Thursday, January 28, 2016

The Rise and Fall of the Japanese Retro Video Game Market

 If you look over on the archive of this blog you`ll note that its first 3 years (2009 – 2012) were a lot busier than its most recent 3 years.  Take a glance through the posts in that first three year period and you will see a lot about me going to game shops in Fukuoka and finding some amazing bargains.  At the end of 2012 I left Fukuoka and haven`t been able to roam the retro game stores like I used to since, hence the lower number of posts since then (not to mention becoming a father in that time period too).

A couple weeks ago I went back down to Fukuoka on business.  I tried checking out some of the game shops I used to write about on here, including Mandarake and 007, while I was in town to see how things are going.

What I found made me realize an important and, I hate to say, sad fact: most of the posts I put up here during the Golden Age early years of Famicomblog are now hopelessly out of date.  I don`t just mean that the details, like what shop had what games, are out of date.  I mean that the entire reality of retro video game collecting in Japan which they depict is one which no longer exists.

To put this in extremely simple form: 5 years ago retro video games in Japan were easy to find and cheap.  Now they are hard to find and expensive. 

And this kind of sucks. At least if you live in Japan and collect old video games.

I`d like to devote one of my longer essay-type posts here to talking about how the used video game market in Japan has gone from one which just a few years ago was full of amazing bargains to one which today features way fewer of them.  I`m going to do so by looking at the development of three distinct modes of buying retro games in Japan and how they have changed over time – big recycle shops, specialist game stores and online auctions.  First up will be the big recycle shops…

The Peculiar History of the Market for Second Hand Goods: Hard Off and the Big Recycle Shops

Most people who have spent some time collecting old video games in Japan are no doubt familiar with the big second hand goods stores, often called `Recycle shops`.  The best  of these in terms of hunting for retro games are major nationwide chains, like Hard Off/Book Off, or regional chains like Manga Souko in Kyushu.  These can sometimes turn up amazing treasures.

If you haven`t been here for too long though you might not realize that these types of stores are actually a relatively new feature of Japan`s retail landscape.  When I arrived here for the very first time in 1999 they were only just starting to appear and prior to the 1990s none of them had existed at all.

Second hand goods in Japan before that time had been a relatively small niche market dominated by pawnbrokers (which still exist but generally trade in higher value goods rather than old video games and thus aren`t on most video game collector`s radars) and smaller mom-and-pop style second hand stores.  During the bubble economy era of the 1980s there seems to have been a social stigma associated with buying used goods in general – one often hears stories of how people instead of selling perfectly good electronics items that might sell for big money in America, would instead just put them out as trash.

More importantly though, the structure of the used goods market before 1995 was heavily influenced by regulations set out in a law called the Used Goods Dealers Act. (For information on this I am aided by a series of very interesting articles by Prof. Frank Bennett entitled `Second Hand Japan: Used Goods Regulation 1645 – Present`). The Act, which was passed in 1949, mainly regulated the trade in second hand goods from a theft-control perspective, viewing it as a problem (since people could fence stolen goods through second hand stores) more than as a market worth promoting.  One of the key requirements of the Act was that all businesses operating second hand goods stores required a special license to do so.  This wasn`t in itself necessarily problematic, but these licenses could be revoked if a business was found to have sold stolen goods.  Since the license was granted to a business as a whole rather than to a specific store, Prof. Bennett opines that this largely discouraged the development of businesses running chain recycle stores.  Under those regulations, if a chain like Hard Off had existed and one random part time employee of at one of their hundreds of locations had inadvertently bought and sold a stolen TV for example, the entire chain (as opposed to just that one location) could be shut down.  The risk of that happening thus prevented Hard Off and other chain recycle shops from existing under that system – nobody would be willing to take the risk of creating a business model with such an Achilles heel. 

A second area of regulation which affected second hand retailers is that affecting large scale retailers.  Prior to the late 1990s large scale retailers (ie box stores) were subject to a fairly rigorous approval process whenever they wanted to open a new location.  Small scale retailers had a lot of say in that process and could effectively veto plans for any stores that might harm their interests opening up nearby, which meant that there were actually very few large box stores in Japan until the turn of the 21st century (department stores and supermarket chains like Daiei being an exception). Since most of the big recycling stores today are based on a box-store type business model (they need a lot of floor-space to stock a wide range of goods in order to attract customers), this feature of the regulations also prevented Hard-Off type businesses from existing.

In the late 1990s both of these areas of regulation were significantly changed, with the licensing system for used goods businesses abolished in 1995 and the approval process for box stores significantly de-regulated a couple of years later.  Not coincidentally Hard Off opened its first location at this time and the chain stores that we know today began popping up in all corners of the country.  This was also helped along by the negative economic picture in Japan in the late 1990s, which made people appreciate the value of used goods more than they had previously.

Famicom and other retro video games were among the variety of goods which these chains would stock. Importantly at the time these chain stores were starting to appear in the wake of deregulation, the Famicom was still a relatively recent item (Hard Off opened its first location only 2 years after the last Famicom game was released) and thus retro games weren`t treated as collector`s items but rather were dealt with in the same way that books, CDs and VHS cassettes were – just used things that people might want to use.

The business model of these shops generally involved (and still involves) people driving up with carloads of old crap they wanted to get rid of and just taking whatever the shop clerk offered them for it.  The clerks would then slap a price on stuff and throw it on shelves.  With things like old video games there is very little consistency among shops within the same chain as to what to charge for a specific game. They were just another random commodity and the store could only make money if they sold things in volume, so the clerks could, given how little they paid for the item (one Hard Off I visited gave a flat rate of 10 Yen per Famicom game regardless of the title) put whatever price they wanted on something.  This made these shops a collector`s paradise if you happened to be in the right place at the right time.

When I first arrived in 2008 I got most of my games from chain stores like these – especially Omocha Souko which I have numerous posts on here about.  Two big things have happened in recent years which have really changed the usefulness of these shops to video game collectors though.  The first is that both the shops and the people driving carloads of junk to them have obviously become much more aware of the fact that video games are a collector`s item than they were 5 or 6 years ago.  I don`t have as much time as I used to for video game shopping, but I still drop by Hard Offs and similar stores every once in a while and it has been a long time – years – since I found a great bargain at one.  The standard experience I get when I walk into one today is a retro game section consisting of a rack full of Super Famicom tennis and soccer games for 500 Yen each, along with a pile of broken PS1 controllers (this is what I found at 007 in Fukuoka the other day).  The days when clueless people would dig out a box with 50-100 games in it that was covered in dust and included copies of rarities like Gimmick in it, truck it over to a Hard Off, sell it to an equally clueless clerk who would then dump everything into a 200 Yen each bargain bin seem to be over.  TV shows highlighting the collector value ofvideo games have probably played some role in this.

The second problem is that the big chain stores themselves are starting to disappear.  My beloved Omocha-Souko of course closed down in 2012, but it is hardly alone.  I don`t have any data on this, but I do know of several other chain recycle stores and Book Off/ Hard Off locations which have closed in the past 4 years (and none which have opened in the same time).  Book Off seems to have been particularly hard hit, the suburban Japanese landscape is becoming increasingly cluttered with box store locations that you can easily tell are former Book Off locations based on the distinctive yellow and blue color pattern left on the buildings.  Increased competition from online auctions is the most likely culprit, and I will get to them a bit below. 

Basically what I want to say though is that the big chain recycling stores are kind of an interesting, but probably disappearing, element of the retro game collecting experience in Japan. De-regulation in the 1990s allowed them to burst onto the scene and for about a decade they provided an amazing source of cheap games to pick over.  That window seems to be closing now, which is kind of a shame.  Glad I was here to experience it while it was still open though.

The Video Game Specialists – Mandarake and Super Potato

In the previous section I mainly talked about large recycling shops, but its important to bear in mind that those shops generally don`t specialize in games or have any knowledge about them.  Some shops, however, do specialize in games and cater to gamers (and collectors of games) in particular.  

It is hard to find information about some of these.  Obviously game shops have existed since the first video games went on sale, but what about game shops that specifically stocked used games?  Anecdotal evidence from my travels suggests that a lot of mom and pop style shops did start to spring up during the Famicom`s original lifetime.  Coinciding as it did with the above mentioned regulatory framework favoring small retailers these seem to have been small, family owned businesses.  Many of the smaller ones I visited in Fukuoka while I was there seem to have closed and I don`t have a lot of info on them.  But two of the more successful ones which eventually became chains – Mandarake and Super Potato – we can talk a bit about.

Aside from both being chain stores that often operate in close proximity to each other, Mandarake and Super Potato are quite a bit different creatures.  Super Potato is actually the only one that really counts as a `pure` retro game store since that is all it sells, while Mandarake sells a wide variety of other goods (mainly comic books, toys and cosplay stuff).  An important common feature they have though is that unlike the big recycle shops they both have specialist staff who know the value of games and have long priced things accordingly.

It would be really useful to know a bit more about Super Potato`s origins as a store, but the internet doesn`t really tell us much (at least as far as I can find – anyone out there know a bit more?)  Its website says nothing about the store`s history, nor does the Japanese Wikipedia page or any other sources I could find.  Mandarake, on the other hand, is a publicly traded company listed on the Tokyo Stock Exchange and subject to certain disclosure requirements and thus it is much easier to find out historical information about it.

The first Mandarake store was opened in Nakano (Tokyo) in 1980, under the simple name `Manga Used Book Store`.  Judging by the name it likely specialized only in comic books at first.  Business seems to have gone well and it was incorporated in 1987 under the name Mandarake with a capital of 2 million yen (about $18,000 US at today`s exchange rates, not a huge sum).  It opened its second store in Shibuya in 1994 and in the following years would further expand to Nagoya, Osaka, Fukuoka and Sapporo, as well as opening further locations within Tokyo. 

Its sales have grown year on year – from 1.4 billion yen in 1995 to 8.6 billion yen in 2012 (the last year for which data is posted on its website).  This would seem to indicate that it is doing well, but it is a bit difficult to determine how much of this amount is attributable to retro video games (which generally only take up 10-20% of floor space at the Mandarakes I have been to) and how much is from other merchandise.

While we don`t have much information on Super Potato`s origins, we can piece together a bit of its recent story based on information about store closures.  According to its Japanese Wikipedia page, 10 different Super Potato locations have closed across Japan since 2009, with 8 of those coming in the period 2013-2014.  In the same time period, only one new store (in Nagoya, as first reported here on this very blog!) opened.  For a chain that currently has only 10 stores in operation, closures of that scale are huge. 

This isn`t a perfect comparison, but I think it can generally be said that Mandarake is a growing business while Super Potato is a shrinking one and the main difference between them is that Super Potato is a pure retro game shop while Mandarake has a much more diversified product range.  It is hard to speculate about what problems Super Potato is facing (I note that its prices have always been on the high side for Japan), but I suspect some of it might be owing to the above mentioned changes in the retro video game market as a whole – it is simply getting harder to find cheap stock on the one hand, while increased competition from online auctions is probably biting into their customer base more than it is for the more diversified Mandarake.  Either way, Super Potato is kind of the market leader for retro game shops in Japan and if it is doing bad, this bodes poorly for other specialist shops too.  This brings us to….

The Online Market – Yahoo Auctions

Finally we come to the big elephant in the room – online auctions.  Even online, it seems, Japan has to be different from the rest of the world.  Ebay tried entering the Japanese market in the early 00s but quickly withdrew after failing to make much of an impact (probably due to the prevalence of postal accounts, which allow for free transfers between buyers and sellers.  Paypal fees? No thanks.)  Yahoo Auctions is the big one.  And at any given moment it has a huge amount of retro video game stuff up for bid.

I have been an active user of Yahoo Auctions (only as a buyer) for almost 5 years now and I can say from firsthand experience that the market has changed radically in that time.  In keeping with the above description of the big recycling shops, when I first joined Yahoo Auctions it was obvious that a lot of the games were being sold in lots by people who didn`t have much idea as to the rarity/value of the games they were selling.  This suggested that people who would previously have been dumping those games at recycling shops were now dumping them on Yahoo Auctions in order to cut out the middle man. 

Most interesting though – and fun for me at the time – was that the auction prices never seemed to go too high.  Often you could get stuff for a tiny fraction of what it would sell for on Ebay.  So in addition to relatively uninformed sellers you also had a fairly laid back set of uninformed buyers bidding on the stuff and building up nice collections on the cheap. 

This dynamic no longer exists.  Sellers now are obviously way more knowledgeable than they were in 2011 or 2012 – you almost never see a rare game stuck in a huge lot anymore, and on rare occasions when you do the seller has usually put that game`s title prominently in the description.  Prices too have gone through the roof – I wouldn`t say there are no longer any deals to be found, but when you find them they tend to be much more modest (no steals, but maybe some decent priced stuff) and they happen way less often. 

Japanese bloggers generally chalk these huge price increases on Yahoo Auctions to overseas buyers and I think that is probably the case.  One big piece of evidence supporting this theory is the correlation between exchange rates and game prices on Yahoo Auctions.  The first big bump in prices I noticed happened shortly after the Yen lost a large chunk of its value against the Dollar about 3 years ago (which wouldn`t have happened if only domestic buyers were to blame).  Another is that proxy services which allow overseas bidders to bid on stuff seem to have proliferated over the past few years, making the Yahoo Auction market much more open to the rest of the world than it was a few years ago (and thus much more easily influenced by foreign prices). For famous and hard to find games (Contra, Crisis Force, etc), the prices on Yahoo Auctions in 2011 for single copies used to be easily half what you would have paid on Ebay, but now they are pretty close to even.  It is really hard to explain this increase based on any changes particular to Japanese collectors, so I think the influence of overseas buyers is by far the biggest factor driving this.  This of course has side effects on physical stores in Japan, who in addition to having more difficulty getting stock in the first place are also more incentivized to sell their games on Yahoo Auctions where they can reach overseas buyers willing to pay much more for games than Japanese buyers are, thus making the brick and mortar stores even less appealing to bargain hunters. 


It is kind of sad to say but I think the market for retro games in Japan has basically gone global, meaning the selection of games and the prices charged for them to collectors living in Japan (or visiting) is a lot less attractive than it used to be.  A lot of the stuff I said in posts like this one here simply doesn`t seem to be the case anymore.  The big recycling shops that used to dump treasures into junk bins are disappearing and the ones which still exist don`t get many treasures to dump anymore.  The specialist stores seem to be having trouble making their business model work in the era of online auctions.  And the online auctions have seen prices explode over the past few years, which has effects on the other two.  Its an irreversible cycle that will probably continue down that path for a while before it hits some sort of equilibrium when prices stabilize on the international market. 

This isn`t to say that you can`t find bargains, they still probably exist out there.  Somewhere.  But the wild west days of finding copies of Gimmick for 100 Yen seem to have past us by.