GUIDE: How to become an independent retailer

Ben Parfitt
GUIDE: How to become an independent retailer

Former employees of the 277 closed GAME stores are interested in opening their own independent games shop. Game Guide and Complete EPOS chief Chris Ratcliff explains how they can do it...

Suddenly there’s a gap in the market and the indies are making hay while the sun shines and enquiries about the Game Guide Epos system and our other services increasing daily. But is it that easy to open a shop and start selling games? Not always, but with a bit of planning, some careful research and the right location, you have a fighting chance.

Any type of retailing is a challenge. Just to open a shop there is legislation to comply with, taxes to pay, insurance to get, security to think of, marketing to organise, stock to be bought and you then need shelves to put the games on, a till to store the money or an Epos to run your business efficiently and maybe you have wages to pay and employees to manage. 

There are some vital considerations before deciding to open a shop of your own, the first being location. Get the location right and you are most of the way there, but before you decide on anything you must write a business plan to help you through thought process, the ‘what if’ scenarios and very importantly, the financial plan that will tell you how much it is going to cost, if you can afford it and will it make you a living.

A simple business plan consists of:

Type of business: Will you deal in new and used games, hardware, peripherals, accessories and other merchandise, such as action figures and collectables? Will you operate as a limited company, sole trader or partnership, with a written partnership agreement?

Target market and how to reach it: Will you be looking at a town centre location or a main road, is parking a problem and is there sufficient passing pedestrian traffic? You must do your research and stand outside a potential shop at different times of the day and week and see who passes it. Are there school children on their way back from school, good general shopping traffic or is it just the old people from the home opposite? Make sure you check the place on a Saturday as well.

Operating plan: Who will do what? If you are a sole trader then the answer is simple, you will do everything, but it is important you write it all down so you realise how much will be expected from you, especially the hours.

Set up costs and how to fund them: Fitting a shop, arranging the lease, paying the rent, rates, public liability and contents insurance and what about the stock? Simply paying for it on a credit card is not efficient or viable in the long term, so you need to fund it through savings or use collateral for a bank loan.

Management of the business, including accounts and administration: The books need to be kept up to date, the inventory has to be controlled and all the legislative rules and regulations have to be addressed and complied with.

Location and property requirements including rents, rates and insurance: In the present economic climate you are in the driving seat when it comes to negotiating a shop lease. Make demands and stand your ground on lease length and notice period, which can be as short as 3 months. Check to see if you qualify for business rate relief and make sure you know who is responsible for repairs and building insurance and whether your business requires planning or change of use permission.

Budget plan and project cash flow: This will reveal how much money have you got and estimate how much will it cost to acquire, fit and stock a shop, what will be your ongoing costs and when can you expect a return on your investment.  Simply put. What cost, what price, what profit.

Legal, licences and IP rights: You will need Public Liability Insurance cover. If you intend to play music you may need licences from PRS for Music and PPL. You will also need to know the legislation regarding age ratings. It is a criminal offence to sell a BBFC age rated game to a person under the age the game is rated for, or without parental guidance for PG rated games. Selling a European released game marked with a PEGI rating that is rated by the BBFC in the UK, is also a criminal offence. UK PEGI ratings are advisory for the moment.

The business plan will identify your strengths and weaknesses and help you to adjust your plan to meet your resources and skill levels.

Other considerations:

VAT: Once you achieve a turnover of £73,000, you will be required to register for VAT with HMRC. A business registered for VAT has to charge VAT but can claim it back on legitimate supplier and services invoices and also take advantage of the Margin Scheme for VAT on second-hand goods, as you only owe VAT on the margin between the buying and selling price of second-hand goods. Search the web for ‘HMRC Notice 718’.

Buying stock: To give you an idea, just one premium game from a distributor is going to cost you £38.40 inclusive of VAT, I have included the VAT because until you have sold it or included it in your subsequent VAT return, it is money that is not in your bank account. Your target profit margin in retail should be 30% to cover all your overheads and pay yourself a wage, but typically a £49.99 game will be sold by the nationals and online at around £37.99 including VAT at launch. Rather than compete on price you have to compete on service, knowledge, added value, back catalogue, allied products and most importantly, but not understood by the development and publishing community, on your pre-owned games operation as that is how you are going to stay solvent.

For new games you will need to contact the main and subsidiary distributors, such as Advantage, CentreSoft, Gem, Koch (Nindie), Interactive Ideas, Focus Multimedia for account applications.

Website: There are plenty of Amazon and Ebay type sites to sell games on but the market is crowded and very competitive. Running your own webstore brings its own problems and you will have to pay out good money to have a secure and attractive site, but you will be a very small .com in a massive ocean of .coms. If you do build a website, aim the content at your own shop’s customer base and use it to promote your shop locally with deals and promos, which have to be redeemed instore and use a free service like MailChimp to make your email database work for you. 

Diversity: The day of the games only retailer has gone and an indie who sells game also has to sell a broad spectrum of entertainment goods, software, collectables and general ‘boys toys’. 

Information: Market information is very important and my company takes the pain out of selling new games and buying and selling used games. We provide the Game Guide Epos system for video games retailers, which is updated every month with new titles, barcodes, age ratings and will even calculate your VAT using Global Accounting for second-hand goods. It is a subscription model with no contract period, so it is a very affordable way of having a top of the range specialist Epos system. We also provide a monthly database of new and used values of all current video games with the Epos system or as a standalone system starting from £18 a month. cessupport@completeepos.com 01543 370002  www.ggepos.com

References:

http://www.prsformusic.com

http://www.ppluk.com/

http://www.bbfc.co.uk

http://www.directlineforbusiness.co.uk/

http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm

http://www.ggepos.com

http://www.game-guide.co.uk/

http://mailchimp.com/

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Tags: Retail , video games , independent , indie , guide , ratcliff

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