Used Games – A Business Perspective

We started selling used games over a year and a half ago now, back in August 2012.  It’s been a interesting experiment, one that we got into due to demand from our customers and a view to making our business somewhat differentiated.  As far as I know, we’re the only Canadian online store that does take used board games.  It’s actually created a few significant challenges, which I thought I’d write about.

The Quote

One of the hardest parts of setting this up was figuring out what the quote / how much we were going to pay.  We had two options – have a general guideline and ‘wing’ it or have a more formalised quoting procedure.  Within that, we also had to decide on the discount we provided for demand (i.e. how fast it’d sell) and damages.

When we first started, we had damage grades up to D.  Grade D is still on the site as a guide, but we no longer take such games as experience has shown that customers just don’t buy Grade D damaged items.  Another question was the demand ratio – at what discount were we going to place on products that sold slowly.  It’s interesting to note that some products have ‘sat’ for ages, while others like any bestseller flies off the shelf.

The trickiest part right now is our Out of Print items and one that I think we’ll be revising very soon.  Certain long out of print items are easy enough to price – there’s a decently stable OOP market (e.g. Heroclix).  On the other hand, newer out of print items see a lot more fluctuation and can be priced at an extremely high level.  It’s something we have to adjust I think as we find ourselves with some great OOP items, which are for one reason or the other, extremely highly priced.

The Inspection

Outside of quoting, inspecting games has been the biggest headache.  Used game counting is low on the general priority list of tasks that need to be done by the staff in-house.  There’s always something else to do – from cleaning to shipping to adding new products to the site.  So Used Games get shoved to the back of the pile, with the result being that we often get a huge backlog. It doesn’t help that we often have ‘dumps’ from customers – we’ve had as much as 50 games come in from 1 customer before.

The actual inspection process took a few revisions before we got it right.  Initially we didn’t have an inspection fee, but after a bit of work we realised we were deathly afraid of GMT and FFG games.   Too many counters, too many chits.  With GMT in particular, finding an actual counter count was often difficult – we have had to look up counter sheet images to get an idea of quantity.  Since then, we’ve instituted a processing fee which kicks in when a game is taking up a significant amount of our time.

Unfortunately, the inspection process is necessary.  While 90% of all games received are complete, the 10% of missing components can be difficult.  Sometimes, the missing parts are significant enough that we can’t sell the game.

The Payout

One of the most interesting / tough parts of doing used games is how they are paid out.  It’s a matter of cashflow really – 99% of our gift cards we pay out are used within a week.  I’d say at least 80% are used within 48 hours.  Games however can take longer to sell – anywhere from a few weeks to a few months.  While the gift card isn’t cash – we still have to replace the products bought, which is a cashflow hit.

It’s one factor we have to take into account on how we price and/or quote our used games at.  We obviously want to get as much money as possible, which means pricing these products higher but we also want to ensure that we do not have too significant a delay between payout and sale.  Like any of our other product lines, we want a decent turn rate from this area.  In addition, we need to generate a higher overall profit margin than with our normal games due to the cost of quoting, receiving, inspection and customer service.  It’s significantly more work to sell our used games than to sell a new game which has to reflect in our overall profit.