sure if they are much interested in games though (although judging from the crowd here, maybe so).

There has to be something to this. Porn 'n Games. Give porn some legitimacy in a "real" store and create a hook for games that sets you apart from major retailers. Losing the under 18 customers might hurt but there's major profit in porn.

edosan · Post by **edosan** » Tue May 03, 2005 3:35 pm

Ironrod wrote:One more naysayer piling on here. I, too, am thinking of opening a retail store of my own. The two commodities that I know best -- games and books -- are both dying at retail, killed by monolithic chains and online availability. The independent bookstore business is almost completely gone, except for a handful of well-established shops and a lot of very marginal used or special interest niches.

Hear, hear. The bookstore my wife worked at (45 years as an independant bookstore) closed last year. Everyone I talked to said it was a real shame it was closing but when it was open all people could do was complain that they didn't meet or beat Amazon/Target/Borders' prices. Note to all prospective store owners: people will crawl a mile over broken glass to buy a book for 20% off at Wal-Mart rather than pay full price.

mrzubblewump wrote:What I am saying is that I don't see Walmart as a problem as long as there is enough business to go around and they cannot make drastic price cuts and run me out of business.

Unfortunately, you just summarized Walmart's business strategy.

Padre · Post by **Padre** » Tue May 03, 2005 4:03 pm

What you definitely can't afford to do, if you intend on selling anything rtail, is charge more per unit than Gamestop et al do. The chain stores are merciless about matching each other for price, and I myself have trekked from store to store just to get a game a few quid cheaper. If you're charging a noticeable amount more than your competitors, you will sink, however friendly your demeanour and returns policy.

Pyperkub · Post by **Pyperkub** » Tue May 03, 2005 4:08 pm

Carpet_pissr wrote:On the other side, let me offer this:

1. do you want to do this because you love games, being around them, and would like to somehow introduce them into a career?
OR
2. do you want to do this because you think you can make some money by filling a perceived niche - ie you perceive it as a good business opportunity?

If for number 2., I think you may get disappointed for reasons listed in other posts here. But if for number one, GO FOR IT.

You should be financially prepared to lose money for a long time.

I would like to echo the #1 point here. If it's what you want and you go in knowing that the odds are you will lose money (or at best break even) it can be fun and personally rewarding. Also - You're not working for anyone but yourself. Set your own hours (according to how much money you need to/would like to make), set your own policies, etc..

If you need a tax write-off, this can also likely qualify.

I wouldn't mortgage the house or anything tho.

I would also go in expecting to do most of the work myself, and expect to work some long hours. You'd be doing this for love, not money. A lot of gaming (and other free) time will go by the wayside too.

morlac · Post by **morlac** » Tue May 03, 2005 4:23 pm

Do not underestimate the buying power of soccer moms. In my above post Steve(the owner of the 2 stores)knows all of his regualr cutomers by name and likes/dislikes. He also asks ?'s such as 'how is little timmy doing?' etc. Hell he even knows my fiance's name and ask how shes doing everytime im in there, suggesting some new platformer she might like. Soccer moms love to talk, espically about their kids. The moms trust Steve to not let them buy something too violent or inappropiate for their kids. His hardcore customers trust him not to reccomend something crappy Does he have hard time getting certain titles on relaese day being a bit player? Ocassionally. And yes his prices on a whole can be higher if something is on sale elsewhere but his used games and rentals are cheaper so it seems to even out.

Getting and keeping a good customer base is the key of course as you won't have alot of random/walk up purchases like a mall store. Make it a destination spot. Be active in your local communities, doante to the hgihschool band, do fund raisers etc. The more you make your store seem part of the communtiy the better. oh' and don't plan on getting rich
but if done properlly I feel like you can still earn a lving doing something you love.

Gorath · Post by **Gorath** » Tue May 03, 2005 5:52 pm

I don´t think such a business endeavor is hopeless. It must be very carefully planned, though. Take at least 3 months to double check every single assumption you make, every conclusion you draw and every decision you make.

Some random thoughts:
-selling consoles, console games and full price PC games (-> mainstream segment):
You can´t compete with the big guns in this area. If you´re too expensive you drive your customers away, if you´re too cheap you earn nothing.
-> Conclusion: You have to find another hook!

-reliability:
This is one of your biggest advantages over the retail chains. You _know_ which game is good, when you have it in stock and which price you can make. The aim must be to convince your customer everything you say is correct because you´re an expert.
If you say "We´ll have it tomorrow at 12 for $45" you have to make sure the product is there. Ideally you have your distributors under control, or even better a broadline games, etc distributor nearby, or you have to bite the bullet and shop across the street.

-exit strategy:
I guess returning unsold inventory will hardly be possible without a penalty, at least until you´ve established good business relationships with your key distris.
You need a procedure to get rid of shelf warmers (a) without taking (too big) a loss and (b) without cannibalizing your more profitable products.
Ebay? Special discount on trade-ins? Be creative and consequent.

-traffic:
Get people into your store. And make them come back. Very important, very complex. I´ll leave this one to the experts.
IMHO traffic is the most important point. You _need_ traffic to sell product.

-side business:
This is where it gets interesting. Who says you should limit yourself to the retail part? Keep the trade-ins in the store for a week, then sell them on eBay; n* $10 profit can add up. Have the high margin goodies available for the most important games. Offer preorder gimmicks. Organize every small or back katalog game the customer demands. Offer special discounts and stuff for clans. Run an eBay shop. Don´t forget about nichés. Maybe adventures are small, but adventure players are loyal! Do LAN party events.

-marketing:
I doubt expensive ads are the way to go for a small shop. Do smaller stuff. An event every 2 months, identify opinion leaders and make sure they like your shop, etc.