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Is the sky falling?

I am seeing way too many “the sky is falling” type videos and social media posts about Pokemon TCG prices tanking lately. There is panic in the market right now, but should you be panicking too? That’s a good question and the answer depends on why you’re buying Pokemon TCG in the first place.

A seller’s perspective

Since we transitioned to being an online shop only a few years back, we know first hand the different dynamics between pricing for a physical store and a virtual one. The biggest being the cost of overhead! When we had the physical store we had monthly rent, water & power bills, employees…all of those things eat into margins. It is incredibly difficult to make money running an LGS — the margins on selling TCGs are so extremely thing. A physical store NEEDS to clear at minimum 30% margin, whereas an online only shop can get away with 20% margins or even less. Sure, you’re not going to be making much at 20% but you can still cover any overhead you might have…hosting costs, seller fees if you’re selling on eBay, Amazon, etc.

We are seeing a lot sellers who are over leveraged, getting squeezed and needing to dump their inventory to free up capital. Generalizing, I see two types of sellers in the market that drive prices in the short term and in the long term. 1) Sellers who put all their capital and credit into each release and require selling their entire inventory in order keep buying new products 2) Sellers who have access to larger pools of cash/capital and can keep buying new product regardless of sales.

If you look at the prices of Battle Styles you can see the squeeze happening on the first type of sellers. For the first time in a long time sellers had access to larger amounts of product. Heck, we easily got our full allocations on Battle Styles; it’s been a really long time since we’ve seen that happen! We still see an abundance of Battle Styles product available in the marketplace. Imagine if we had put all our cash into buying Battle Styles AND we got full allocations? We would still be sitting on so much inventory we wouldn’t be able to purchase our allocation of Chilling Reign, put in pre-orders for Evolving Skies, etc. It can snowball out of control very quickly for sellers who do that, resulting in illiquidity, possibly losing their relationships with their distributors, and closing up shop.

Even for most online sellers, selling a booster box at or below $100, including shipping, equals breakeven or a loss. We are seeing tons of products being unloaded at below this price right now which a strong clue as to how their business is managed.

If you are thinking of becoming a seller, I highly recommend taking a slow approach and having a enough capital to buy through all releases for at least one year. Assuming 5 to 6 releases per year you can easily do the math. Ebing a smart seller means you are buying time to make more rational business decision rather than getting backed into a corner and having to sell at a loss. Set yourself up to be able to be patient. Heck, in person play hasn’t even started up again, that could be a game changer and energize the market…who knows.

A collector/player’s perspective

I hope you’re buying Pokemon because you love playing the game or collecting it, but there are also soooooo many people who jumped in this past year who only see it as a commodity. Look how many YouTube channels there are dedicated to Pokemon TCG prices! Some are great and informative — others just jumped on the bandwagon — no doubt the market downturn will shake out the bandwagon peeps.

It’s a good lesson to collect what you love because there is a fair chance you will lose money. Being stuck with something you come to loathe is no fun at all. I have a large, vintage PEZ collection that I have amassed over 20 years of collecting. The 2000s saw a huge boom in PEZ prices and then the 2008 financial crash that brought everything down decimated PEZ collectible prices, and they’ve never really recovered. I bought all the way through the rise and fall in prices, but I love my collection. I have so many specific memories tied to even ones that are probably forever worth 50% less than I paid. If I had collected with the notion my collection would make me right, I would be devastated today.

I won’t disparage people who buy Pokemon TCG as only an investment, but smart investors are diversified into a wide range of investments — they’re not putting all their eggs in one basket, so to speak. Similar to sellers who are over leveraged, you don’t want to put yourself in a position where you HAVE to sell you collection because prices are falling.

Only time will tell if the current downturn in prices gets deeper, but one thing is for sure, if you’re a player or collector this is a great time to be a buyer! The Pokemon Company has really been putting out fantastic products lately — the new card artwork has been ridiculously good! This gives me very strong faith in the longterm viability of the game, the collectibility, the playability, and Pokemon as an investment.