While the acquisition of rival specialist Gamestation during 2007 has driven total sales growth, the incredibly buoyant market has aided the like-for-like improvements.
Like-for-like growth of over 30 per cent is almost unheard of among maturing retailers which – like GAME – have not added a considerable amount of organic space over the last two years. True, the retailer has re-formatted its stores and improved merchandising, but the root of this performance is a booming market.
The console and software market has the best line-up it has had for some time. The PSP and DS are still proving popular on the handheld front, while the Xbox 360, PS3 and Nintendo Wii have all been in demand. Indeed, Nintendo's Wii and DS consoles are still not in free supply – something almost unheard of in the industry considering both have been available for well over a year. Not only are there five strongly performing hardware platforms, but also their appeal stretches far and wide – giving retailers such as GAME a larger than ever market to target.
The increase in hardware sales has impacted profitability at GAME – due to its lower margin compared to software – but sales growth has more than made up for this.
GAME has also announced that it expects limited like-for-like growth during 2008. Strong comparatives and possible price cuts on consoles mean increasing revenue will be extremely challenging.
Looking ahead, GAME must prepare for the inevitable downturn in the market that occurs when new console launches appear on the horizon. Though some way off – until well into the next decade – whispers of a launch always dampen growth as gamers begin to consider waiting for the new product.
Obviously, manufacturers hold the aces here, and this highlights the dependency that GAME has on these suppliers.
While at present driving the business forward in both the UK and Europe must remain a priority at GAME, managing this likely downturn and limiting its negative impact must be considered by GAME now, in order for plans to be formulated and implemented.