Tao Wong: Launching a Board Game Store in Canada

We thought it might amuse some of you to find out how a pair of geeks ended up owning and running an online board game store in Canada and the process that we took to get here. The following article could almost be used as a guide to launching your own store, though we suggest you do talk to others, too, if you’re considering this.

So let’s start at the beginning. What happened?

Fencing. We are both members of Academie Duello, a historical fencing school, and we went for some sushi after class – you have to love living in Vancouver – got talking about, well, geek stuff and ended up under board games. I can’t recall who commented that there weren’t many good board game stores in Vancouver itself; most were in hard-to-reach locations for those of us who don’t have cars. We started debating why no one had launched a store in a better, more convenient part of town and what it would take to put together a board game store. At a certain point, we realized that we should really just find out…

So what did you learn?

That we couldn’t think of a reason why no one had launched a better store at this time. Obviously, it was expensive – in fact, retail businesses are probably quite marginal at the best of times, and a retail board game store – especially in Canada – is not considered the best bet.

Still, at that point, we started the plans for putting the store together, at first more as a “what would it really take” and then more seriously. Quite a bit of discussion went into the company name and the store name. We finally decided to incorporate the company under one name (PDB Sales) and decide what to name the board game store at another time to get the entire ball rolling.

So what happened next?

The next step was to take all our calculations off the back of the napkin and put it on paper. That’s right – we started writing an actual business plan. Part of the process of writing a business plan is to relook at the facts and figures in more detail, forcing us to do proper market research and eventually maybe use the plan for a loan application.

We couldn’t find much in the way of concrete numbers concerning the general board game industry. In fact, the closest we could find involved the gaming industry as a whole, and what we could find indicated that the numbers are bad out there. Really bad. Games Workshop was/is losing money on its North American stores. There have been huge closures of gaming stores all across North America in the last decade or so from early 2006 back. Yet, strangely enough, the entire industry seems to be growing in terms of sales.

Lastly, and perhaps more importantly, we started doing research into whether there were any grants (as opposed to loans, which you have to pay back) that we were eligible for.

Any grants at all?

Not really – at least none that we were comfortable with. The fact is, if you’re looking to start a non-tech company and if the company’s majority shareholder / management is not female, there aren’t any grants in Canada. Loans yes, but not grants. Obviously, we might have missed out on some and if you know of any, feel free to give us a shout.

Let’s talk about money...

After all that, we started putting together the numbers for a three-year period to see when a mixed gaming store became profitable. Here’s a quick idea about the numbers we were looking at: Renting a location, especially in the areas that we were looking at was easily in the $2-3 per square foot range. Since we wanted a location of reasonable size (about 1,000 sq. ft.) so that we could have a place for people to test and play the board games, that’s a minimum cost of $2-3,000 a month just in rental. And then we need to purchase the various cabinets and paint and do the rest of the interior design bits. All in, we figured it’d cost between $5,000 to $15,000 to set-up the retail store itself and that would be without professional help.

Oh, and did I forget to mention that just incorporating the company in BC cost us nearly $2,000? Yeah, those lawyers are swimming in cash for the amount of actual work they do. I swear, they must just cut and paste the same thing.

Then there’s the other major cost: wages. With a retail store, you need to have someone there all the time, which means you need to pay someone else – or at least be able to not get paid yourself for a while. At a minimum wage cost of $2,000 a month, that’s another on-going expense. We haven’t even gotten into stock yet – that’s easily another $10,000 to get in a reasonable quantity.

The bottom line?

Fact was, we couldn’t be certain that we could put the retail gaming store together and get enough financing and revenue fast enough for it to last more than a year. And since most people say you need at least two years funding…

We just couldn’t get a physical store up and running with the funds available to us. And considering we were in our early to mid-20s at the time we started this, our chances of getting a loan of sufficient size was pretty low. Thus, we started looking at other options to launch the store.

The “cheaper” option – an online store

We came across a few issues when we decided to go down an online route, most of which were administrative issues like:

• Banking: Who has the best deals? How supportive are they?

• Board game distributors: More correctly, could we locate one that would sell to an online-only company for the moment?

• Site design & back-end software: Who would do it? What type of software would we use on the back-end? Did we want something fully customizable or get an off-the-shelf solution? What about future growth? What were the costs?

• Payment gateways: Also known as how do we get money from our customers?

In the beginning, we needed the basic bank accounts up as soon as possible. As such, and since Alison has banked with them for a while, we went with Coast Capital Savings. They are a great credit union and we’re still working with them. In fact, after more research; we still haven’t found any bank that does better – credit unions really are the way to go. Coast Capital in particular provides full online access at no additional charge along with a no monthly fee account. We only pay for payments out (not deposits!). That’ll be important later.

Board Game Distributors

Setting up an account with board game distributors means that you will need to make sure you have all your administrative information on-hand and ready to go. That means tax numbers, business licenses and payment methods. If you’re a new business like us, you’ll also likely not be allowed to run any terms with them.

Furthermore, board game distributors in Canada are not competitive in their pricing compared to U.S. distributors. There are numerous reasons for this ranging from the wage costs in Canada, our higher overall taxes (and thus higher costs in general), the cost of transportation and logistics for bringing goods across the border, and probably more that I don’t know about.

We’ve been lucky because we were able to find a great U.S. distributor in DC which we can then purchase from directly to reduce our costs. It is a high price in terms of time spent picking up the games, but we find it’s still worth it to bring down our costs.

Site Design

Through personal contacts, we knew of Collins Harper who gave us a great quote and even better service. They have a lot of combined experience in e-commerce, which is always good. For Starlit Citadel, we started out with the base OS Commerce design with quite a few changes. Our developers were big proponents of the software, and the flexibility to continue adding modules (either drawn from the public realm or hard-coded) means that the site can be continually updated and improved.

Perhaps the most important thing when you’re working with an external supplier, especially your IT guy, is to make sure they can communicate with you. You’ll find a lot of great developers who either cannot understand your points, or cannot communicate theirs. This leads to a ridiculous amount of frustration as the simplest changes can become a Herculean task.

Payment Gateways

Oh, do we “love” Moneris. They are the largest payment processor in Canada, and as such, the one almost everyone uses. The biggest problem with them is that set-up costs are high, on-going costs are high, and they only work with HSBC or BMO. Moneris also “clears” your account on a daily basis, depositing the sum that you made every day.

You’ll find that with most business bank accounts, especially HSBC, there’s a set number of activities that come with your package – and for anything over that, you will be charged. These activities include everything from withdrawals to deposits and are often set quite low, like 10 or 15 a month.

Do you see the problem there? Add the fact that HSBC charges you for online access (a ridiculous fee that was in the $60/month range for the basic package) and it just wasn’t worth it. So in the beginning, we opted to use only PayPal.

Eventually we found a “third-party” gateway service – they basically have an account with Moneris or another major gateway and charge you a smaller, monthly fee but a higher “discount rate.” This provides them their profit while offering you an opportunity to work with the bank you wish to go with. In fact, we found that our costs using a third-party gateway service (including our banking costs) were lower than if we went with Moneris.

And the site launch

After all these issues were finally dealt with, we were ready to launch the store. Storage space, in the beginning, was out of Alison’s second room, which dealt with the last major hurdle. After that, it was just a matter of making ourselves known to our customers and watching the money roll in.

Of course, it wasn’t that easy, but that’s a different article entirely…

Comments: