Launching a Board Games Store Part IV

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
– Inventory
– 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

Payment Gateways
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

Inventory

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

Capital Equipment

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

Conclusion

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.

6 thoughts on “Launching a Board Games Store Part IV”

  1. Only in a previous company, not this one. They are good if you can afford them and have the volume to make it worth your while. But because they only use HSBC or BMO, your costs can be very high as both those banks have really high business account costs.

  2. Happy New Year, Tao!

    Hope it is going well for you. These are interesting reads.

    I can tell you that we started Best Dang Games with $4,000 in cash and $20,000 on credit. We still have over half our credit available to us and we have not lost any cash. So, I would say as a rough estimate from another store, it required $8,000 or so to start our store. We did not stock nearly as much stock as you describe. Our suppliers are local, so they are just a drive away.

    The big issue we found was the ability to keep the good games in stock. Over the holidays, we were literally going to the distributors and shipping every day for about 2-3 months – as a part-time gig. That was a lot.

    I saw your article about Amazon and how they screw merchants. I don’t feel this way at present. After our experience with the holidays, we decided to use them for their fulfillment services. In the process, we have identified that there are a lot of customers there. So, we are currently moving our primary sales items to Amazon and we are determining how to handle the site. It will not go away, it will just change to fit the new market need.

    For shipping, we used all Priority Mail – free boxes – or we used the boxes our suppliers shipped to us. I think we actually bought peanuts two-three times in a year. The suppliers sent them with every order, so we just reused.

    By the way, Best Dang Games is a Yahoo store and it runs $40.00 per month. I did all the site design myself, so there has not been any development cost.

    That may be more than you wanted to know, but there is some corrolation to what you describe, as well as a few differences. We were definately on the cheap side. You also missed Google ads and any advertising you may do. What about Search Engine Optimization services? We did not use
    any. I took a course and we are starting to see long term results – Our January was better than December!!! Our February is looking pretty good as well.

    Take Care!
    Barry Nadler
    http://www.bestdanggames.com

  3. Hi Barry,

    Very interesting and thank you for sharing. Certainly the logistics / inventory problems we have are unique in many ways to Canada and Vancouver in particular. The largest distributors are all in Ontario so we are stuck in an annoying situation of either going to WA or shipping across the country.

    As for stock, you are right, what you described is on the other end of the scale for ‘cheap’ amount to hold. We started that way and now hold a lot more stock, but again, see above about inventory. Part of the reason for the more stock is exactly what you describe – we can’t afford to be crossing the border every day to get new stock in and still ship.

    I considered the various other Yahoo! stores and the like, but for various reasons especially long-term growth, decided against them. Didn’t realise it was that cheap to set-up though these days. That’s very interesting.

    As for Amazon – the article was more a pointer for long term worry. Certainly it’s not so much an issue for us in Canada – they don’t even have that option for the most part.

    As for Marketing and other Operating Costs, I’m working on another post to cover that. I wanted to keep this one to just capital costs.

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