I read with interest your cover story last week (‘Can recession end price war?’ MCV 24/7). It was an interesting take on things, and appears to make sense: as games retailers’ margins become more and more squeezed, and Argos leads the way by putting up its prices, many more of the High Street chains will stick closer to games’ RRPs.
For an indie like me, this would be a wonderful scenario – and one we’ve been waiting on for a long time. Strange to think that a recession could be a ‘golden age’ for a business like mine, but in terms of competition, that may well be true this year.
As CHIPS’ Don McCabe put it so succinctly under the story on your site: “The real long term effect of a recession is to remind all business that the purpose of being in business is to make a profit. After each recession that we have been through we have always managed to have very, very good years. Then slowly but surely we have the return of the idiots who sacrifice profit for market share or growth.”
However, there is one problem in this halcyon ideal: the supermarkets. You see, their business model is nothing like ours, or, for that matter, GAME’s or HMV’s.
While we’re all scrabbling to ensure we cut games’ prices a little, but not enough to lose us our profit margin, they don’t care. They only care about ‘basket spend’ – getting the customer in-store with the lure of the cheap game, and then encouraging them to buy shampoo, bourbon biscuits, Babycham, etc. Making a loss on a game is no great shakes to them – so long as they make it up on other items.
In previous years, this has been a frustration – but this Christmas, it could be fatal. Because this year, more than ever, my business – again, just like GAME’s and HMV’s – will need to keep our margins high, as you rightly pointed out in your article.
None of us can afford to make a loss on any of the big titles, particularly small and independent retailers. Because if we make a loss, we make a loss. It’s as simple as that. We make our profit on games. We sell games. We know games.
With all of us sticking to higher pricing, I have grave fears about the effect some irresponsible price-cutting from the supermarkets may have, and whether we’ll see yet more High Street casualties this Christmas as a result.