By Kyle Cheromcha
It’s a chilly February afternoon, and inside VideoGamesNewYork, a family of Italian tourists follows owner Giulio Graziani through a maze of towering display cases and metal wall racks. Like a museum tour group, they move slowly through the store’s massive collection of retro games and accessories, listening as Graziani points out some of the more interesting items.
They pause in front of a ten foot tall case in the back corner, which holds some of the earliest home video game systems from the 1970s, including Atari and Mattel Intellivision. Kneeling down, Graziani lapses into his native Italian to tell the little boy about Pong, Atari’s famous arcade game released in 1972 that became a cultural phenomenon.
An independent retailer, VideoGamesNewYork in the East Village has an inventory of about 60,000 games, systems, and accessories that spans the forty year history of the industry. It also sells new releases and Japanese imports, but for most customers, the retro collection is the biggest draw.
“If I want a collectible or rare game, I always come here,” says William Rodriguez, 27, who drives in from Long Island to visit the store. “And I’ve been coming here a long, long time.”
But VideoGamesNewYork is part of a dying breed. Corporate chains such as Best Buy, Wal-Mart, and GameStop, combined with the rise of online distribution, where consumers can buy retro and modern games online and download them directly to their consoles at home, have made it difficult for independent video game retailers to stay in business.
And while the video game industry has fared better during the recession than others, overall in-store sales for national chains fell about 30 percent in 2009 compared to the previous year. On the production side, California-based Electronic Arts, one of the largest publishers in the industry, laid off over fifteen percent of its workforce last year.
Yet VideoGamesNewYork, whose Sixth Street store is also within walking distance of four different GameStop locations, survives. Jesse Divnich, vice president of Electronic Entertainment Design and Research, a video game market research firm, credits this to the personal attention an independent retailer can give to customers.
“Their advantage will always be customer loyalty,” he says. “Local shops tend to look at their customers as people, instead of dollar signs.”
Location, Location, Location
For a place that boasts one of the largest private collections of retro games on the East Coast, its appearance doesn’t really match its pedigree at first glance. Sitting underneath a bright yellow awning and dangling Christmas lights, the front windows are filled with promotional displays and posters, some curling and fading with age. Dominating the scene are two giant figures of Sonic the Hedgehog and Mario, seminal characters of the video game industry.
The space used to be a laundromat, giving the inside an odd U-shape. A huge cluster of display cases stands in the middle, ringed by a narrow aisle opposite more display cases and wall racks reaching the ceiling. Games and controllers are literally everywhere – filling the cases, lining the walls, even sitting in buckets on the floor. Well known brands such as Sony, Nintendo, and Sega sit alongside Neo-Geo, SNK, and other more obscure names. With so much merchandise, there’s simply not a lot of room to move around.
“I’m always fighting for space,” Graziani says with a thick Italian accent from his office, a tiny cubby next to the center cases opposite the front counter.
Since the store is small, much of the collection is spread out between three storage facilities in the New York area. His most valuable piece is an original Nintendo console that was used in the 1990 Nintendo World Championships, valued at around $12,000. He says that he gets at least one or two calls a month from people offering him more money, but he always turns them down.
“It’s not for sale,” he says. “In this business, our publicity depends on what we have.”
His collection does get a lot of attention. It encompasses all aspects of the industry, including systems, games, controllers, and accessories, from all eras. Well known brands such as Nintendo, Sega, and Sony sit alongside Magnavox, SNK, and other more obscure names. The majority of the inventory is used, and the retro games are the biggest source of income for the store. Graziani says they determine prices by looking at the market price and gauging supply and demand.
“This is a very risky business. But if you invest with logic, you can make a lot of money,” he says. “You buy a game at a certain price, and then you wait for it to go out of print, because that’s when it goes back up.”
The store relies heavily on word of mouth marketing. It has a Facebook page, but Graziani says their actual store website is a bigger marketing asset. It also gets help from the managers of the area GameStops, who send over customers looking for older games almost every day. And with a decent buzz from the video game media, Graziani has seen an increase in international customers.
“Don’t ask me how they know about us, but we get calls from people in places like Germany and Brazil asking if we can hold a game or things like that,” he says with a smile. “We’ve become one of these places that when they come to New York, they have to visit.”
Born in northern Italy, Graziani first visited the United States in 1991 as a fashion photographer, and, impressed by the number of job opportunities, moved here permanently in 1996. He worked as a small-time movie producer and then started a little tech company during the dot-com bubble in the late nineties. When the market crashed, he set out to find a more stable job.
A friend of his owned a video game store on St. Marks Place and convinced Graziani to open another store in Harlem in 2003. But his friend had serious money problems, so Graziani offered to buy him out in 2004. A year later, two of his employees stole nearly $25,000 worth of merchandise and claimed the store had been robbed. He says the police didn’t have enough evidence to make any arrests.
He decided to close the other two stores and find a new location, but moving costs on top of the loss from the theft put the business heavily in the red. At one point, he says, he was nearly $300,000 in debt.
“I absolutely considered shutting down,” he says as he leans against a case of Nintendo 64 games. “In 2005, I would say that it was an eighty percent chance that I shut down, twenty percent that I stay open.”
He avoided bankruptcy thanks to a loan from his girlfriend, whom he later married, and two years of strong sales before the recession hit, but the business is still climbing out of that hole. Much of the store’s profit since then has gone towards paying off the debt. He hopes to be free and clear by the end of this year.
Surprisingly, Graziani is not a gamer. He rarely plays games in his free time and claims no deep love for the industry in general. He learns about the latest trends by reading and talking to his employees.
“My function as the owner of this business is to make sure everything runs smoothly, to fix the problems when they come up, and to create a future for the store,” he says. “It’s not to play video games.”
Building an Identity
When Graziani took full ownership in 2004, the collection was less than a quarter of its current size. He immediately set out to expand the inventory and revamp the store.
“I went digging for any kind of forgotten warehouse in a forgotten corner of the U.S. and Japan,” he says.
As the retro collection began to swell, so did the store’s popularity. To capitalize on its growing success, he began importing and selling Japanese games, many of which are not available in the U.S. and require Japanese systems to play. The decision helped shape the growth of the business for several more years, he says.
The problem with importing Japanese games is that stores need to order in bulk, so they have to be able to sell a lot of them. Graziani knew that they wouldn’t sell enough in the store alone to make any money, so he hit the anime and comic convention circuits. He’s on the road up to eighty days a year, traveling the country to sell enough Japanese games to turn a profit. This strategy has another benefit – it raises the perception of the store as a destination for Japanese imports.
“The wide range of import games is important,” says employee Shane Steinhilber, 31. “We also carry a lot of limited editions, a lot of which come straight from Japan and aren’t available at major retailers in this country.”
Their import business has been a success so far, but he believes that it couldn’t stand on its own. The secret to their overall success, Graziani says, is that they can turn a profit by covering multiple niche markets.
“That’s the only way to do it. There is no other way,” he says. “If you don’t, then you’ll be shut down in six months.”
A Sense of History
For many under the age of forty, video games are inextricably linked to their childhood. And somewhere amid the dusty shelves of cartridges and the smudged display cases of rare games, there is a palpable sense of that history in VideoGamesNewYork. The nostalgia factor is addicting – it draws people in, but more importantly, it keeps them coming back.
“I come back a lot just to browse,” said Danny Romero, 21, a customer since 2007. “Since I grew up with [these older systems], it’s nice to come back and sort of absorb it all sometimes.”
When the store moved in 2005, Graziani set up what he likes to call “the museum” – a small area at the back of the store, about fifty square feet, surrounded by handmade floor-to-ceiling cases that contain games, systems, and accessories from every era of gaming. Everything from mainstays like Atari and Super Nintendo and more obscure items, such as a tiny, desktop Pac-Man arcade unit, are represented.
“We don’t want to be just a retail spot,” says Graziani. “We want to be a sort of cultural experience, and the history of video games is a big part of the culture.”
Much of the museum is still for sale, so the content depends on what he has in stock and what people would want to buy, but he always tries to keep the most important pieces on display. One of the only things missing, he says, is the Magnavox Odyssey, the first home video game console, released in 1972.
The Big Picture
While some analysts consider the video game industry to be recession-resistant, no one disagrees that it’s currently in decline. Last year, a lack of high profile titles made a rough economy even worse on video games, sending summer sales plummeting over thirty percent. The free fall is slowing, but overall January software sales this year were still down twelve percent from 2009, while hardware sales dropped more than seventeen percent.
“In-store retail has probably been hit the hardest,” says Lewis Ward, a gaming analyst with IDC. “Depending on the genre, console game sales were either flat or down in 2009 compared to 2008.”
But VideoGamesNewYork finds its own ways to stay in business. One strategy is to sell new games a few days before their official release dates, which Graziani says he does when he can get shipments ahead of time. Large companies would get in trouble with the publishers if they did that, but Graziani says his store is small enough that it flies under the radar. Customers will sometimes cancel their pre-orders with GameStop to buy from VideoGamesNewYork, drawing the ire of some local managers.
“The big chains get those big, cool pre-order bonuses, and sometimes they even get exclusive in-game content. They’ve really cornered that market, and it’s hard to compete with that,” says employee Shane Steinhilber, 31. “Selling games early is a big part of our edge.”
VideoGamesNewYork also provides extra services, like repairing systems and tracking down rare games, that the chain stores do not. In addition, the store relies on a more personal approach to customer service to draw customers away from the big chains. Steinhilber says some customers are turned off by the “robotic” customer service in places like GameStop and turn to their store for a friendlier and more honest atmosphere
“You get the sense they can’t say certain things about a game, or they’re told to promote certain games,” says Steinhilber. “It’s a different feeling over here. It’s a more personable shopping experience.”
Jermaine Wynn, an employee since 2006, says that regular shoppers often recognize him out and about in the East Village.
“The prices are the same as the chains, but here, you can develop a relationship with the people who work here,” says Onil Melendez, 22, who stumbled on the store while taking pictures in the East Village in February.
Graziani estimates that only about forty percent of the people who come in every day buy something, but even those that walk out empty-handed can still spread the word.
“I’ve brought friends here,” says William Rodriguez. “They come in and want to buy everything they see.”
The Future of VideoGamesNewYork
Graziani won’t share his sales numbers, but he says the recession has taken its toll. Overall, 2009 sales were down five percent from 2008, a drop that he calls “a situation.” Still, the store remains profitable.
Although some signs indicate the economy is starting to recover on the macro level, he believes it will be at least another year before things start to get better on the ground. At conventions and in the store, customers are spending less and, perhaps more tellingly, using their credit cards less. He says that 2010 could be their worst year ever.
But the future is not all grim. Both Microsoft and Nintendo are planning to launch their new consoles in 2011, which Graziani thinks will regenerate a lot of interest in the industry and boost sales.
“To people like me, one more new system coming out means that there’s one less old system that the big chain stores are going to sell,” he says. “And that’s one more old system we’re going to carry.”