The comic book and videogame industries are pretty similar. Both rely on niche support from big-spending, highly dedicated fans. Both are slowly expanding in the mainstream market. Both have been revolutionized by the internet and are struggling to find a business model that includes digital downloads.
Yet while independently owned specialty shops dominate the brick-and-mortar comic book business, the videogame retail space has increasingly become synonymous with one name: GameStop. The slow conglomeration of mini-chains like Babbage’s, Software Etc. and FuncoLand came to its monolithic conclusion in 2005 when GameStop’s merger with EBGames gave them a full 25 percent of the videogame market (a share that’s surely increased with the chain’s nonstop expansion in the years since). The remainder is almost entirely taken up by big box retailers that sell videogames alongside unrelated products like electronics and home supplies. For most consumers, the small, mom-and-pop game shop is a thing of the past, if it was ever a thing at all.
“Independent retailers are definitely decreasing,” says Kevin Halligan of game distributor Mecca Electronics. “In my five years I’ve seen a lot of independent guys go out of business. … It’s really hard to compete against GameStop, because GameStop is everywhere, in every neighborhood.”
The competition is that much harder because it’s not really a fair fight for independent stores. “The No. 1 disadvantage for independent retailers is the whole industry of price protection,” Halligan said. Big retailers can order games directly from the publishers and get a refund when those publishers inevitably lower a game’s asking price. Independent stores, which overwhelmingly get product from distributors or wholesalers, are out of luck when the price drops come, and they tend to come faster and faster these days. “[This year’s] PS2 Madden, EA dropped the price in four weeks,” Halligan said. “That was a game where people were confident, they had no problem buying 120 pieces on day one; they figure it’s definitely not going to drop because this is Madden. A lot of places really got burned on that.”
Even if the price doesn’t drop, the margins on new games are so low – around 15 percent – it’s nearly impossible for an independent shop to stay in business without trading in more profitable used games. But that doesn’t mean you can just ignore the new games, either. “The only two [independent stores] that I’ve known that have not succeeded did not carry new merchandise to the extent that people would trust that they would have the new games,” said Jason Graham, owner of Brockport, New York’s Game Players Unlimited. “I seriously spend so much money on new games that I don’t make any money on new stuff. But it brings in the trade-ins. How am I gonna get NHL ’07 if I don’t have NHL ’08?”
Just because you sell a company’s games, though, doesn’t mean they’ll help you out with promotion. “Even little things like getting point-of-purchase promotions, [publishers] don’t want to send that stuff to us,” says Doug Demotta, owner of Reading, Pennsylvania’s MicroPlay. “A little poster is a big deal to us. Our competition will get big, thousand-dollar displays of systems, consoles they can put on the floor, and people can try and play. We don’t get anything like that.”
Out-of-store promotions can be tough, too. Independent stores might have a small budget for local cable or movie theater ads, but they can’t compete with the mega-chains’ marketing muscle. “Every Sunday you open up the paper and see these circulars for Circuit City and Best Buy, and it’s a downer,” Halligan says. “Every holiday season, Toys ‘R’ Us does this buy-two-get-one-free videogame thing. That kills everybody. All the independent storeowners go to Toys ‘R’ Us, and they buy tons and tons of stuff. With that deal it’s cheaper than buying it at wholesale.”
It all adds up to a nearly impossible market for an independent store to break into. “There’s no uniqueness,” says Beverley Liedler, co-owner of southern New Jersey’s Game Zone stores. “If you’re in the apparel industry, you can have a certain look in your store, you can be targeting a certain audience that is not gonna be in the big box retailer or the chain. It’s very hard to have a unique product in the videogame business because we don’t create the demand, the television does, the publishers do, and you can’t be more attractive price-wise because there’s nothing to work with there.”
So how do the independently owned stores set themselves apart? Just being knowledgeable about games and the industry can be a big help. “When people come in, they know that they can trust what we tell them,” says Demotta. “I know there were some dog systems that have come out, like the N-Gage. We just steered people away from them, whereas other places had a big display of it and had to sell it. It’s part of their corporate mandate; they had to do that. We could tell them, ‘This is going nowhere, avoid it like the plague.’ And sure enough, it disappeared.”
Building a sense of community also helps. Chicago’s Game Champs store has 11 flat-screen TVs and hosts tournaments to create a social hub for the area’s gamers. “We try to put an atmosphere here for gamers where people like to come in and try the games out and play them,” says Game Champs manager Michael Jones. “We’re building a more community-based atmosphere than a small cubicle to come in and go home to your own little world. … I like to have gamers come in, talk about a game, play with each other. It turns it into more of a social thing.”
Building up a unique selection can also work. Videogames New York owner Giulio Graziani says his store has become a place people seek out because of its extensive gaming collection. “If you come in our store, there’s probably 60,000 games. A lot of the stuff is touchable, so they a lot of people feel the chance to touch a little bit history, that is what makes us so unique. We are like something between a museum and a videogame store. … When you don’t find something, you come to us, always. That’s what we’re famous for. It might be more expensive, but we have it. That’s what we’re building out reputation on.”
Despite all the challenges with running an independent store, there are cases where it can be helpful to be smaller and more nimble. “In some ways it’s easier for us,” Liedler says. “We have three stores, and when you’re trying to get a quantity of Wiis for three stores – 60, 100 pieces – is a lot easier to obtain than 100,000 if you have 5,000 stores. We have more flexibility in trying to obtain the products we need.”
That flexibility can also let you take advantage of opportunities, if you’re sharp enough to see them coming. “Sometimes you’ve got to be bold,” Demotta says. “There’s a game called Sniper Elite for PS2. The game’s been out of print for a long time. We found a supplier that was selling them, we brought in 20 copies, and it took a while, about a year, but eventually all 20 sold. You make your money on that stuff because nobody had it. If we were a public company and somebody said, ‘Why are you buying this obscure title? When do you think it’ll sell, a year from now? I’m not gonna do that. It’s a waste of time.’ [With a big company] you have to make money every quarter, not four quarters from now.”
Even so, the independent retailers that have stuck around are pretty pessimistic about the future of their small slice of the market. “The risk is too high compared to the benefits,” Graziani says. “Between me and you, there’s too much bullshit in this business. If you are opening a videogame store today, I’d give you an 80 percent chance of failing in three years.”
“There’s a lot of businesses you could go into that would be a whole lot easier than this one,” Liedler says. “Our business is getting narrower and narrower as far as number of competitors – and they’re just getting bigger and bigger. Between the chains and the big box it’s just not an easy business to continue being successful in, and the number of stores that have been successful is shrinking. It’s a shame because it kind of takes some of the uniqueness away from the business.”
But there are some who manage to stay positive. “Since the day I opened nine years ago my sales have gone up every year,” Graham says. “I’m not rich or anything, but my customer base is expanding, my sales are growing every year, I just opened a new store and we’re going to open a third store. … Let me tell you, if you walk around in your store all day long selling videogames, saying, ‘Woe is me, sales suck, I hate this place,’ people aren’t going to come back. You’ve got to be upbeat, you’ve got to be positive, you’ve got to feel good, you’ve got to be smiling, you’ve got to be happy, and your customer’s going to feel that when they walk in the door. This is really a super-positive place to walk into.”