2010 was a tough year for the industry. What do GAME Group’s Christmas trading results say about the market?
Our latest results show there is no question that the negative year-over-year movement the market saw throughout 2010 began to get better towards Christmas.
We had a great software line-up complimented by Kinect and Move, giving people a reason to re-engage with games – both for themselves and for their Christmas shopping.
And you can clearly see that over the Christmas period we’ve outperformed the rest of the market.
If you think about the assets that GAME has, our scale and the offers and incentives we offer customers in-store, it’s a vote in confidence in the business model of the specialist.
I think the fact that we have the pre-owned business model which, relative to multi-outlet competitors, is a real point of difference for us. That’s really important.
Even in the run-up to Christmas, when you would think most people are buying games new as gifts, you still have a lot of trade-in happening. Around 50 to 60 per cent of the time, when we were selling a brand new game, we were taking in a trade-in against it.
From that point of view, you’re building plenty of pre-owned stock, and it means our customers don’t have to worry about the full price of the new game because they know they’re getting some of that back.
That gives us a very strong competitive advantage over companies that can’t do trade-in in the way that we can.
But the pre-owned scene has become much more crowded over the last year, with Tesco, Asda and Argos all starting their own trade-in schemes. What impact has this had on GAME?
One of the things I’ve learned since joining this business is how difficult it is to do pre-owned well.
You’re spot-pricing thousands of SKUs from both a trade-in point of view and from a pre-owned sales point of view. Your operational processes have to be absolutely on the button.
GAME is a business that has been doing that for 15 to 20 years, so we’ve built up a real body of expertise and experience. That makes it quite a hard thing to replicate.
When you look on a store-by-store basis, at areas where our competitors have started doing trade-ins, if anything our own trade-in business has got bigger.
I think that’s because those companies have added credibility to the concept of pre-owned. They have made consumers think about the benefits of pre-owned more, rather than just taking market share. They’ve actually made the market bigger and we’ve taken a good chunk of that.
Kinect and Move did their part to boost sales, but hardware was still in decline throughout 2010. Do you think the market would benefit from price cuts?
I think it’s innovation that draws people into the market. Prices will come and go, and move up and down, deals will be done and all sorts of other things during the year, but fundamentally market growth comes from lots of customers being engaged and wanting to buy lots of product. And that’s driven by retailers bringing new people into the marketplace, as well as platform holders and developers creating innovative new content. For me, that trumps anything else in terms of driving growth.
What’s GAME’s take on GameStop’s global expansion? What have you done to fortify your position?
You have to remember that we’re an international business as well, so we’re in lots of countries: Scandinavia, France, Spain, Portugal, the Czech Republic and Australia. International now accounts for 40 per cent of our revenue, so a big part of our business is what happens outside the UK.
When I look at the global competitive environment, there are countries where we are head-to-head with GameStop and others where we aren’t. And in all territories, there are lots of places for customers to buy games: whether it’s online, at supermarkets, at electrical retailers or specialists. Customers face a lot of choices.
Our job is not to second-guess competitors but to be putting ourselves in the position where we’re the No.1 choice for customers. The figures show very clearly that we’re the No.1 choice in Europe, but we’ve got to continue that.
And how will you accomplish this?
We’ve got to look forwards: this is a market that’s going to evolve. The way people play, the types of games they’re playing and the way people buy them is changing. So things like social gaming, mobile gaming, and multi-channel retailing are all going to be crucial over the next few years.
GAME Group is busy in all of those areas, and we have our upcoming strategy day to show everyone what we’re doing to embrace the new elements of the market and what the agenda is for the next few years.
When I look back at our Christmas trading results, they’re great but they’re not the finished article. We’ve got a lot of strategic changes to drive through our business, and we’ll talk about that in a few weeks time.
Is there anything you can tell us about the strategic update?
It’s largely based around what we have been discussing over the course of the year.
We’ve talked about the importance of multi-channel and online – and I want to do more in that space. We’ve talked about getting in the middle of digital and downloadable content – they’re relatively small parts of the industry as its stands today but they are growing and we want to be even more involved with them.
And one of the key assets the GAME Group has is our customer relationships and particularly our GAME Reward Card.
There are 15 million Reward Card holders around the world, and this gives us a great opportunity to have a deeper dialogue with customers. As the market evolves, it means we can take customers on that journey with us.
So expect to hear a lot about multi-channel, online, digital and Reward Card, what we’re doing in all of those areas and how we’re going to drive them all further.
There’s plenty to look forward to this year, such as the launch of a certain new handheld. How excited are you for Nintendo 3DS?
Very. I’ve seen it and I think it’s a fantastic product. I’m also very excited about it for GAME as well. We excel at new launches, we excel at technology innovation and products that people want to see and touch and hold before they buy.
We have already taken plenty of pre-orders for 3DS. I think it will be a great launch for Nintendo, and GAME will be strategically important to that.
We’re also expecting Sony to finally announce the PSP2 any day now. Do you think there is still an opportunity for the company in the portable market?
We’ll see. We’ve seen a lot of questioning in 2010 about what the future of handheld gaming is. Is it all going to be done on mobile phones?
Evolutions in mobile phones have really thrown down the gauntlet to handheld platform holders. For a device to be worth consumers owning, it’s got to offer a lot more than what their phone can do. Nintendo very clearly answered that challenge with the 3DS. The idea that Sony would be looking at doing something with their own handheld strategy wouldn’t surprise me at all.
It’s interesting that both 2011 hardware launches are portable consoles. Could this be the year of the handheld?
Let’s wait and see. Our job is simply to create retail theatre, bring people into our stores and sell them products. We’re doing well at that, and will do with any future products.