I have a secret dream to do this as well. I just started my own business in the GIS/Mapping field, but I'd trade it all for a successful video game store.

I've seen a lot of Mom & Pop game stores come and go around here (Chicagoland), but no one seems to have been able to crack the nut, they always end up going under. I always root for them and try to bring some of my business to them even if I have to pass 3 Funcoland/Gamestop's to get there, and I'll usually ask the owner/manager some questions.

One thing that seems to be a decent moneymaker is console repair. I don't know how good you are with that, or if you know someone that is good at it, but it seemed to be a good way to get people in the door with a couple of the places around here, especially since the newer systems break down so much.

If you could offer reasonably priced repair on older systems (blinking NES's), as well as newer consoles you might at least have a corner on a part of the market that the big guys don't touch. Even if it isn't super profitable, it could help raise awareness about your store.

I'm torn on kiosks for demoing games. While it seems like a great way to drive traffic, they always seem to attract tons of kids that are abusive to the controllers, have no intention of buying the games, and don't want to play for just a minute and move on. One place around here used to allow you to use any system and game for a couple of bucks for 15 minutes. I thought that seemed cool, but the store didn't last too long, so I'm not sure if it worked well or not.

One way I can always tell when a store is in the "death spiral" is when the merchandise starts to stagnate. It seems like that starts to happen when the owner doesn't keep the pricing up to date. I know it must be time-consuming but especially with newer games, the pricing has to be updated frequently. Just before it finally closed, one of my favorite stores still had a ton of older PSX games with yellowed price tags, many still at $15-25. I'm sure a lot of people saw that and didn't bother to even look around much more. The most successful used game store around me is a used CD store called Disc Replay. It's not unusual to go in there and find a PS2 or Xbox game with 4 price tags on top of one another, but they keep up with market pricing and always seem to move a lot of merchandise.

On the business side of things, make sure you have all your ducks in a row before you jump in, I would highly recommend writing a business plan. I would also recommend setting up an LLC (Limited Liability Company) if you think you will do this at some point. It offers you a ton of protection on your personal assets by keeping personal and business assets completely separate. Also, make sure that you know who's going to balance the books, deal with taxes, payroll, etc. All of that stuff can be incredibly complicated and time-consuming, especially in the beginning.

I hope that you are able to make this work - I'll be rooting for you! I'm going through the whole new business thing right now, so feel free to e-mail me if you have any questions.