Last year, I noticed a small trend with some of my friends and members of a particular forum I frequent, they started their own business selling video game. While some are still selling games (and setting up real, physical stores or thriving online businesses) till this day (original titles mind you, not pirated ones), some got their fingers burnt by the business but fortunately live to tell the tale.
A friend of mine who has quit the business was a good sport when I interviewed him on the local video games retail scene, and agreed to have the interview published on Nine Over Ten. Since he wishes to keep a low profile, lets just call him Jack.
On the subject of profit margins, Jack has only one thing to say, there’s no point in doing the business if you can’t get the sales volume up as the margin is not worth it. He adds that the lowest one can earn per title would be RM 15 and while selling that way will set you up as a “nice guy” offering low prices, you’ll still need to get your sales volume moving northwards.
Since his operation was a one-man show and without a physical shop, I ask whether his profit margin was any different from that of the typical brick-and-mortar store. Jack replied it really depends on the cost of the game, which defers per title. Most suppliers would offer a bulk deal such as getting a free game per every 10 game purchase. This is how video game sellers adjust their cost and therefore their profit margins.
Some local distributors would try and push titles by making resellers take B-list titles along with A-list title orders. This, in Jack’s case, actually caused him to lose money as those B-list titles weren’t actually hot sellers.
Jack also revealed some insight on dealing with suppliers/distributors, which I found to be rather straightforward. Resellers basically place their orders and the supplier will try to fulfill the order. Try is the operative word here as in the case of hot titles, small time resellers are allocated much less stock compared to large retailers and sometimes even lower than what their initial order specified. There’s no credit facility offered so retailers will pay up on placing an order.
Some suppliers might impose a minimum quota such as 10 titles per order, but this is more of an exception rather than the norm. As for delivery times, the supply chain is pretty much well set up in Malaysia, with games arriving on their respective release dates.
To be Continued
Stay tuned for the next installment of this interview, where Jack describes customer behaviour, video games piracy and video game communities in Malaysia!