How are you going to pay for that stuff? I covered basic ways people get money to open, but let’s say you have that covered, great. Now you have to constantly spend money to get the newest thing. MTG set, Pokemon set, whatever. Do you have your $50,000 in cash reserves? No? Then how ya gonna pay for that? You had that money for inventory, but it’s likely gone now. I am talking about that never ending rotation of new things.
Even I you just focus on the big 3 card games, you get new releases every 3 months for 3 games. MTG has Draft, Set, Collector, Jumpstart, PR kits, Commander Decks, for each set. Pokemon has Booster and ETBs, Tins, Specialty boxes. So, a set every 3 months and a ton of sub-products per set. What do you get? How much of each? I personally do about $2k on Pokemon, $4k on MTG and $5k on Force of Will every set. A lot of times they all drop close to each other. The 3 I just mentioned all dropped within 2 weeks of each other this last time, so there is $11,000, and that’s just for release day.
Now, you can just say, I’ll do pre-orders and use that. Sure, you can, but are you a big player online? Can you sell a box and make $5 on it? Online is cutthroat and a lot of times, depending on a set, some places will take a loss on it, just to move volume or to get their name out there. And by $5 a box I mean after, fees, shipping, etc. It adds up (see GSL #4). And what if the set is hot garbage? The last commander legend set I can get for like 40% off wholesale. My distributors are almost throwing it at me, but I won’t touch it. This is important to know, if a set for a TCG can make or break you, you need to look at the business model you have.
Another thing people do is get net terms with wholesalers. 30,60, 90 days to pay for the product. Personally, I don’t like this. Because this is another reason you see prices online at a loss. The bill is coming for that new DBS set and is hasn’t sold well. Now, getting desperate, the store owner is just trying to get anything for it so they can pay that bill.
I am not saying net terms are bad. I am just saying if you have terms, don’t use it unless you have it. Maybe there are multiple releases close by and you don’t have the capital to get them all, so use those terms to get the regular amount. One thing I see with people that get net is they feel like they can speculate on a set, as in get more than they normally can. This is good if the set is hot and you can move it, but what if you can’t? Going overdue on a Net order won’t ruin you, but it turns off that wholesaler until you do pay it off, then there are penalties, etc.
Going overboard on a product because you think it will be good is not only an issue for Net terms. I see people use credit cards, spend money they can’t afford to, even get short term loans to try and get more than usual. If you don’t have cash on hand to get something, don’t. If you have stable sales and know you WILL have assets to cover costs, then go ahead. But this is based on a diverse product offering and all that. The point being, think about if that thing you are about to buy a ton of fails, will you still be, okay? If not, then don’t buy it.
This model works for some people, they get lucky. I have speculated on products before. My Hero Academia 1st edition of the first set, I took a gamble on, and it paid off. I also got a lot of YuGiOh Dawn of Majesty, I am still sitting on boxes 2 years later. One of those was profitable as heck, the other not so much. BUT, I didn’t lose my shirt off the bad one, and I can wait until it all does sell eventually. I had no need to sell it off at a loss to recover money.
You can’t base our business on a boom-and-bust model, especially if you don’t have the resources to absorb a bust. I saw a lot of people eat it after the TCG boom of covid, now a lot are sitting on a ton of stuff, or even still buying based on those trends. They are over because people aren’t bored anymore, covid money is done, and producers are making more than they ever have to meet demand. This means more supply and less demand. This also means the new stuff won’t gain much value, or as fast as the older stuff, that is another article as well.
This mentality also lead to the “One more month” idea. People think if they can just make it one more month they will recover. I guess you can call if Sunken Fallacy or Diminishing Returns, but it’s all the same. If you do have a bust and can’t make enough to stay open, just get out. Don’t hang on and make it worse. Your credit, family, and other factors will be damaged if you do. And as people get desperate, they can get sillier in their decisions.
I believe all businesses should have an exit strategy in place, at least for the first few years. In case anything goes bad, you have a way to get out with the least amount of damage to the rest of your life. Mine is simple, don’t carry more debt and obligations than you can afford to get out of if you had to sell everything at 50% off. So, if I found myself in a position where I knew I had to close, I could slash prices of all inventories by 30-50%, sell as much as I could in a month or two and I should be able to pay off everything and walk away. I also have exit clauses in my leases for just such an instance. But I am paranoid.
In the end, you have to cultivate a nice stable business model with long term goals, not seat of your pants schemes. You may miss out on a few big chances at first, this is fine. More will come. The goal is to have a sustainable business and save your money for those future “chances” that if they turn out not to be, won’t ruin you. Growth at the start is slow, and it does kind of suck, but if done right, it will be like a stone down a hill in the end.
Thanks again for wasting your time with me.