Insider: Margins

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To be perfectly honest, it's been a slow week. Even my colleague Sigmund Ausfresser decided to avoid Magic finance and throw a unique twist on his article, which I really enjoyed.  While my article topics aren't usually time-sensitive, it feels like the eye of the hurricane before Pro Tour Kaladesh throws a bunch of cards up and down. I was drumming my hands against the keyboard for about an hour before I figured out what I want to write about:

Let's talk about profit margins.

The term and associated percentages are thrown around a lot; we use it when deciding what to buy, checking our finance spreadsheets on how well we did this month and when cashing out from Magic entirely. What cards are going to have the best margins? What prices do I buy cards at when I'm acting as a personal buylist? What margins do I make when selling on TCGplayer? I'm here to answer these questions, and maybe even take a bit of a step back from bulk for today.

The "Double-Up"

If you've been listening to Brainstorm Brewery for a while now, one of the core concepts that they've instilled is that you should be confident that your spec will "double up" for you to make any money. This is a drastic shift from real-world markets, where smaller profit margins are universally accepted and worked within. For example, gas stations in New York only make around $.10 on a $9.00 pack of cigarettes.  Margins on gasoline are even thinner, or nonexistent. Stockbrokers are ecstatic to see a 100% increase in something.

Unfortunately, our industry is a bit different. While Magic financiers often like to think of ourselves as the third-party middle man between "person selling Magic cards" and "people buying Magic cards to play with," we're far from that. There are often hidden costs to purchasing cards (taxes, fees, shipping), and we all know about the percentages we can lose on selling cards (again; taxes, fees, shipping).

When Jason, Corbin, Marcel, and Ryan would suggest the possibility of doubling up on a spec, you often weren't really turning $5 into $10. You were turning $5 into $7.50 after stamps, selling fees, taxes, and shipping materials. When you buylist, there's also the usual costs of the store knocking you down based on condition.

Sometimes, the hardest cards to make good margins on are in the $1 to $4 range. The "not quite bulk, but might not be worth listing on TCGplayer because of the flat fee system" cards. When you sell a card on TCGplayer, there's a flat 50-cent fee per transaction in addition to the 10.5% fee on the card itself. This can make it awkward to list cards like Boros Charm, Etched Champion, Terminate.... you get the drill. If you bought these types of cards at retail for the purposes of playing with them, it can be disheartening only getting back 50% of your initial cost. When you buy a collection (or even just a pile of singles from someone who needs an immediate buylist), I think the expectation of a lot of players is to get a flat 50% back minimum, with even stronger margins on Modern and Legacy staples. While those might be numbers that Card Kingdom can afford to pay on absolutely minty cards, it doesn't really make a lot of sense for us to pay a flat 50% on the smaller stuff. This can sometimes be a bit rough to explain to people when they think that you're gonna make a 400% profit on their $1 Temple of Plenty, but it's just not realistic for us to pay that much.

Near-Bulk Margins

For this reason, I generally only offer 15 to 25 cents on cards that will end up getting thrown in my dollar box. Sometimes I'll get lucky and hit that double-up after fees and bulk purchases (sure, I'll give you 10% off if you want to buy 20 dollar rares from me), but more often than not those cards sit in the dollar box until I end up outing them at a Grand Prix for 30 to 45 cents each. If you're thinking about starting up as your area's buylist, don't overpay on the near-bulk stuff just because the 50% rule has become so commonplace.

If I list an Etched Champion on TCGplayer for $2.99 (with free shipping, of course), we can see exactly how much I lose to the fees: 50 cents to the flat fee, and around 33 to the 10.5%. Add in another 53 cents for the stamp, envelope, paper, ink, top loader—we're looking at only getting $1.63 in our bank account for that sale. Yikes. If we were ChannelFireball, we could charge $3.49 and make back some of those margins.

I'm fortunate to have a display case set up where I can have a "$3 box" and just throw all my Etched Champions into it, then give the store its 10% cut. I've written about that method before, and I still think it's the best-case scenario for those looking to take their MTG finance to the next level. Even then, it helps to add a "If you buy five, get one free!" tag to help increase sales. For everyone else, TCGplayer and buylists (preferably in person at a Grand Prix) will be your best bet when it comes to these lower-valued cards.

"But DJ! I don't want to make $1.63 when I sell my Etched Champion!"Well, sometimes you have to. While Card Kingdom is paying $2 right now on that very card, it doesn't really end up being $2 by the time they get the cards. If you're trying to maximize efficiency and ship a bunch of cards to Card Kingdom at once, then you'll be paying a decent chunk in postage by boxing up several hundred cards and weighing them at the post office while shipping with tracking. In addition to that, the $1.63 from TCGplayer scales upward if you sell more cards in a single transaction, which encourages listing a whole ton of cards on the site at once. Selling a whole playset of Champs at $2.99 earns you $9.68 after fees and shipping, which is more than the $8 you would have gotten buylisting to Card Kingdom. You're still not making that 100% profit margin, but profit is profit.

End Step

When it comes to those negative feelings about shipping out at 50% of retail, we're lucky when it comes to hobby prices. I know that Magic and Wizards in general get a lot of hate for this game being expensive, but we're privileged in that our game has an incredibly strong margin when it comes to the concept of "I'm done with this game and want to make my money back."

If you have other hobbies in addition to Magic, you know what I'm referring to. Do you play a sport? How much can you get on Craigslist for that old equipment that you've worn out or outgrown? Paintball? The cost of entry is incredibly high, and the amount you get out of it when you're done is nowhere near close to the percentage you get from Magic.

If you by into MTG singles at full retail for your Modern deck, it's absolutely possible to get 80% of your value back if you take good care of your cards and sell through the correct outs.

What about video games? Digital games like League of Legends and Hearthstone are money pits that you can't recoup value from at all, and console games are really the only thing that can sometimes come close to our market when you want to Restore Balance to your bank account. The yearly Call of Duty game will rotate out like your Standard cards, and only the true collectors titles like Pokémon and Fire Emblem retain value in the long term.

This doesn't really have an overarching lesson or anything, it's just a note on perspective. Magic players complain a lot about the price of the game, but other hobbyists who play Warhammer 40 would kill for our ability to liquidate at a high margin. Something to think about.

2 thoughts on “Insider: Margins

  1. Thanks for the shoutout. Great reality check writeup. I am very fortunate in that my top few hobbies all pay for themselves over time. It’s a great feeling to buy a card or a vintage video game, play with it as much as I prefer, and then sell it for the same or even more than what I initially paid!

  2. I haven’t sold a lot of cards, but when I do, I sometimes charge shipping and I sell through FB groups, so my only real fee is the 4% from Paypal fees.

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