Video games aren't what they used to be--and that's completely OK with David Kaelin.
In the early 2000s, Kaelin worked as a manager at an Austin location of EB Games, a chain store that later merged with GameStop. He noticed that the retro games he loved--like the Legend of Zelda, Super Mario Bros. and Mega Man--were always on clearance, selling for just a couple of bucks.
He knew games that catered to a niche market of "super nerds" like himself weren't worth the shelf space at a big chain store, but perhaps they would be at a smaller operator. That was the seed for Kaelin's business idea.
In 2005, he drained his bank account and cleared out the nearly 3,000 '80s- and '90s-era video games and consoles stacked around his home to stock his first 1,000 square-foot Game Over Videogames store. For the first two years, he worked for free, buying and selling retro games with the help of one part-time employee, and loving every minute.
"Video games have always been a passion of mine," Kaelin says. "I might've had the right product at the right time, but it has to also be something you're passionate about."
Eleven years later, Kaelin typically launches a new store (of which he's opened 13 more in Texas and Washington state) with 10,000 games and up to 2,500 square feet. He says the business is profitable, and he's been able to pay himself since his third year in operation. He now has 70 employees--and for the past three years, the Austin-based Game Over Videogames has made Inc.'s list of the fastest-growing private companies in America. On this year's Inc. 5000, the company hit No. 1,916, with 2015 revenue of $4 million--up almost 200 percent since 2012.
A cult following
Kaelin, now 41, started playing video games on an Atari 2600 system, one of the first commercial models to come out, in 1977. He says he grew up with the industry, so he understands why someone would pay $20 at his store for a Sega Master System-compatible Cyborg Hunter game instead of buying it for half that price on Amazon. When you love games in your childhood, he says, you don't stop.
"In the '80s and '90s," says Kaelin, "people thought it was just a kid thing, but those kids grew up and still play as adults." He says the majority of his customers range in age from 40 to 60 and are buying for themselves. He sells online with free shipping anywhere in the U.S. and Canada, but he says online sales bring in less revenue than even his smallest retail store.
"A store is not just games on a shelf," he says. "It's how they're merchandised; it's the community. It's like going to a history museum of Atari, Nintendo, Super Nintendo."
Selling where the big stores can't
Game Over now has locations in seven cities in Texas and two stores in Seattle. Before he expanded, customers were making the three-hour drive from places like Arlington, Texas, because, they said, there weren't any retro gaming stores in their town. Even if there used to be, Kaelin says, a lot of stores shut down because they made the mistake of trying to compete with retailers like Walmart, Best Buy, and GameStop that sold new games.
If a brand-new PlayStation 4 game retailing for $60 costs the store $52, the overhead kills a small business, Kaelin says. Independent stores have trouble stocking new games the day they come out, at the prices customers want. And while bigger stores sell some used games, they won't ever be a major part of their business. Similarly, brand-new PlayStation games will never be a big part of Kaelin's business.
"There's a nice symbiosis between us and places likes GameStop," he says. "Because we serve the same market, but from different corners of the room."
More than just a game
But Kaelin does sell a few new games, along with merchandise like T-shirts, keychains, collectibles, and local artwork. He also hosts events such as game tournaments, live music, and lectures by video game historians. Classic Game Fest, the video game convention Kaelin started in 2008, has become a separate business. Tickets cost $10 to $25 for adults, and Kaelin rents out Austin's Palmer Events Center for the two-day event, which drew 6,000 people the past two years.
"It's a family environment. Gamers feel at home here," Kaelin says. "And this is a group that's sometimes tough to socialize, so you have to give people a reason to come into the store."