Opening a retail store...

Guru · August 10, 2007 4:01AM

Food for thought here...what does it take to open a retail store? What does it take to keep one open and keep it going? What does it take to generate enough profit to stay open? Is it better to have partners in or not? Just some food for thought. I'm curious what it takes and why so many fail when others don't. Thanks!

Guru

mikeschmidt · August 10, 2007 4:46AM

Guru:

Quite simply, the overhead is high. There are a lot of dealers in this hobby who don't make a lot of money, and they don't have to pay rent/electricity/staff etc. to man a retail shop. They are just getting by doing shows or online.

If you open a shop, you're going to need capital to start it. Depending on your area of focus, it may be as little as 25 - 50k, but it can be many times that as well. But you can do some pretty easy back-of-the-envelope type of calculations of volume and profit margin needed, just to break even. It is probably going to be higher than you think...

From a straight cost perspective, even if you can sell $10,000k/month at a 20% gross profit margin, that only gives you $2,000/month to pay rent, overhead + your salary. At the end of the day -- you make more doing almost anything else. You have to figure out how to either a) drive up your volume or b) drive up your margins. And in this business, you have to be a price taker as opposed to a price maker -- given the proliferation of the Internet, Ebay, Vcp, etc.

~ms

CDsNuts · August 10, 2007 4:47AM

Drop the idea and never think about it again. Just trust me.

fur72 · August 10, 2007 4:57AM

I have a better question. How do you buy directly from the card companies?

Leiascards · August 10, 2007 5:08AM

You have to be able to prove you own a B&M store in most cases to buy direct then you have to order a set amount per month from them. If you are just a small dealer your best bet is to open a dealers account with Dave and Adams and order there all you need with them is a state Tax ID and copy of your credit card and a signed authorization to charge that card for your orders.

Bosox1976 · August 10, 2007 5:09AM

Agree with CDs & MikeSchmidt. The math simply doesn't work - even for a virtual store.

Say you want to make 52k per year pretax... and work 50 hours per week.

52 weeks x 50 hours = 2600 hours per year

$52k/2600 hours = $20 per hour that you must clear (every single hour, for 50 hrs per week)

Aggressively, 4 sales per hour with a $5 margin on each would be one way to get there. That would mean locating, procuring, advertising (ebay auction setup), monitoring, answering questions, collecting $, banking, packing, and shipping 4 items every single hour. Additionally, the items procured must produce $5 margins on each.

Add in bricks & mortar and you are probably at 5 transactions per hour. You might get higher prices, and some easier sales, but also will have to clean, merchandise, deal with people, etc. But you might be able to purchase from walk-in traffic too, and at better prices.

With a partner, you could specialize - one buys and one sells basically. But you would have to do twice as much of both to stay even.

Either way, it is not easy at all. Nor particularly lucrative.

yankeeno7 · August 10, 2007 5:42AM

I think it can be done but its VERY hard. I think first off you would have to be in a well populated area. One shop in Albany, NY does KILLER business. He has the personality and the honesty you would need to be successful. I can't imagine how much he spends on unopened material as well as what he buys in the store from walk ins. I would venture to guess he is buying 20-30K in just unopened material a month. Sounds like a lot of money, yes but think about how expensive boxes/cases are these days...its a decent amount of stock but not a lot.

I also want to add that he also does a lot on ebay and does a lot on Beckett Marketplace. Beckett is high cost every month but he moves a lot of stuff...enough to make it worth it. You have to use those venues to move the cards that dont move in your store to assist with cashflow and not let stock just sit there. He had two partners...both equally bad and booted them to be on his own. His business probably grew an easy 10-fold because those partners were bad for business.

cohocorp · August 10, 2007 5:47AM

i agree with lee. forget about it. in todays age, it is nearly impossible for a retail store alone to be profitable enough to be worth your time. think about it, do you really want to compete with ebay?? whether you realize it or not, you will be. then you get to hear all the time from potential customers, "i can get it cheaper on ebay". its a very frustrating situation to put yourself in.

justmichael · August 10, 2007 6:01AM

Yankeeno7,
I agree with you about the shop in Albany.He has put a ton of work to get his business where it is today.He makes sure he is well stocked and being a friendly person to his customers has helped him even more.I don't even want to think how money he shells out each month between overhead and product and inventory but it has to be a small fortune.
Mike

yankeeno7 · August 10, 2007 6:13AM

Mike
Are you in Albany area or just visit there once in a while

RipublicaninMass · August 10, 2007 6:28AM

<< <i>Drop the idea and never think about it again. Just trust me. >>

Opening a retail card store.......we call that one the "widow-maker"

-Simpsons

justmichael · August 10, 2007 6:45AM

Yankeeno7,
Yes I live in Albany.I am a regular at the shop you were talking about.I'm sure we have crossed paths many times .
Mike

MooseDog · August 10, 2007 7:52AM

Having been there-done that let me throw in my 2 cents. Next to working at the race track, this was probably my favorite gig, even though I decided to close my shop when the 1994 baseball strike brought things to a crashing halt.

First off, running a store can be a great way to make a living. Making a go of it in the current climate, both economic and the state-of-the-hobby wise, would be very tough but by no means impossible. When I had my store there was no widespread Internet use and more importantly no eBay...if there was, it's likely I would still be in business.

What you need - PERSONAL
1) It helps to be a "people person". Enjoy BSing with customers, know how to "read" them, that is who is just looking, who is a possible buyer, and who is there just to case the joing (more on that later).
2) You should either be single or have a very understanding family/significant other. Most women don't understand why anyone would collect pieces of cardboard, let alone want to make a living at it. If you have kids, so much the better. Put them to work.
3) You need to have at least some sense of business. Understand that retail business is based on cash-flow and turnover. It does no good to have inventory sitting in your showcase, shelf, or stockroom for months or years. Know basic accounting and how to use accounting to your best advantage. If you don't have that knowledge, consult someone who does before getting started.
24) You need to be organized. No one likes to go into a card shop where all the cards are in piles and the owner doesn't know where anything is. You don't have to be a neat freak, but it helps.
5) Patience. You must have tons of it. You'll be dealing with young kids a lot, and a lot of people who bring in stuff to sell you that isn't worth buying...be diplomatic.
6) Don't expect to get rich, but if you do it right you'll be a happier person who can't wait to get to work every day. If you can get by on a $2000-3000 draw in your worst months then you should be fine. If you need to make $100K a year then there are much better ways to do it - not that it can't be done selling cards.

WHAT YOU NEED FINANCIAL
1) Check out retail space in your area or where you want to locate. Ideally, you want to be in a fairly high-traffic location (foot or car) so your signage gets exposure. Check with local realtors (commercial), want ads, Craigslist (if you have in your area), and probably the best source look for hand made signs on empty shops. The latter are usually owned by families/solo owners as opposed to commercial property companies. Get an idea of what rents are going for. They are usually quoted in total ($500/month) so calculate per square feet if you want to compare side by side (rent divided by square footage). You'll get the best deals through these kinds of owners, though usually not the best spaces. Since this isn't a business that relies on walk-ins, it isn't vital that you be on a busy street. Rents will be cheaper on side-streets anyway. Get as much space as you can for $500-600/month rent or less, preferably with utilities included and NO TRIPLE NET rent.
2) If you expect to deal with kids, you'll need to be near a school, mall, or place where kids normally hang out or at least pass by. You'll also need to be in a fairly safe location. I had to move my shop 1/2 down a street and lost a lot of business because parents wouldn't let their kids travel down to the "ethic" part of the street. If you plan on dealing in higher end stuff and deal with mostly adults then this is less of an issue as they will drive there.
3) Buy all your showcases, shelving, etc USED. All big cities are full of this stuff and here in the SF Bay Area you can pick up a lot of this kind of stuff dirt cheap or FREE in a lot of cases.
4) If you have inventory you can probably get going with $25,000 if not try to line up $50K or more. If you don't have that much cash but your credit is good you can probably set up a reasonable credit line with a bank. This can be very handy for buying and short term cash flow needs. You want to try to keep at least 3 months expenses and about $10,000 in working capital in your accounts if at all possible.
5) Accounts can be set up with most manufacturers pretty easily. They just want pictures of your store and 2-3 trade/credit references. These can be other card related businesses or even regular people you deal with on a regular basis who can vouch for you. Also, there will usually be a distributor of some sort if you are in a big city. These will be companies that sell wholesale candy, cards, supplies etc. usually to comic book stores. Handy for stocking supplies as you don't have to pay the shipping from Cardboard Gold, UltraPro, etc.
6) Finally find out what license fees, fictitious name statements, tax permits (resale) are required. Usually this is minimal expense unless you are incorporating.

ADVERTISING
1) Local Yellow Pages...not the imitations, the real one whatever your phone company is. Take out at least an in-column ad saying you buy cards and list your hours. This runs anywhere from $75-200 a month to your phone bill but this is the best possible advertising you can do.
2) Do shows and freely distribute flyers and/or business cards.
3) Have at least a basic web site. Better yet, e-commerce, baby!
4) If you have access to local sports teams, get lesser players or rookies to do signings at your shop. You can charge a small fee, people will gladly pay, and get extra items signed for yourself. You'll eventually make money on the extras, plus the sales of pictures, balls, etc. Advertise these appearances in the local sports page. One shop owner here in the SF area managed to keep his shop open during some very tough periods. He was paying $500 to lesser players, even Class A minor leaguers, and doing quite well. He's one of the few shops left in the area.

FINAL THOUGHTS
1) Make your store attractive. Try to have some kind of theme, whether it be funky, modern, whimsical, etc. Use every inch of available space, still leaving enough for customers to get around comfortably. Decorate the walls or fill them with shelves full of cards. Hang jerseys if local or national fame from the ceiling if you have a high ceiling. You need to make your store look well stocked, even if it means using empty wax boxes!
2) Plan on losing 3-5% of your gross sales volume to "shrinkage" per year. This will be due to damage, loss, employee theft, and yes, customer theft. All of these WILL happen, you just need to do your best to keep it under control. If the idea of this bothers you, then stick to selling on eBay.
3) Don't rely on store sales to keep you going. If you do things right this day and age, you should probably do no more than 20% of your gross sales in store. The rest will be online and shows.
4) I would recommend being open Tues-Sat if you are a solo owner. Stay open late at least one day a week. My slowest days were Sunday and Monday. If you have someone you can trust to run the place those two days then open minimal hours on Sunday, say 11-4 and regular hours on Monday. DO NOT WORK 7 DAYS A WEEK - YOU WILL BURN OUT!
5) Invest in a nice flat-panel TV and $19.95 for Direct TV or DishNetwork and have ESPN or games on when you are open. Nothing is better than watching sports and getting paid for it!

Personally I shy away from partners. Going solo gives you complete say over how things are run. The more cooks...well you know.

RipublicaninMass · August 10, 2007 8:26AM

because parents wouldn't let their kids travel down to the "ethic" part of the street.

Yeah streets and their ethics these days

nice read thanks!

steadyeddie33 · August 10, 2007 8:52AM

Take that money and invest it in a good mutual fund.

Guru · August 10, 2007 10:24AM

Just got home and I'm reading the responses carefully. Thanks for the info everyone. Still would like to hear what others think also. Moosedog, thanks for the excellent advice. The reason I asked this question is because the other day my wife and I were challenged by our pastor to set goals for life. One of mine was to retire and open a card store. I was just wondering what it would take to get there. That's all.

Later tonight...

2007 Topps Chrome Box break
4 2006 Bowman Heritage box break

Scans will be included!!!

alnavman · August 10, 2007 10:54AM

This is a great topic. Although it's a different topic that obviously would be catering to a different clientele I always had visions of opening a bar...but as times changed (less people drinking), insurance costs, location, location, location and having the personality to pull it off also comes into play for that trade.....I would love to also open a shop but it seems they are all closing, not opening....I"m near Cleveland and can only remember two places opening recently, one is taking ebay consignments for what I understand while the other always has cars in front of it but when you go inside it seems cards are scattered everywhere and as noted by someone else friendliness is needed, there wasn't any in this place.....if really wanting to try a store, why not the Beckett stores or even an ebay store to start... just my thoughts, unfrotunately I have to keep my day job

Alfonz24 · August 10, 2007 11:08AM

I thought about this many years ago and thought it would be a good idea to have a partner that specialized in something else like coins, stamps or comics. That way you get a larger space and split the square footage. Plus you could also help advertise for other.

Caricon · August 10, 2007 11:37AM

Ok if I full store seems out of range try thinking about this. There are many antique and flee market stores
in my area. For a small fee you can rent a space in there and set up cards you want to sell. I've seen others
do it. Is a thought...

lostdart58 · August 10, 2007 12:13PM

<< <i>Yankeeno7,
Yes I live in Albany.I am a regular at the shop you were talking about.I'm sure we have crossed paths many times .
Mike >>

I have been to that card store also ( RT 5 central ave?) It was recommended to me by someone here last summer when i was visiting my sister.
Great store and the owner knew his stuff......and he was busy.

yankeeno7 · August 10, 2007 12:16PM

Yes Lostdart, he is on Central Ave. He actually moved his store closer to Wolf Road closer to the Mall. Has a much nicer setup too.

Estil · August 10, 2007 12:22PM

You know, I do wonder if I could open a card store someday (perhaps a partnership with someone else?) since my hometown of 65K has no card stores whatsoever.

TheCARDKid · August 10, 2007 2:41PM

Retail stores have never thrilled me as a business possibility.

Not saying they can't be done, but they would be way down my list of best opportunities.

Here in Southern California (LA area), there are 3-4 stores that have survived since the boom years, out of 15-20-25 or how ever many there were.

The negatives...

-High fixed overhead
-Fixed location (vs global ebay or mail order)
-You're working a ton of hours per week (50-60-70)
-You've got to move an aweful lot of merchandise to stay afloat.
-With new cards (post 75, post 80) you also run the risk of the value of your inventory going down (new boxes going down in value, etc).

If I had $50 or $75 k to start, I'd consider something with much lower costs and lower risk. Say, buying up expensive lots on mastro or REA, working with a set number of collectors or something like that.

Or buying large inventories from stores that go out of business.

Not everyone has $50 or $75 k lying around, thus a nice advantage. Plus of course, customer service, accuracy, integrity/honesty. A nice Jack Welch quote..."if you don't have competitive advantage, don't compete".

There's alot of other variables,...there's alot to consider. But you've gotten good advice so far.

cohocorp · August 11, 2007 1:45AM

"3) Don't rely on store sales to keep you going. If you do things right this day and age, you should probably do no more than 20% of your gross sales in store. The rest will be online and shows."

jerry has an excellent point here.

--- and since this is a pretty accurate statement, you dont need the store front and overhead associated with it to do the other 80% you would be doing online and at shows. thus by "trim the fat" theory, you are better off without the store b/c the storefront will add much more in overhead, related expenses, time and headaches which you otherwise wouldnt have if you simply forgo the roughly 20% of total revenue it would bring in and just stick to the internet and maybe shows. i ran 3 stores in the 1990s so i speak from experience here.

lastly, partnerships very very rarely work out. everyone thinks they are different and thinks it will work for them of course, but the bottom line is that they dont work out. i am not trying to be so negative here as i am not a negative person, but i am just calling it how i see it. there are virtually no benefits to having a partner. one person has to be able to call all the shots for it to work. you dont want to put yourself into a position whereas you can be affected negatively by someone else. on the other hand, having a silent investor can work though. just be clear with the terms ahead of time.

HeritageAddict · August 11, 2007 2:07AM

This thought has also crossed my mind in the last 6 month. My main reason for even thinking about it was the walk in traffic of people selling cards, which I could then sell online. In todays age I think it is hard to compete with online prices. The plus side for me would be that I'm in the midwest and operating costs would be substantially lower than in many other areas, example: 800 square foot shop in a small strip center right next to the Junior High School and a block from the High School would run me $2100 for 6 months. After I had gone over all the numbers I still couldn't justify it, I'm not saying it can't be done and a shop in my area could probably stay afloat easy enough but it wouldn't provide a lot of extra income. It's kind of like going into a casino, you shouldn't walk in with more than you can afford to lose.

ctsoxfan · August 11, 2007 2:22AM

Moosedog, that was a great post (and the whole thread has been fun to read).

Owning a card shop is one of those things that I always think about doing, especially after a bad day at the office - but in the end I think it is one of those things that sounds better than it actually is. I'll be happy with Ebay, and let someone else try and roll the rock uphill.

CDsNuts · August 11, 2007 2:32AM

It would be like opening a bar, only people could go online and get drunk for cheaper.

tedh111 · August 11, 2007 3:57AM

I jsut opened my retail store in April, and so far things are going ok... I am 24 years old and i started doing shows and ebay when i was 17. I was always a modern card type of guy and never did much with vintage or wax. I chose to open a store because i would rather work more hours close to home then have to travel almost every week. I still go to a good number of shows, but i am not dependent on being able to find deals and flipping them on ebay. That game is getting harder and harder and the capital neccesary to make a good living is getting larger and larger.... Now, i have my pysical store, my ebay store, a beckett Mp store, regular ebay auctions, and some shows to keep me in business. At this time, none of them are enough to sustain a full time living, but together I am now in the green and paying myslef a weekly salary after only 4 months. So yes it can be done... What i have found is that there are tons of collectors out there most of whom are not full time ebayers. Only the most serious of collectors seem to quote ebay prices, and most everyone esle is more concernced is paying a fair price. Generally a fair price to most of these collectors is somewhere between ebay prices and full retail like one would find in a mall store... I also have found that word of mouth is the best advertising possible. Setting up at shows, sending business cards with online orders and very simple marketing things have worked much bettter then andy print advertising has done.

giantsfan20 · August 11, 2007 7:23AM

Moosedog if you care to say was wondering what was the name and location of the store you had in the bay area?

rise2it · August 11, 2007 10:07AM

moosedog's post was great - with great advice for ANY business.

Most important - listen to all of the others that said Partnerships are a mistake.

Partnerships break when you start making money - one person always 'slacks', and the other feels like they are doing all the work. End of partnership, end of friendship.

Go solo...

MooseDog · August 12, 2007 3:26AM

rise2it and ctsoxfan - thanks for the kudos.

giantsfan20 - my store was Bay Area Sports Cards in Redwood City.

I just want to encourage anyone to follow their dreams. Too many of my friends that went the 9-5 job route, did the 80 hour work thing during the dot-com boom, married, had kids, bought homes, etc. are very unhappy, losing their hair and generally not enjoying life despite having 7 figure net worths. I missed out on ALL of that and have started and closed four small businesses and went through one bankruptcy - but I can honestly say I'm in better shape physically AND mentally than they are. Maybe not financially. Of course I have other friends that have seemingly perfect families, great jobs, and can retire any time they want, and they seem happy too...

My point is that one should do what you enjoy, and the money will usually follow, or you can make it work. Maybe you won't get rich, maybe it will be a struggle. But if you are the one making your own destiny, you'll be better off in every way.

No one should BLINDLY follow an impulse though. Think things through. Like a person who wants to be a singer but can't sing.Get advice - everyone has an opinion - you don't have to always take that advice.

A couple of posters mentioned the overhead...but consider this. Even if you only sell on eBay, it is a lot harder to prove hobby vs business if you don't have an actual place of business. If you have a retail store or office (as I do now) this is pretty much a slam dunk that you are actually in business. Plus it gives you a place to transact business away from your place of residence.

Then there are those business "expenses" but that's a subject for a whole 'nother post...

Opening a retail store...

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