Thursday, October 1, 2009

The Dilemma

To make the obvious observation: retail is a lot like Game Theory.

(O.K. Maybe not so obvious. Maybe not game theory at all; but...hey, this post IS about games. And it IS a theory. So there....)

I have a perfect example of it this week. Of course, unlike the 'Prisoner,' I don't actually have to play.

This week we are getting in our newest Magic the Gathering release, Zendikar. They come in booster boxes of 36 packs, which retail at 3.99 each. Usually, though, they sell for 80.00 a box on e-bay.

Oh, boy. Not this time. Currently, the prices are about 120.00 to 130.00.

Normally, I'll sell my booster boxes for around 100.00 in advance, which is considerably less than the 145.00 retail price, but higher than the online price.

Limited quantities make this an game theory exercise.

Normally, as evidenced by the current online prices for Zendikar, higher demand and lower quantities mean higher prices.

At the same time, I really don't want to sell my cards for more than SRP.

So I want to keep enough boosters in stock to continually sell the packs until the demand subsides. But in order to get enough guaranteed product, I purchased 3 times my normal numbers, or more than 4 times what ordered of the last release.

So I'm going to have a large quantity of boosters. I paid higher for about 3/4th of those boxes....I've already pre-sold at the lower 100.00 price all the lower wholesale boxes.

So what do I do?

Do I sell them at slightly less than online prices and lower than my local competitors? And risk selling out, but still make my money back?

Do I sell at higher than online prices and my local competitors, and thus guarantee I don't sell out, but risk having too much left when supply catches up to demand?

So the dilemma is: If I sell higher than my competitors, do they risk selling out and not having product? If I sell lower than them, do I make it more possible they won't run out of product but I well?

My usual rule of thumb used to be, "It's better to have the product at higher prices than to not have the product at all."

But that was before I vowed to charge more than SRP as little as possible.

Let's go back to what I said above: Unlike the 'Prisoner', I don't actually have to play the game.

So I'm not going to. I'm going to set a price on the booster boxes which gives me a reasonable profit, but not so high that it tamps down sales. I'm going to keep enough in stock to sell packs at SRP until supply catches up to demand.

If the boxes don't sell, I'll have quite the overstock, but I am have sufficient reserves to take a year or more to sell them.

So, I opt out of the game.

This has just been a big tease. Sorry.

I'm going to start my boxes at 125.00, which isn't as much as I probably could get (hell, I could sell them for that much online right now), but not so low that everyone will go crazy. I'll sell the packs for regular price.

If the boxes sell too fast, I might raise them 5.00, but to no more than 130.00. If they pass 130.00 in demand, I'll just sell them by the pack only.

1 comment:

Duncan McGeary said...

Two things.

I ordered on spec from my reading of demand. That's what my experience has taught me -- he who hesitates is lost.

And I was able to get a larger quantity because I had a good source who is loyal to me and because I was willing to pay a bit more.

Both of which most stores can't and won't do.

So we'll see.

Biggest problem for me is that Bend is still kind of a small town, and the quantity coming into town may be more than it needs even with the higher demand.