Welcome back, readers! Today's article will focus on a somewhat confusing subject: metrics. No, not the system of measurement that everyone outside the US uses, but a system or standard of measurement.
The idea behind this article came about a few months ago when I was working on my LGS's business breakdown, which in turn became this article.
The store's owner, when discussing his perceived strengths and weaknesses, used somewhat vague arguments like, "we have the most competitive prices," or, "we have the most competitive player base." There's an obvious problem with such arguments. How do you define "most competitive?" When I asked him this exact question, I got a blank stare back.
To be fair, part of the reason many people use this type of amorphous statement is because what they're trying to measure is difficult to define. Thus a nice blanket statement is used to cover all the bases.
The problem with this approach is that by not defining a problem specifically, you have no way to track progression or digression from any goals related to said problem.
The idea of metrics is to come up with some concrete measurements that can actually be tracked. Then you can compare your performance over time to see how you're improving (or not improving).
Goal: To Make More Money Selling Magic Cards
Let's take an example and see if we can break it down to get an idea of how this works. Our aim is to end up with some metrics we can use to evaluate how successful we've been at achieving the goal.
Our "amorphous goal" will be simply to make more money selling Magic cards. This seems like a pretty obvious goal for any given store or financially-minded player.
There are a lot of different ways to accomplish this goal:
- Sell a higher quantity of cards.
- Sell at a higher profit margin.
- Buy at a lower cost.
- Sell more valuable cards (with the same profit margin).
- Buy more liquid cards
Any one of the above avenues would lead to making more money selling Magic cards, but all take different approaches and some might use different metrics to evaluate how successful we are at accomplishing said goal.
Let's look at each one and discuss what metrics may be applied to gauge success.
Increase Quantity Sold
The obvious metric here is quantity of cards sold. This will be helpful if everything is the same price, but it won't be sufficient by itself.
If we sell 100 $1 cards in one month or five $25 cards in a month, our metric would imply the former was better, when in fact, from an overall monetary standpoint it wasn't. So you probably need to track the total value of cards sold, as opposed to a simple quantity.
Increase Profit Margin
The metric here would be to maximize the difference between your buy price and sell price, or spread. However, the problem with this is that while you have direct control over both prices for your specific store, the market itself really sets these prices.
What I mean by this is if you offer to buy a card at $1 but its market average is $100 you'll be unlikely to find any takers (and to be honest you'll run into quite a few people who will question your moral judgment).
Of course, real stores modify their prices to reflect the market value, so both you and your competitors will create a buy price that "evens out" over time. A store offering too high a price will quickly fill up their stock and drop the price, whereas stores offering too little won't get any in stock and will have to raise prices to fix that.
Sell Pricier Cards
This goal would also use a metric of quantity of cards sold, however, it would ignore cards below a certain value. The challenge here is defining "pricier" as it's almost as amorphous as "making more money." After all, money has different values in different places, and even within the US the cost of living can vary greatly---selling a hundred $5 cards in one place could be a great week, whereas somewhere else it won't even cover the rent.
Buy More Liquid Cards
This goes in the other direction by focusing on what you as a store acquire to resell to your player base. I've discussed before the importance of understanding your player base, both as a store or trader. We all have limited assets and every time you buy a card, you're forfeiting some of your current cash assets now to acquire additional cash assets in the future.
If that's confusing, think of it this way. You have $1200 cash and someone walks into your store and wants to sell their Unlimited Ancestral Recall, in beautiful shape. You verify it's real and check on Trader Tools to see the highest buy price is currently $1250. The owner is asking $1200.
So you can buy it on the spot and make $50 at the least, but you'll have to ship the card off and you won't have any cash to pick up additional cards this week. You also know that none of your regular customers have any interest in buying an Ancestral Recall, by cash or trade-in. So while this transaction would net you at least $50, it comes at a steep opportunity cost because the card isn't liquid to you.
You're far better off holding your cash reserves to acquire cards your customers want, even if it means losing out on some profit. The risk of not having assets available when other options with a much higher profit potential come along is too great.
The other challenge with this metric is in defining a card's liquidity. Unfortunately, the metrics for card liquidity are incredibly hard to nail down. In fact, coming up with an equation or algorithm would likely make you a lot of money if it proved to be even remotely accurate. Sadly, I don't have a degree in economics, so I can't make any progress on that front.
However, a savvy store owner/trader does keep track of what has sold quickly and repeatedly in the past. An even better one tracks the trends of different formats' metagames to make educated predictions on future card prices (i.e. speculation).
So it's important to look for trends and patterns. I don't own a store, but I've had a lot of requests for various Modern staples over the past year. This leads me to believe Modern prices will likely experience a decent upsurge this year (and from what I've read from my fellow writers on here, I'm not the only one to think this way).
Because I've received these requests, I've made it a habit to target strong Modern staples in trade binders and keep track of my stock in a spreadsheet.
All too often I see people (including myself) fail to track data as well as they should. I'm pretty good about recording data when it comes to speculation targets, documenting everything in a spreadsheet. I'm less diligent when it comes to the number of requests for any given card, as I often fall back on the all-too-easily-forgotten "mental note."
I would suggest a separate spreadsheet to document the card name and date of each trade/sell request you receive. The larger your sample size, the more accurate your "demand estimates" will be, which ultimately will determine how likely you are to sell a given card.
Don't forget the price you're offering will play a major role. Ideally you'll want to keep the same price structure throughout the data gathering process. If you see your sales slump dramatically this obviously might have to take a back seat, but be careful not to make comparisons across the different pricing structures without adjustments.
It's absolutely critical to establish metrics when setting any sort of goal (whether Magic finance-related or personal). Hopefully this article has helped you review and consider not only how to word the goal, but how to track it to determine your progression.