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Web Retailer Bails on Games Industry, Hard
Online retailer DVD Empire has gotten out of the sale of videogames, and on their way out the door they made a point to call out the industry on a number of sore spots. As reported by Gamespot, the company felt that they actually lost money by offering games to customers. In their eyes big publishers only care about large chain stores, leaving small and medium-sized retailers to pick up enormous overhead costs on the titles they carried. They have an extensive list of frustrations on the former 'games' page, including: "When we sell a game we make on average 8.3% gross margin. That does not take into account any of the cost to store the video game or labor to receive/ship an item. The only way we can make a profit on an item is to sell it over the MSRP, but unfortunately we are not allowed to do this. Take a $400 console; we only make $5 on the sale--that is a .01% gross margin (note the decimal point). The game companies make their profit selling to us. We make no profit selling to you." Besides Gamestop there are two other videogame stores in my town ... but both of them are exclusively used game resellers. Are used games the only way to make videogame sales profitable?
The only way EB Games, and Gamestop stays in business is from their used game sales. Depending on the game, they will buy it off of you for 10-20 bucks, and resell it for 90% of the normal retail price, making a huge margin. Now EB and GS probably make a bit extra than an independent store, but not much.
I notice that the link to the screed in their games section has a userid component. I also notice that the link to the 20% off all games link has the same userid in it.
Does this site reward referrer links?
If it's for-profit but free, you're not the customer -- you're the product (e.g., the Slashdot Beta's "audience").
I buy mine used at GameStop for two reasons
1) 90% or so of the retail cost, with an additional 10% discount (for a mag subscription that I enjoy)
2) If the game reeks I can take it back within 10 days and return it, exhange it, etc. 90 days if it just doesn't work
Walmart and Target don't give me that.
-WS
An operating system should be like a light switch... simple, effective, easy to use, and designed for everyone.
These guys waited till point 6 out of 10 to explain the REAL problem:
6. Games Are Better Suited for Brick and Mortar Retailers:
There is not a huge selection of games; it is a new release industry (majority of sales are in the first two weeks of release). Large retailers make money on other products after they get you in the door. We do not; most people come to a website to purchase a video game, not a video game and a bunch of movies. There is also no game catalog market, if you wanted to buy an old copy you would buy it used. So retailers are able to stock all new games, and they can return the ones that don't sell. Games bring in great foot traffic for physical retailers and they make money elsewhere. EB Games/Gamestop relies heavily on their used business. It is very difficult for online retailers to have an advantage, except for convenience.
If this is the case, then why did they bother to get into the game business? Why not stick with something they do well at- selling DVD's online? It sounds like they're bitter at making a terrible decision and pointing the finger at everyone but themselves.
This is just another boutique retailer who got burned by the big guys who manage to get games into gamers hands cheaply. Heck, one Walmart store probably sells more games than these guys. It shouldn't be a huge surpise that they can't do well when they buy through a distributor. It doesn't mean there's some huge structural problem in the industry.
Oh, and by the way, 8.5% retail margins are not horrible. These guys should talk to independent grocers if they think they've got it bad.