The impact of High Street closures on game distribution

Following the loss of HMV and Blockbuster stores, the role of a distributor has become (in principle) easier for now, with fewer stores to deliver to.

But this offers no comfort when there are fewer orders coming in. So have the suppliers been hurt the most by the High Street’s woes?

Actually, no. In fact, the UK’s leading distributors say these closures have not had as much of an impact as you might think.

As most stock is now on a consignment basis, these bankruptcies are less of an issue than they would have been some time ago,” Mastertronic’s operations director Dermot Stapleton explains. However, where we have expensive console stock in the retail channel and no practical means of retrieving it quickly, it still poses a problem. The ongoing transition to a digital business has minimised the effects of these closures.”

Many distributors have offset the loss of UK orders by fortifying their business in other, less troubled territories abroad.

The general state of the retail landscape has made sales more challenging in the UK and Europe,” explains Vogue Distribution’s sales manager Tom Popple. However, we sell to just about every territory around the world and by spreading our sales in this way, we have protected ourselves, as well as massively expanding our business.”

Click Entertainment’s head of business development Jake Wright concurs: It is sad to see such large names disappear from the UK high street. While we all feel it to a certain extent, we are fortunate as an international distributor that the rise in UK retail closures does not have an immediate effect on all regions that we operate in.”

Music and film suppliers reportedly worked closely with HMV as administration loomed, negotiating better sales terms.

While little was said about games suppliers’ contribution to these proceedings, distributors point out that games have a wider specialist market to worry about, both on the High Street and online.

The reality is that the games suppliers have
probably helped the likes of HMV to a greater
extent than they have been given credit for."

Bright Red Distribution MD Danny Russell

The reality is that the games suppliers have probably helped the likes of HMV to a greater extent than they have been given credit for,” Bright Red Distribution MD Danny Russell. However, at the same time games suppliers are trying to support the full market – and given the pressure on forecasts and turnover, it is no surprise that deals are struck that will prove advantageous to other retailers.”

Gem’s UK GM Darren Houghton adds: Distribution will always get a bad rap as being a necessary evil or box shifters that add no real value and only steal precious retail margin. That’s up to distributors to dispel.”

Far from losing customers, store closures at GAME, HMV and Blockbuster have actually shifted business towards the surviving retailers that have moved quickly to fill the void, and this has benefitted distributors in its own way.

Our business is mainly focused on theindependentretailer base in the UK and so we have not been directly impacted by the demise of some of the larger chains,” says Link Distribution MD David Donaldson.

In fact, we’ve seen growth in order quantities by smaller retailers up and down the country–and an increased desire by them to promote major new releases that perhaps they’ve shied away from previously as they could not compete.”

USD director Dave Cotton adds: The struggle on the UK High Street has had, in a strange way, a positive effect on our business.

We are a specialist PC distributor. While most retailers have cut the allocated space for PC gaming, there is still a huge installed base of laptop owners with disposable income who want to continue to enjoy strategy gaming. HMV and Blockbuster closing has merely accelerated the demand for our games online.”

With total games sales slowing this year and the possibility of further consolidation on the High Street, it’s more important than ever for distributors and retailers to work together closely.

Distributors don’t always have the time to focus on all product opportunities due to the breadth of range usually carried, whilst retailers are still looking of course for the best margins and service levels, so both need each other,” says Impact Global Solutions’ MD Martin Richards.

Digicom Solutions director Kawsar Miah adds: Communication is key. Because we are in an ever-changing market, suppliers need to give as much notice to retailers where they can, in case agreements need to be changed in order to allow everyone to prepare and adjust.

In addition game suppliers can also support retailers by passing along any cost savings they can especially to smaller retailers who are always in a constant battle against larger retailers and supermarket chains.”

Retail is evolving faster than ever now as chains adapt to a more connected world. Stores are interacting more with their customers, both on and offline, and suppliers need to know about these ventures so that they can adapt too.

GAME’s creation of a ‘retail gaming community’ has shown how physical retailing can modernise allowing us suppliers to exploit social networks linked to retail store,” says Craig McNicol, Northern Europe MD for Koch Media.

At the moment the market is quite slow due to
people being over cautious and ordering lower
quantities of new releases. We would like to see
retailers being more optimistic."

Click Distribution director Ian Finch

What would be ground-breaking is if we can share intelligence on what work we can do together with retailer-influenced communities, thus hopefully delivering pre-order spikes. Building theatre up to such things as trailer reveals in partnership with customers would be incredible – think of a livestream into a chain of stores, for example.”

Sony DADC’s general manager Natasha Tyrell adds: Games retailers should be open to all ideas and suggestions and to recognise the challenges faced by games suppliers. Both parties should work together to ensure good supply to the High Street, as well as online, in order to give consumers the choice they desire, which will drive sales.”

While the High Street’s troubles haven’t impacted the distribution financially, they have had an impact in terms of company confidence.

There is an understandable air of uncertainty but suppliers urge their clients to persevere and ultimately learn from these difficult times.

At the moment the market is quite slow due to people being over cautious and ordering lower quantities of new releases,” says Click Distribution director Ian Finch. We would like to see retailers being more optimistic."

Creative Distribution’s new business manager Kevin Young adds: It’s terrible to see video game retailers adding to what is an already bleak high street.

The unfortunate thing is that its been coming for some time and it’s all to easy to see where it could end up.

We just need to adapt as best we can and work together more closely. Put in the right titles and most importantly the right quantities. Maximise online with back catalogue and move away from the ‘deals’ and price-beating philosophy that has contributed to where we find ourselves now.”