Talking Point: The Future Role of High Street Games Retailers

Tough times ahead?

The past twelve months have shown just how volatile the current market is for retailers. With the global recession taking its toll, several high street businesses are finding it difficult to compete. This week alone saw both HMV and Blockbuster slip into administration in the UK, putting thousands of jobs at risk. Video game retailers have certainly not been immune from these issues; GameStop failed to meet expectations over the holiday season and not so long ago UK video game retailer GAME was hanging precariously over the abyss.

Consumers just seem to be buying from elsewhere these days. Whereas in the past they would always buy their games from video game retailers, now they are offered much more choice from places like supermarkets and larger chains such as Walmart. GameStop took half a million 'pre-orders' for Wii U that really meant registering interest, and it only managed to actually sell 320,000, the remaining 180,000 either decided against the new system or went and picked one up elsewhere. Considering all of this, what does the future hold for video game retailers on the high street?

The first big threat comes from the supermarkets, juggernauts that wield significant power over many different sectors of the high street. You’ll no longer find just food down the aisles of these stores; you’ll also see books, DVDs, CDs, clothing and video games. Supermarkets tend to have a habit of undercutting video game retailers such as GameStop and GAME - after all, money knocked off a copy of New Super Mario Bros. U can be added to something else in store if necessary. It’s also heavily convenient for the consumer who can now shop for music and games while picking up necessities – no need to make a special trip to the high street.

Speaking of convenience, can you possibly get more convenient than buying your goods online? With just a few clicks you can pre-order the latest upcoming game and have it posted through your letterbox on the day of release. Online retailers such as Amazon have started to pick up a lot of market share in recent years and have done so by offering its customers a quick, easy and more affordable way to buy games and other entertainment products. They can save money on overheads seeing as there’s no reason to lease stores and pay staff to run them – this saving can be passed on to the customer, undercutting the high street.

The one trump card — arguably — that the high street does hold against the online realm is the fact that you have to wait for online retailers to post goods out to you; not so with high street retailers where you can head down to the store, buy a game and be playing it in the same afternoon – but is this enough to keep customers passing through their doors?

Naturally, video game retailers have plenty of schemes in place in an attempt to keep customers coming back. Pre-order bonuses such as GameStop’s Castlevania: Lords of Shadow – Mirror of Fate 3DS cover are becoming more and more relevant as high street retailers attempt to offer the customer something they can’t get elsewhere. Then there are loyalty schemes allowing customers to rack up points every time they purchase something in-store. These points can obviously then be put towards another game enabling the customer to save money – or at least give them the feeling that they are.

Are consumers saving money on the high street anymore, however? The loyalty points they’re racking up are received after buying products that are often priced extortionately; GAME in the UK was selling ZombiU for £54.99 at Wii U launch, a price that was easily undercut by supermarkets and online retailers; even with the loyalty points more savings can arguably be made by consistently buying from elsewhere. Loyalty cards can only do so much and if customers feel they’ve had the wool pulled over their eyes they will invariably stop trusting the company, and will take their money elsewhere.

There is of course the pre-owned market. The deal is simple; you bring in your old games and put them in part-exchange for a new game – saving you money. It’s been the lifeblood of many video game retailers, allowing them to make a profit on used games without giving the publishers a penny.

It is debatable, however, whether this business model can last. For starters online retailers are already on this band-wagon, with Amazon in particular starting to push its Trade-In service where customers can credit their account with items they send away to a depot. Then there are the games’ publishers themselves, which understandably aren’t too keen on the pre-owned market and have devised ways to combat it. This is where online codes come in, games such as FIFA 13, Batman: Arkham City and Tekken Tag Tournament all come packaged with codes that need to be entered to open up the whole game (at least on the PlayStation 3 and Xbox 360 versions) – all of a sudden pre-owned games start to look a lot less appealing. When you see share prices of game retailers plummet after news of Sony’s anti-used game technology patent, you realise just how much pre-owned games mean to them.

Publishers are also moving closer and closer towards the ultimate severing of the middleman: digital downloads. Downloadable games have been growing at a staggering rate in recent years with small developers finding their footing in online stores such as the 3DS eShop, Xbox Live Arcade, PSN Store and of course the Wii U eShop. However it’s not just small games finding themselves in virtual stores, now fully fledged retail titles are offering themselves to you digitally as well as offering physical copies from the high street.

Naturally many see the next step already: download-only retail games. Unchained Blades became the first download-only retail title on a Nintendo system a few weeks back in the U.S., and Fist of the North Star: Ken’s Rage 2 will only be available in Europe and North America via the Wii U eShop - retailers will not see a penny.

This is something Nintendo of America's Dan Adelman brought up in our recent interview, an area he knows well as a driving force in the company's download strategies:

Now that even big budget AAA retail games are starting to go the digital distribution route, there’s less cost and therefore less risk built into the process.

Companies of any kind tend to like things that offer lower costs and less risk, digital distribution is something that offers just that, not only for small developers but also for the big boys.

High street retailers, meanwhile, have been scrambling to combat this by offering download codes in store. It’s not uncommon to find DLC codes in shops as the retailers attempt to get a cut of the action. It's a time when we find that fully fledged downloadable game codes could be just around the corner on Nintendo systems, it’s already happening in Japan and could soon become commonplace in the West. But, in the same way some book stores are selling eBook devices, are games retailers dooming themselves by getting more people into downloading games?

With all of this in mind, it’s understandable why many retailers are finding themselves in dangerous financial situations. We may well get sentimental about long-standing high street retailers but in the end it is us, the consumers, who decide who lives and breathes in the marketplace. If fewer people are buying from retailers like GameStop and GAME, then their futures will always be in doubt.

Where are you buying your games from? Let us know in the poll below.

Where do you buy most of your games? (217 votes)

Specialist game store brand (eg GameStop / GAME)

42%

An independent specialist game store

4%

Supermarkets / large chain stores

15%

Online retailers

33%

Retail downloads

6%

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