So, a question raised on BGG about how much it’d cost to launch a board games store online came up. I was going to answer it there, then realised I might as well just answer it on the blog and point him in this direction since I’ve written a few articles on this already.
There are a few major costs associated with any online business that needs to be taken into account when considering adequate capitalisation. Note that the normal; the more the better, for capitilisation holds true. I am also not including operating costs (I.e. salary and hosting and the like) in this post.
So, major costs associated are:
– Incorporation, business license and other related costs
– Website Design and Set-up
– Payment Gateway
– Capital Equipment
Incorporation and other legal fees
The cost on this one varies, depending on whether you are incorporating or just going it alone as a sole-proprietor or partnership. If incorporating (our suggested venue) it’ll cost you at least $500 after taxes; and this is if you do it yourself. If you go through a lawyer (e.g. you need changes to the Articles of Incorporation or need a rock-solid shareholder agreement) it’ll go up from there. Figure all in with good solid legal representation (definitely a good idea if more than 1 person is involved in ownership); about $2,000. This includes your business license which is generally pretty cheap and easy to get.
Range: $500 to $2000
Website Design and Set-Up
Asking how much this costs is sort of like asking how long is a piece of string. It really, really depends on what your site specifications are. For something as sophisticated as Amazon – think hundreds of thousands. I’ve also seen quotes for as little as $1,500. You could, using Yahoo! Merchant Accounts probably get a site running for about $750; using pre-designed themes and editing it slightly to fit what you want.
For something more professional and serious, you will likely get quotes between $7,500 – $15,000 for full design, backend set-up and some customisation to what you wish. You might be able to get it cheaper if you have contacts and/or are able to do your own design. And obviously, you could go much higher.
Range: $750 to $15,000. Middle range – $7,500 – $10,000
We’ve mentioned them before. These are the guys who actually charge the credit cards put through the site (or for that mater, at a normal retail store). Moneris is the larges, most sophisticated payment gateway in Canada. Their set-up cost is $500 but generally charge a much lower % of the orders. PayPal is free to set-up. Generally, you can get quotes from other 3rd party gateways for between $250 – 500.
Range: $250 to 500
There are two sections to this – firstly your various stock inventory and secondly, the packaging materials. Figure at least $250-500 for packaging materials (different size cardboard boxes, a weighing scale, tape gun and tape, printer paper, etc.).
Inventory really depends on the strategy that you are taking, from being a one-stop shop for all customers to only picking out the best-selling board games and charging a higher premium. Obviously, the sky’s the limit for the amount of inventory you would need for the first option (e.g. Funagain games stocks according to their site over 4,000 board and card games. At $20 cost per game, that’s $80,000 at the minimum in inventory).
The other side of the spectrum would require you to have a minimum of 200 board games. Even at $20 per game and holding only 1 copy (highly unrealistic since these are the games you are expecting to sell consistently like Settlers, Blokus, Ticket to Ride, etc.); you are looking at a minimum of $4,000. I would say you would need at least $6,000 to give a proper go at this, probably more like $10,000.
Now, note that this does not include funds for new games that are coming in (e.g. say Age of Steam or the next print run of Dominion). To be safe you would like to have at least $1000 or so free to buy these games and any additional games special ordered by customers.
There is another wrinkle to this – how fast can you get games from your distributors. The faster the transit time between when you place an order with a distributor and your receipt will dictate how deep you will need to carry popular board games (if it takes a week to arrive, you will need at least 2 weeks worth of stock to be safe).
Last note, this is specifically the amount for board games. Role-playing games and miniatures and varius game accessories could easily increase the cost here.
Range: $6,000 – 80,000. Mid-range – $10,000 – 20,000
This category covers everything else you will need to run the business including a computer, a printer, a dolly and shelving for your games. Again, cost varies depending on what you want and if you already have equipment you could use (e.g. a personal computer and printer). Shelving costs varies from $35 IKEA shelves to $90 metal shelves. Dollies are cheap – figure about $50 – 100 depending on make and brand.
Range: $300 – $3000
So, to do an online game store, with a minimum of investment – $7,800. A more reasonable capitalisation amount would be around $20,000. I’m certain I’ve forgotten some other expenses here and this obviously does not include any on-going fees you will have to pay – this is just start-up costs.
I would also add that most stores end up stocking between 400-500 games at the least. Figure your inventory costs to that amount with reasonable depth (i.e. 4 to 5 copies) for the more popular games.