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Friday, 31 October 2014

New Game plan

Research experts offer their advice for getting Game, the beleaguered videogames retailer, back on track.

It was almost ‘Game Over’ for high street videogame retailer Game Group last month. The firm was placed into administration as looming rent, tax, wage and supplier bills worth £180m threatened to overwhelm it.

Administrators PricewaterhouseCoopers found Game to be its own worst enemy. Alongside an ambitious overseas expansion, the company had brought rival UK group Gamestation for £75m in 2007. Yet Game and Gamestation stores competed on the same high street, often in walking distance from one another. “Unfortunately, there was a lot of proximity between Game and Gamestation stores, so one store was cannibalising the sales at the other store,” said PwC valuation manager Mike Jones in an interview with Sky News.

While in administration, 277 Game Group stores were closed down, leaving 333 still trading in the UK and Ireland. The surviving outlets have been acquired by OpCapita, the group that also owns retail chain Comet.
“We strongly believe there is a place on the high street for a video gaming specialist,” said OpCapita managing partner

Henry Jackson. “We have assembled a strong team of experienced industry operators to implement the programme of operational change that is needed. There is a huge amount to do but we look forward to the challenge of restoring Game’s fortunes in partnership with its employees and suppliers.”

A challenge it will be. Game’s store sales might be down but the whole videogames market is suffering too, being at the tail end of the home console release cycle. New iterations of the Xbox and PlayStation are not due until 2013 at the earliest - and besides, the sluggish economy has left shoppers with less in the way of cash to spend on entertainment.

But as the hard work gets under way Research has pulled together a group of experts to help diagnose Game’s ills and recommend an effective course of treatment. Welcome to the Research clinic.

FIRST OPINION
STORE ENVIRONMENT

Sarah Buckle: It is easy to blame the recession and our struggling high streets, but lack of innovation is at the heart of Game’s troubles. The company has failed to innovate both its in-store experience and its products. This is at a time when its competitors were doing exactly that, innovating in terms of speed of delivery and creating excitement around new game launches.

Rob Gregory: Too many times I walked into their stores to find demonstration TVs broken or not switched on. All very well and good when the sector was booming, but not acceptable now. Game failed to roll out interactive play areas within its stores to generate some excitement. Why didn’t it use their areas of the store to host tournaments or get exclusive demos of the latest releases for shoppers to try?

Richard Preedy: Gamers are often unfairly besmirched with a reputation for not being a particularly social bunch. However, for those interested in them, games, like music, can form a real (some would say obsessive) passion. It is this emotional element that retailers need to tap into and which arguably Game has failed to do. There is a need to avoid excessive ‘show-rooming’ – where consumers research products in store before purchasing them more cheaply online elsewhere – so it is essential that Game offers a compelling digital proposition to sit alongside its in-store experience.

SECOND OPINION
COMPETITION FROM THE MAINSTREAM AND ONLINE

RP: At a practical level, the rise of popular online retailers (and, for that, read Amazon) meant it was becoming harder/nigh-on impossible for Game to compete on price in-store.

SB: Game also suffered from the gaming industry moving from niche to mainstream. Multi-entertainment outlets (like HMV) now stock more video games and customers can buy the latest release with their pint of milk in places like Tesco, Asda and Sainsbury’s.

Fiona Keenan: Games are a huge focus for all of the big grocers now. They are incredibly strong on new releases in all entertainment markets and incredibly aggressive on price, usually in the first week. Look at what Sainsbury’s did with Call of Duty Black Ops two years back. From our grocery data you’ll find that it is rare for people to visit a grocer for a destination shop - that is, going in for just one item. If someone is going in to take advantage of Call of Duty, say, at £29.99 the odds are that there will be more than that one item in their basket. That’s why grocers are expanding their non-food offering.

THIRD OPINION
DIGITAL DOWNLOADS

RP: The problems facing Game are a familiar story of the high street failing to acknowledge or successfully compete with the online revolution. The advent of direct digital software distribution channels is certainly contributing to this and is only going to increase in importance over time. Available figures suggest the biggest successes in this space thus far have been for PC and Mac titles (via websites such as Steam and Onlive), in social and casual gaming and, where the major console manufacturers - Microsoft, Sony and Nintendo - are concerned, publishers offering polished versions of classic titles rather than the latest releases. The digital space allows publishers to keep flogging their older wares for a longer period. Doing so will have eaten into the pre-owned sector revenue that Game was increasingly relying on - and the sales of which provided 100% profit to them.

Recommended treatment

FK: Game has a loyalty card scheme, but what we see in our data is that they don’t have the most loyal of shoppers. People will buy from them but a lot of their spend goes elsewhere, to the competition. There is work to be done to understand where those customers are going and why they are shopping elsewhere. They also need to make sure they are making the most of the shopper behaviour data they get from the loyalty card scheme.

RP: It is key for Game to understand what makes gamers tick. An immersive, ethnographic approach to research would help to unlock the factors that are important to enthusiasts of all ages, unpick the elements that underpin their obsession and identify what it is about gaming that gets them excited. Spending time with gamers at home will show how they arrange their gaming environment, the visual and cultural cues they surround themselves with and how this impacts upon the creation of an optimal gaming space. Doing so on an individual basis, but also in organic group-based scenarios with friends and family, will reveal the interactions and emotions that underpin gaming which Game should try to reflect in-store. Combining this with in-store observations to understand how consumers interact and shop will help to demonstrate the importance of the in-store environment in encouraging purchase, but also building an affinity with a brand.

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