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The Nerd Cave: Losing $100,000 Building a Space for Gamers

The Nerd Cave was a new kind of retail model, a truly safe space for gamers of all kinds to go and enjoy their passion and hobby. They were doing it great, earning $16,000 AUD/month. But when they moved to a new location, they saw a big loss of income, which provoked the closure of their doors.

Australia
Gaming
Capital

David Desi

March 17, 2018

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Hi Dave! Who are you?

Heya! My name is Dave Desi, one of the founding partners of The Nerd Cave in Sydney, Australia. Longtime retail manager and 2-time business owner.

What was The Nerd Cave about?

The Nerd Cave was supposed to be a new kind of retail model. One that blends community centers, retail and hobby store all into one place. Our focus was on building a truly safe space for gamers of all kinds to come and enjoy their passion and hobby, without the pressure that is generally present in a standard retail store. 

The idea was rattling around in my head for many years, but (believe it or not) the idea actually comes from the original Teenage Mutant Ninja Turtle live action film. There is a scene where April O’Niell’s editor’s kid heads to the foot clans city hideout. When he arrives, he is greeted into a massive space where kids are playing arcade games, gambling, skateboarding and more. My plan was to make that place a reality, minus the gambling, drinking, and smoking… and foot clan. 

Foot Clans City Hideout

Our plan was to approach it slowly and build the play space rather than being purely focused on retail. We were always working with key people in the community to facilitate events and make The Cave the most desirable location to run games/events.

 

How did you build it?

I initially started by finding some business partners. I knew that I wouldn’t be able to get the loans out I needed by myself. After we gathered and all worked out our individual loans, we pooled our money and began building. 

We did everything on an EXTREMELY tight budget. This meant fine tooth combing almost every aspect and finding the most affordable means of achieving every goal (this became known as doing it “Cave style” between us). That’s not to say the equipment we purchased was bad, but it was always on a budget. We were worried about stepping really deep into it without being able to 100% ensure our methods would work.

We built each of the 10 PC’s by hand, ordering parts from the cheapest locations we could find. Those PC’s lasted the full 4 years of operation. 

Through our time being open, our focus was always smaller upgrades as we felt comfortable. When we had more people using our board game tables than we used to be able to seat, we upgraded our tables and seating to be more functional and space efficient. When certain games weren’t playing or selling as well, we moved them on as quickly as possible to maximize retail space for only current best-selling items (where possible). 

When we found the first location to be overly full and capped out with customers, we moved to a new location.

We only made changes once it was past the tipping point. This kept our setup constantly changing and flowing with what worked.

Initially, the business plan was a gym membership style model, but this quickly changed as we heard from our original (and small) community that they would only be willing to pay for use of the electronic items, rather than the “analogue” stuff like board games.

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Which marketing strategies did you use to attract your first customers?

Our strategy was simple. Approach the existing gaming clubs, find out their needs and fill them. Offer the local ones a new location to run their meetups and events. Once we had that ball rolling there, we moved onto more consistent social media advertising which always worked for us.

Our biggest generator (as for most business’) was word of mouth. We made sure to always have time for our customers, this really helped with word of mouth as we became the store that had staff that was interested in interacting with people.

The Nerd Cave Place

We utilized multiple different websites to advertise events, local “things to do” guides and websites like Eventbrite. We didn’t always sell tickets online, but it always generated traffic.

Which were the causes of The Nerd Cave's failure?

Much like any failure, I don’t personally think it was due to any one singular reason.

Through the Cave’s lifetime, we moved 3 times. Our first move was based on a lack of space within our store. We had people sitting on the floor and we were turning customers away at the door. It was obvious that we had outgrown our first tiny location.

The 2nd location was the longest-term location and it proved to be our best. It was, however, within a fairly decent proximity to 2 other game/hobby stores (both franchises of the same company) which caused many issues for us. Our retail sales dropped off after this move and we had to adapt a larger portion of the store towards a wider variety of retail items to be able to compete with them.

Our 3rd location was a move we weren’t all that excited about. The 2nd location’s building was slated to be knocked down and the owners refused to settle a new lease agreement with us, leaving us on a month by month lease with an axe dangling above our necks. It took us 8 months to find the 3rd location, mainly due to the constraints on location and size.

In our 3rd location, our demographic shifted. We were further away from the universities, meaning we lost a little bit of the 20-30 age bracket. This caused a shift on what was selling well for us and generally less income. We closed our doors after being in the new location for only 5 months.

I believe during our time of operation, board gaming and gaming clubs evolved around us to be similar to what we were trying to do but distanced enough away from a normal gaming store to stand out.

A lot of “gaming bars” have come about in the last few years (we never sold alcohol) and many other locations offering table space for board games. The market became more diluted than when we started and I am not sure we did enough to set ourselves apart. 

Near the end of the business, I spoke with a few other store owners about our situation and someone said something that struck me as quite prolific; when people start a business, we all think that the “thing” that will set us apart is “us”. We all say, “Well I will treat my customers well and always have time for them”. The problem with this mentality and thought process is that we aren’t selling ourselves. Your customers don’t know you are a nice guy until they have already become a customer. So, find the “thing” that makes your location unique.

What were the biggest challenges you faced and obstacles you overcame?

We started with a very low capital ($75,000AUD). This meant that our start was slow and we really had to prove ourselves in the early portion of the Cave’s existence.

Another challenge we had was defining ourselves. We had a little of everything, which meant some people were confused as to what we were actually doing. This was generally overcome once they stepped through the door and experienced it for themselves, but we definitely should have had a stronger identity to really breakthrough.

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Which were your investments? Did you achieve some revenue? Did you lose any money?

As stated above, we had an initial capital of $75,000AUD. We took on one additional partner in our second year to help with moving and equipment costs which added $25,000AUD to the initial investment. 

I am quite happy to say that we all only have a very minimal debt after the 4 years of operation, with the majority of it being rental debt based on exiting our lease early.

If you had to start over, what would you do differently?

This is a tricky one. Me and the other partners have had lots of thoughts on this one, but if I’m being honest I am not sure I want to share them! Keep your eyes peeled in the future.

What I can say is that having a strong identity and selling point would be key.

What did you learn?

Apart from general retail management, I learned skills that I am not sure they have come from any other experience. Negotiation, interpersonal skills, economic, the list goes on and on. 

The most valuable lessons are the ones you learn through experience and running a store gives you plenty.

 

Which are your favorite entrepreneurial resources?

The only thing I ever looked at in regards to business was /r/Entrepreneur. Me and my partners have never been a “by the book” group of people, so it never made sense to us to follow old practices.

We did, however, seek advice from other store owners in similar industries, in an attempt to widen our knowledge pool where necessary. 

 

Where can we go to learn more?

The only living vestige is Facebook! Feel free to drop us a line there and we will always try to answer as best we can.

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