In a piece published on the Playtime.co.uk blog, long-term indie games retailer Gareth Rowbotham shows that he knows how it feels to be downed by the quarterly rent bill.
Here he highlights the similarities between what happened to his chain and yesterday's events at GAME, and also discusses the problems facing all of High Street retail...
Todays events at GAME and GameStation have brought back some memories for all of us at Playtime, some of which are not very pleasant. When I say to all the staff at the GAME Group We feel your pain” it is from first hand experience.
Playtime (originally known as Playtime Multimedia Ltd) went into administration in March 2009 – three years ago to the day – that GAME did.
And for the very same reasons. We found out first hand that it just isn't possible to run a profitable business on the high street, selling just games.
We didn't have 606 stores when we first closed – we had 10. We didn't have 5,500 employees, we had 53. But the similarities are striking.
We got into retailing because we loved games, and wanted to work with them. That's how GAME and Gamestation both started. And we grew as gaming became more mainstream, just like GAME did!
But when the supermarkets move in, there's very little any specialist retailer can do. Online has grown but over 70% of games are still sold through conventional boxed retail channels.
It's just that most people don't come shopping on the High Street now. Shoppers flock to supermarkets for their weekly one-stop” shop and pick up the latest release there, or they go to the huge shopping centres where they can park and leisure shop”.
Any business analyst will tell you that most businesses need a Gross Margin of at least 30% to be sustainable. Supermarkets do it by margin mixing. High street brands do it in shopping centres like Bluewater and Meadowhall by selling expensive, premium brands.
Single product, specialist chains like Playtime and GAME are not sustainable if they have to sell most games at the prices customers expect to pay! And in any free market, that is the price you have to charge. I'm not complaining. I'm a great fan of the free market, even though we have suffered at the hands of it. If you get knocked down, get up, you brush yourself down, and try again!
I'm sure it would have happened a lot earlier to us and to GAME, had it not been for the pre-owned part of the games business. Margins in this area are much closer to the 30% GP required than they are for selling new games. Perhaps though that just stayed the execution.
So try again we did. We only have three stores now and we have diversified, both online and into collectables & other game related items. To be honest though, it still doesn't make any money. We do it because we have lease commitments to meet and we are still gamers at heart – we love being around games & gamers!
I'm sure GAME will return too. Maybe not with 600+ stores. But if they can find someone to service the debt they've built up (or even wipe it out) they can then start again with a lower cost base.
There are still people who want to buy their games from a specialist.
For the foreseeable future anyway….