Secondary Markets

We have a strong Magic: The Gathering following at our store. When you first think of something as simple as a card game you'd think that it might be easy money. But there's a lot of nuts and bolts when it comes to managing just one game.

The first myth that needs to get busted is the singles market. In a normal retail space the singles market doesn't work. Which is to say, it doesn't generate income. The singles market is best run by someone on their own time out of their own home with little to no overhead. When you bring the singles market into a retail space things change drastically.

A lone gunmen running singles out of an eBay store can set his own hours and trade at a very comfortable rate. The largest advantage they have is the lack of overhead in a retail space. The difference between their gross earnings and their net earnings is very minimal.

When it comes to retail space you quickly have to start analyzing a lot of different factors that modify the gross income and the percentage of that which becomes your final net earnings. Floor space, local competition, and manpower are some of these factors which determines how much effort you're allowed to place in the singles market.

If you run a store with the single purpose of running Magic events and trading singles you can probably break even; if you're smart. When you're attempting to supplement the income of a much larger store things become much trickier. There are two key elements I think of when considering the singles market.

First, how much manpower and time am I going to dedicate to this process? This has literally everything to do with how much an employee makes per hour, and if you're using that employee's time at maximum efficiency. Generally this means tracking my own time so the store is using me to my fullest potential. Second, how much floor space are we dedicating to the product? This has to do with product turn over rate, space efficiency, and the cost of that physical space in utility bills.

This creates the basic retail math. Does the cost of the manpower and the cost of the floor space exceed the income of the product? If the answer is yes then typically the product has no selling value and should be swapped out for something else. This is what big box stores do all the time. In my short time at Bed, Bath & Beyond I got to see several sheets of data that talked about sales potential per square footage. A local brick and mortar doesn't have a lot of this complex data, but the general principals work the same.

So if card singles never exceed the overhead to stock them, why stock them at all? The simple term we use for this is a loss leader. Typically a loss leader is a product that is sold lower than market value to stimulate the sale of other more profitable products. In our case card singles is a built in loss leader because of the secondary market as a whole.

The secondary market has existed for years based on the value of a product in an ongoing competitive format. It's become so ingrained in the gaming culture that wherever you go to play Magic, you're expected to see singles for sale.

Essentially, a loss leader is all advertising. If you have a modest amount of singles that rotate at a good pace people will come back to see them. Once a customer knows there's a singles market in the store they can begin to look for other products. Selling singles also encourages trade between the player base. This is all part of the secondary market ecosystem, and should be encouraged whenever possible. A healthy secondary market means the core product continues to move.

That's essentially it. Find the total overhead for stocking the product then measure it's worth against the market value. If it doesn't add up scrap it or turn it into a loss leader for a more valuable product with lower overhead.