GameStop 2003 Annual Report Download - page 26

Table of Contents
and buying patterns of the store’s local market. These communications also give field management access to relevant inventory levels and loss prevention information.
We also sponsor an annual store managers’ conference, to which we invite all video game software publishers to attend, and operate an intense educational training
program to provide our employees with information about the video game products that will be released by those publishers in the holiday season.
Customer Service
Our store personnel provide value-added services to each customer, such as maintaining lists of regular customers, notifying each customer by phone when new
titles are available, and reserving new releases for customers with a down payment to ensure product availability. In addition, our store personnel readily provide
product reviews to ensure customers are making informed purchasing decisions and offer help-line numbers to increase a customer’s enjoyment of the product upon
purchase.
Vendors
We purchase substantially all of our new products from approximately 85 manufacturers and software publishers and approximately five distributors. Purchases
from the top ten vendors accounted for approximately 69% of our new product purchases in fiscal 2003. Only Nintendo, Electronic Arts and Sony (which accounted for
14%, 14% and 12%, respectively) individually accounted for more than 10% of our new product purchases during fiscal 2003. We have established price protections
and return privileges with our primary vendors in order to reduce the risk of inventory obsolescence. In addition, we have no purchase contracts with trade vendors and
conduct business on an order-by-order basis, a practice that is typical throughout the industry. We believe that maintaining and strengthening our long-term
relationships with our vendors is essential to our operations and continued expansion. We believe that we have very good relations with our vendors.
Competition
The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete
with mass merchants and regional chains, including Wal-Mart, Target and Kmart; other video game and PC software specialty stores located in malls and other
locations, including Electronics Boutique; toy retail chains, including Toys “R” Us and KB Toys; mail-order businesses; catalogs; direct sales by software publishers;
online retailers; and computer product and consumer electronics stores, including Best Buy and Circuit City. In addition, video games are available for rental from
many video stores, some of whom, like Hollywood Entertainment and Blockbuster, have increased the availability of video game products for sale. Video game
products may also be distributed through other methods which may emerge in the future. We also compete with sellers of used video game products. Additionally, we
compete with other forms of entertainment activities, including movies, television, theater, sporting events and family entertainment centers.
Seasonality
Our business, like that of many specialty retailers, is seasonal, with the major portion of our sales and operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2003, we generated approximately 40% of our sales and approximately 62% of our operating earnings during
the fourth quarter. Any adverse trend in sales during the holiday selling season could lower our results of operations for the fourth quarter and the entire year.
Trademarks
We have a number of trademarks and servicemarks, including “GameStop,” “Game Informer,” “Babbage’s” and “FuncoLand,” all of which have been registered
by us with the United States Patent and Trademark Office. We maintain a policy of pursuing registration of our principal marks and opposing any infringement of our
marks.
17