Warehouse or Retail Store?

Game LibraryWe are coming up on our end of the lease fast and while we’ve made the decision that we will be moving to a new location as our rents have now increased to a point that we no longer think it’s worthwhile to stay, the question we are still working our way through is whether to go full retail or stay as an online store.

Warehouse

Continuing to run a warehouse makes a lot of sense in many ways.  There are some major pros including:

  • well optimised polices and procedures
  • ability to take on more and larger Kickstarter projects
  • potentially branching into other non-related product lines in ways that don’t create confusion among our customers (e.g. selling sporting equipment on a new website)
  • lower cost (we can get warehouse spaces for cheaper than what we are paying right now, so we’d actually drop our cost!)

The Cons though are somewhat more nebulous

  • new location likely to be less central significantly
  • growth has to come from new categories as our gaming category has slowed
  • potentially being locked out further by publishers
  • it’s boring…

Retail Store

Going with the retail store, things get a bit more interesting for the future, with some of the pro’s including:

  • new revenue streams from snacks & drinks & events
  • ability to access and run events / games likes Magic the Gathering and miniature games
  • increase in sales to casual drop-in’s and potential increase in sales from impulse buying of our geek products
  • significantly more options for PR and social media outreach

However, there are some major cons:

  • significantly higher lease cost (we’re looking at least another $4,000 a month at a minimum, more likely $5-7k).
  • new staff and staffing hours would be required.  Approximately $3k more in terms of staffing cost per month
  • loss of revenue from Kickstarter projects.  We probably could handle the smaller projects still, but the larger projects would be difficult (i.e. we couldn’t quote on projects over a few hundred games just due to lack of storage areas for them)
  • new capital requirements for shelving, gondolas, POS systems, etc.  At least another 5 – 10k depending on how nice we want to go.
  • potentially sub-par location.  We need a minimum of 2,500 sq ft and are probably looking at 3,000 up to 5,000 sq ft.  There just aren’t that many locations of that size in Vancouver, especially in retail and for the prices we can afford which would raise the total rent even higher
  • too close locations are another major issue as there are so many game stores right now, finding a location that isn’t too close to an existing store is another problem.

There’s also a rather concerning trend in real estate pricing.  In general, commercial pricing seems to run 2 – 3 years behind retail pricing, so if there is a drop in sales in retail pricing, we might expect a price drop in a few years which means that any lease we sign right now might be on the high price.