On Video Game Shopping

Despite giving the best years of my life to the video game business — and emerging with no desire for video games at all — I still read Penny Arcade.

I like the snark.

On Wednesday, Tycho wrote: “I don’t want to keep harping about this, okay, I do, but we went to the Best Buy near the office and saw four palettes of Rock Band for the 360 and one palette for the PS3. This was after being rebuffed in an attempt to secure the same product from the Electronics Boutique, ostensibly a store that sells videogames.”

An EB/GameStop employee reading this would look at that paragraph and say, no doubt, “C’mon, Tycho, you’ve been around long enough to know that if you want a game from our company, you need to pre-order the game.” Indeed, just a few weeks ago I saw online 28 rules for shopping at a GameStop, and G spends a few hundred words on why pre-ordering the game is vital, if you want to buy it from EB/GameStop. A telling sentence: “In my home area in particular, the common attitude is ‘I’ll just come in the day it comes out,’ but the large Guitar Hero bundles were not in huge supply, and those that we did have were all reserved out by people who had paid deposits on them. We accepted preorders on the game for months and plenty of people passed on it and got angry with us afterwards.”

Take that scenario for a moment, as it’s exactly Tycho’s experience, albeit with a different game.

What is the customer likely to do at that moment?

GameStop believes that this is “training” the customer to pre-order games. They wanted a game, they walked in the store to buy the game, because they hadn’t pre-ordered the game and can’t get it they are now more likely to pre-order a game in the future. G is saying essentially — and I heard it said by colleagues when I worked for the post-merger EB — “Customer, it’s your fault you didn’t get the game. You didn’t pre-order it. Now you know better for the future.”

And that is completely valid. If EB/GameStop is the only game in town.

Except that EB/GameStop isn’t the only game in town in virtually every market.

The customer has money in the pocket she wants to spend. Money she wants to spend on Game X, whatever that might be. The customer has two choices. Buy a different product, or go elsewhere. Buying a different product actually doesn’t work in the video game market, as video games aren’t like, say, toilet paper and there’s no equivalent substitute. Offering a pre-order on an upcoming game may be a way of capturing the customer’s dollars at that moment, but it’s far more likely — if Game X is what she’s looking for — that the customer will simply go elsewhere.

Essentially, GameStop’s business model encourages customers — particularly the casual customer who wouldn’t be familiar with the 28 rules cited above — to walk.

And in retail, the one thing you do not want to do is walk a customer. Because if you can’t fulfill the customer’s needs now, what’s the chances that you’ll have the opportunity to fill them in the future? You’ve already burned the customer, you didn’t have the product. They’ve taken their dollars elsewhere, and it’s likely as not that they’ll continue to shop wherever they walked to.

In G’s rules he explains that the margin on video games is thin. The margin on a new game is between ten and fifteen percent. What would seem like a healthy inventory level is carrying around a lot of money tied up in inventory.

GameStop’s buying model — buy to pre-orders — does make sense. It’s risk-averse, as it buys according to what customers have voted with their dollars to pre-buy.

Yet, it’s a buying model that risks losing customers for good. Do the benefits of a inventory that turns over rapidly outweigh the costs of not having a growing casual customer base? That’s the question EB/GameStop needs to ask itself.

Because, to judge from Tycho’s experience, EB/GameStop is driving the casual customer away.

3 thoughts on “On Video Game Shopping

  1. Here’s what I don’t get about EB/Gamestop, many of their locations are found in shopping malls which is one of the biggest encouragements of casual shopping. It would appear that the chain is trying to have it both ways and I’m rather surprised that the forays into used games, used CDs, used consoles, and other non-new games enterprises aren’t enough to buoy carrying a case or two of whatever no-brainer “hot” new game is released.

    I know no one wants to be stuck with a crapload of the modern-day equivalent to E.T. for the Atari 2600, but there has to be some middle ground.

  2. After the merger — which, really, wasn’t a merger, no matter how the company tried to sugarcoat it — I said to one of my fellow EB managers, “GameStop is run by a bunch of fucking morons.” GameStop’s policies were formulated on minimizing loss — and that’s not just in inventory, but in other areas as well, to paranoia-like levels of insanity — but they’re also predicated on the idea that original thinking is to be discouraged at all costs. Ideas flow from the top-down, not the bottom-up, and it’s the process, not the end result of the process, that matters.

    Your experience, De, with working for Suncoast strikes a chord. EB, pre-merger, put emphasis on things like units per transaction, net sales, and the like. Pre-sells were important, but they weren’t the be-all-and-end-all of the business. We were in the business of making sales, and EB afforded its managers considerable latitude in how they accomplished that. Policies were guidelines to follow. Original thinking was rewarded.

    GameStop’s philosophy, sadly, is anything but that. The policies seem to me to be designed to limit sales, not grow them. What the GameStop employee wrote is accurate, by the way, about employees jobs being on the line over pre-sells. The mother who wants to get her child the latest Tony Hawk game for Christmas, because it’s the only thing he’s talked about, isn’t going to care about pre-ordering a game coming out in six months. And if GameStop doesn’t have the Tony Hawk game, she’s really not going to care about pre-ordering a game. Or potentially shopping there in the future.

    I’ve been in sales long enough to understand the business model. I see what GameStop is trying to accomplish. It’s a philosophy that works for them, but I think it’s ultimately a self-defeating sales model, and for an ironic reason. GameStop and EB have seen the explosive growth they’ve had over the past decade because of the used game business; that‘s where the money is. But if GameStop’s corporate purchasing practices limit the games GameStop’s consumers can buy (due to pre-orders below the level of actual demand for a game), then ultimately the spigot of games being trading in by customers will dry up. Customers have to go elsewhere to buy their games to begin with, so the idea of going to an EB or a GameStop to trade in the game might not occur to them.

    I’m sure someone in Grapevine, Texas has come up with this analysis. But with the culture is so engrained that pre-orders are the way GameStop sells new games to customers, then changing it may take some doing.

  3. I find it entertaining/curious that the game shops in the UK (GAME, Virgin, Electronic Boutique etc) currently end up with queues on Tuesdays (Wii delivery day). There are people in my office who aren’t game fans but want a Wii – if you explain to them that you have put your name down for the biggest selling console in advance and still queue on delivery day they think the games industry is mad.

    If you suggested the same for the most popular games, they would give up and buy online. So it not only causes casual game players to go elsewhere, it encourages them them to cut out the physical shop altogether.

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