How a 21-Year-Old Beach Arcade Owner Does July Fourth

Kids and parents will swarm the shops that line boardwalks and beach towns this weekend. That’s great news for Mike Dolio, a 21-year-old student at the Villanova School of Business who also happens to run an arcade.

Dolio is splitting his summer as an investment banking intern in New York City and as a co-owner of Uncle Mike’s Arcade in Sea Isle, N.J., which he took over after his mother bought the business about four years ago. The family spends $40,000 a year renting the building and shelled out an initial $80,000 on such games as Skee Ball, pinball, Dance Dance Revolution, and of course, those infuriating cranes that never quite grasp the stuffed animal you want.

The arcade has had double-digit revenue growth each year since Dolio was a 16-year-old co-owner. He shares what business school taught him about drawing in customers:

Arcade capitalism:
“I have two sets of customers. One is the parents, and they need to feel they’re getting the most value possible. No. 2 is the kid, who needs to fall in love with the prize and choose it. Ultimately, the parent chooses how much to spend, and the kid chooses where to spend it.

“At my store, you play a game that may cost me $10,000 or $15,000 to get that machine. I’m not selling prizes; I’m selling entertainment. These machines are not cheap. They’re like cars and have a 10-year life span.

“The trick of the trade is the crane machine. It is usual that 100 people play that game and one person wins. Even if you win a $30 item, the other people who played before you paid 50¢ a play, so I made $50. You got an item that was $30 retail that cost me $10, so there’s $40 in profit for me. The whole goal is to make your customer proceed as if they’re paying retail and being entertained.”

How B-school helped:
“All that financial analysis is stuff I’ve learned in the classroom, like in financial reporting or federal income tax courses. It’s helped me understand the business and understand what’s driving growth, and in small business, that proves difficult sometimes if you don’t have that background. I see competitors and peers not having ability about what’s driving revenue growth, putting money out because you have a gut feeling.

“There was also a class called Competitive Effectiveness. It’s a marketing and management course together with 10 people working on a centralized project. You dive into management concepts and marketing concepts. I had no background in marketing. I didn’t know what cost-per-click was and how to calculate and see whether you’re getting a return and how to measure how you’re performing. I took that right from the classroom to the arcade.”

How to brand:
“The business does, a little bit, brand itself. Sea Isle is a smaller Jersey Shore town. It doesn’t have a large-scale boardwalk like the Jersey Shore TV show. I have the same customers year after year after year coming back into my store. I don’t have the luxury of having someone have a bad experience and the next minute there’s 50,000 people coming in.

“My brand is me, my face, the navy T-shirt with the white print on it that I have. I have customers I’m connected with on Facebook, ones that I’ve known since their kids were very young and now I’m growing up. They’ve seen me go from 13 to 21.”

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