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Game Retailers Make Money On The Margins
This week's Escapist deals entirely with the business of selling games, and the article A Marginal Business details how EB and Gamestop make their money. From the article: "'Used games are keeping the entire ship afloat,' a vice-president of marketing for Electronics Boutique tells me. 'EB and GameStop make basically no money from new product.' No money from new product? But everybody knows the retailers are the real profiteers of the interactive entertainment industry, brutally extracting marketing development funds and ruthlessly returning product in the name of the all-mighty dollar. Right?"
it's the publishers that demand such high prices. Same with cds and dvds.
Given that many of the EB and such stores are in high rent districts, I can imagine that once the new product is sold, all of the margin from their cost to sell price goes to overhead, be it taxes, rent, payroll, utilities and so on. With used games, for reasonably new games, they seem to buy from the individual at less than 25% of the original price and turn around to label it at 75% original list or more, making the actual profit on the used game possibly higher than the new, with less invested.
In terms of costs, it doesn't help that most of these game stores seem to be very poorly managed.
I was at a Gamestop the other day and saw someone come in to sell some games. Not 10 minutes later, 2 of those used games got resold to other customers at a pretty good margin.
Initial sale: call it 49.99 (of which...? is profit?)
Buy it back used, currently popular title: -$25
Sell it used: $45
Buy it back re-used: $-15
Sell it re-used: $35
Buy it back re-re-used: -$5
Sell it re-re-used: $20
Off of that life-cycle for one game, they can easily make $55 bucks off of one game that had a maximum retail price of $50 bucks.
Because used game sales are so attractive, they offer incentives for people to buy and sell used games - I have one of those membership cards, and I get %10 off of the price of used games as well as a %10 bonus to the trade in value when I sell games, and also they'll let me bring a used game back for a full refund if I do so within a week of purchase, no questions asked.
Even better, they have huge leeway with what they can charge for the games - I tend to get pretty good deals when I haggle a little.
Win win for the retailer and consumer, in my opinion.
Since I can't tell them apart, I treat all ACs as the same person.
Really - pretty pages to look at, but someone needs to tell their webmonkies that the web is not print. It took me forever to find the 'next page' button, and I don't like reading web content in three column layout. Even the IHT learned this lesson, and there are many other print-to-web publications out there that show how you can do this without compromising aesthetics.
-EvilMagnus
I have been working at online retailers since college. I've worked at retailers in high school and during college. They always work on the margins, and sometimes, their profits from sales amount to negative.
Where do they get the money to keep afloat? From other sources. Some companies get paid by their distributors or manufacturers to advertise. That's right, Retailer Y gets paid money by Manufacturer X to advertise Retailer Y's store. Since advertising is money that has to be spent anyway, this translates to free cash. Others get cash from investors who believe if they can hold on one more year they'll hit it big. Others have some other service or plan that they are selling besides the product.
Retail is about living life on the edge, with barely enough ground to stand on. When times are good, they are really, really good. (And Christmas is a really good time for everyone!) When times are bad, numbers turn red, and managers start sweating more and choosing which salespeople to let go. For most of the year, no one really knows whether they'll get bonuses or get fired.
It's a tough game. It's tough because if you are a clerk or a salesperson, unfortunately, your higher salary works against you. One store I worked at told me upfront. "If you're good, we'll give you a raise." And then the manager said, "If you make too much money, we'll let you go!"
But this is the same everywhere. Publishers are trying to find out how to whip out more product from their factories for cheaper. Distributors are trying to justify their take on the supply chain, wining and dining both suppliers and buyers. And retail shops are trying to manage the head-ache that dealing with people instead of lifeless products brings. Add to that the workers who want to bleed every dollar from their employers, consumers who are about as loyal as a goldfish, and then the government who wants to tell you how to run your business and take their cut of your money as well, whether or not you are profitable. It's a game where everyone is pitted against everyone else.
Remember, one reason the internet is great for retailers is because you can now run your mail-order business for much cheaper and have more content that interacts better with the catalog readers. We've come a long way since Sears has published their first catalog, and we have a lot of ground to cover yet, but all signs point towards the internet solving a lot of problems mail-order has.
But you know what? All of this uncertainty and stress and competition leads to a superior product and distribution chain. In America, you CAN buy almost any game you want in almost any condition you want for a pretty decent price in pretty much any locality. Not so in most of the rest of the world. In America, you CAN start a new publishing or producing company to compete with the big dogs. It's not easy, but if you are good, you'll succeed. It's what makes it all happen. It's all because we have these free markets where people compete for money and no one is coerced to do anything they don't want to do (except in special cases).
The radical sect of Islam would either see you dead or "reverted" to Islam.