It’s always sad to see a game store close. I have numerous great memories from my childhood while at my local game store (LGS). These are where I met my best friends and best men at my wedding. These are the places we go to when we want to relax and enjoy the company of people with similar hobbies and interests; where people of various backgrounds with a great many differences can bond over shared interests and realize that despite these differences we still have a lot in common. Their importance in the MTG Finance realm is paramount.
All that being said, I think one should take a step back and consider this statement. I don’t know the background or history of Wizard’s Keep Games, but I find it a bit hard to believe that the Secret Lair series was the straw that broke the camels back. I say this being one of the people who criticized WoTC for that series myself. I think WoTC has misevaluated the importance of LGS’s to their own business model, but that is on them to figure out.
Every store needs to understand that WoTC has a monopoly on Magic: The Gathering and all their other franchises. They are going to do what they think will generate them the most income as all good businesses do. This means that WoTC’s #1 priority is their own business growth. We’ve seen a lot of game stores pop up in large part due to Magic‘s massive growth over these 26 years, with many generating a significant amount of revenue with just Magic singles sales. In fact, that may very well be where our problem lies.
Magic singles are a very lucrative business. When you compare buylist prices to store retail price you often see profits of 30-50%, which is insanely high compared to almost every other industry. Now, to be fair, there are overhead costs that eat into those profits, but if you can turn over a large number of cards regularly those costs are minor profit reducers. So why is that the problem?
With singles being so lucrative, it makes sense that more and more people would want in on the market. The biggest bottleneck was how to convey your wares to the world. While we have almost always had eBay as an option, TCGPlayer opening up to non-B&M (brick and mortar) stores was the real game-changer. Now anyone can own a store with your competitor’s prices readily visible, making pricing a lot easier.
To make matters worse for LGS’s, these non-B&M stores have much lower overhead costs. This means they can price out many B&M stores that don’t have enough singles sales to make overhead costs negligible. In this very real and unfortunate way, every one of us who sells cards on TCGPlayer but doesn’t own a physical store presence is contributing to the downfall of the LGS.
The Great Debate
Interestingly enough, I often see two types of players debate this problem on social media.
One side argues that the higher cost of the cards is that the store provides additional value; the LGS provides an environment to play those cards, and if there were no stores, there is little reason to buy the cards. This is a legitimate argument, but one that likely obfuscates a potential root cause of a store’s financial problems. This argument is only accurate to the point where the price difference equals the actual overhead costs + TCGPlayer low with shipping. Obviously, the buyer doesn’t know the store’s overhead costs, but it’s important to understand that any copy of the same card has the same “play value,” in that a copy of Sol Ring I buy from the cheapest store on TCGPlayer is just as playable as the copy I buy from my LGS.
This is important to understand, because we live in a society where people want the best deal. The definition of “best” will likely vary from person to person, but the financial impact on their wallet is almost always a significant factor in defining “best.” A store that tries to sell a card for $10 when the same card can be readily had for $6 online needs to justify the $4 price difference. There may be additional value in immediate accessibility, but there may not.
The other side argues that their LGS prices are not competitive with the market and those stores often try to justify this cost difference due to overhead costs. This argument is typically only known at the micro level; between the person arguing and their LGS owner who is likely not in the debate to begin with, so each instance is very localized.
Unfortunately, this makes it extremely difficult to determine the validity of their concerns. They could be well grounded or they could simply be unhappy with their LGS. In our example above, they view the $10 price tag on a card they can buy online for $6 as the store owner trying to “rip off” their local players. Again the $4 price difference may or may not be justified but the potential buyer views the markup as unreasonable and thus has no interest in making the purchase. The store owner now makes 0% profit instead of whatever they would have had the price been believed to be reasonable from the potential customer.
Why this is Important?
We will now circle back to the Secret Lair series from WoTC. While one could make a fair argument that supplemental products with specific cards included has meant that WoTC has always had a toe in the MTG singles market, the Secret Lair series implies WoTC is willing to dip their whole foot in. One could argue that the Spellbook series was really the initial start of this transition.
However, the big difference here was that the Spellbooks were distributed through LGS’s, so they got a share of the profits. The Secret Lair series bypasses the LGS entirely, which is what has rankled so many store owners. To be fair, this is quite justified as they are already being squeezed by non-B&M stores, but nobody can compete with WoTC in the singles market.
Everything isn’t doom and gloom, though. In the natural world, species that face harsh climates adapt, and so too can the LGS. The LGS environment is definitely a resource store owners can utilize. You have a relatively captive audience, especially during tournaments, which offers a lot of opportunities:
Snacks and Drinks
Many LGS’s offer prepackaged snacks and drinks. While they typically won’t be making a ton of money off this per transaction, concessions do offer good profit margins when purchased in bulk. Having access to a big bulk store like Costco or Sam’s Club allows you to buy these items at a heavily discounted rate, and you can make a 50-75% profit margin while still being competitive with any nearby convenience stores. These profits also tend to scale nicely with tournament attendance.
As a person who buys and sells cards online, one major challenge I face is acquiring new inventory. All online transactions carry additional risk because they aren’t instantaneous: cards can get lost in the mail, people can sell fakes, or even fail to ship out cards. Large stores are willing to shell out thousands of dollars just to set up a few tables at a MagicFest, and for good reason. You can’t grow your singles business without consistently acquiring new inventory, and having an actual set, safe location to conduct these transactions can be a vital resource.
I’ve been to numerous shops where the owner doesn’t actively try to pick up cards from patrons and simply waits on them to come up to the store to sell. This likely means that a lot of patrons never trade or sell cards into their LGS simply because they aren’t actively trying to get rid of anything. However, when given the opportunity, many players will be happy to move cards they don’t really use towards things they do want, though that requires having a good inventory to entice trade-ins.
To be continued…