GameStop 2006 Annual Report Download - page 20

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Used Video Game Market. As the installed base of video game hardware platforms has increased and new
hardware platforms are introduced, a growing used video game market has evolved. Based on reports published by
NPD, we believe that, as of December 2006, the installed base of video game hardware systems in the United States,
based on original sales, totaled over 200 million units, including approximately 700,000 Sony PlayStation 3 units,
1 million Nintendo Wii units, 4.5 million Microsoft Xbox 360 units, 6.7 million Sony PSP units, 37 million Sony
PlayStation 2 units, 14 million Microsoft Xbox units, 11 million Nintendo GameCube units, 44 million Nintendo DS,
Game Boy Advance SP and Game Boy Advance units and over 100 million units of older hardware platforms
including Sony PlayStation, Sega Dreamcast, Nintendo 64, Nintendo Game Boy and Game Boy Color, Sega Genesis
and Super Nintendo systems. Hardware manufacturers and third-party software publishers have produced a wide
variety of software titles for each of these hardware platforms. Based on internal company estimates, we believe that
the installed base of video game software units in the United States exceeds 1 billion units. According to the
International Development Group, the installed base of hardware systems in Europe is approximately 77 million units.
PC Entertainment Software. PC entertainment software is generally sold in the form of CD-ROMs and
played on multimedia PCs featuring fast processors, expanded memories, and enhanced graphics and audio
capabilities.
Business Strategy
Our goal is to strengthen our position as the world’s largest retailer of new and used video game products and
PC entertainment software by focusing on the following strategies:
Continue to Execute Our Proven Growth Strategies. We intend to continue to execute our proven growth
strategies, including:
• Continuing to open new strip center stores in our target markets and new mall stores in selected mall
locations; and
• Increasing our comparable store sales and operating earnings by capitalizing on industry growth and
increasing sales of used video game products and our Game Informer magazine.
Targeting a Broad Audience of Game Players. We have created a store environment targeting a broad
audience including the electronic game enthusiast, the casual gamer and the seasonal gift giver. Our stores focus on
the electronic game enthusiast who demands the latest merchandise featuring the “hottest” technology immediately
on the day of release and the value-oriented customer who wants a wide selection of value-priced used video game
products. Our stores offer the opportunity to trade in used video game products in exchange for store credits
applicable to future purchases, which, in turn, drives more sales.
Enhancing our Image as a Destination Location. Our stores serve as destination locations for game players
due to our broad selection of products, knowledgeable sales associates, game-oriented environment and unique
pricing proposition. We offer all major video game platforms, provide a broad assortment of video game products
and offer a larger and more current selection of merchandise than other retailers. We provide a high level of
customer service by hiring game enthusiasts and providing them with ongoing sales training, as well as training in
the latest technical and functional elements of our products and services. Our stores are equipped with several video
game sampling areas, which provide our customers the opportunity to play games before purchase, as well as
equipment to play video game clips.
Offering the Largest Selection of Used Video Game Products. We are the largest retailer of used video games
in the world and carry the broadest selection of used video game products for both current and previous generation
platforms. We are one of the only retailers that provide video game software for previous generation platforms,
giving us a unique advantage in the video game retail industry. The opportunity to trade in and purchase used video
game products offers our customers a unique value proposition generally unavailable at most mass merchants, toy
stores and consumer electronics retailers. We obtain most of our used video game products from trade-ins made in
our stores by our customers. Used video game products generate significantly higher gross margins than new video
game products.
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