GameStop 2006 Annual Report Download - page 21

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Building the GameStop Brand. We currently operate most of Historical GameStop’s stores under the
GameStop name. Within the next 12 to 18 months, we intend to rebrand the remaining EB stores to the GameStop
brand. Building the GameStop brand has enabled us to leverage brand awareness and to capture advertising and
marketing efficiencies. Our branding strategy is further supported by the GameStop loyalty card and our web site.
The GameStop loyalty card, which is obtained as a bonus with a paid subscription to our Game Informer magazine,
offers customers discounts on selected merchandise in our stores. Our web site allows our customers to buy games
on-line and to learn about the latest video game products and PC entertainment software and their availability in our
stores.
Providing a First-to-Market Distribution Network. We employ a variety of rapid-response distribution
methods in our efforts to be the first-to-market for new video game products and PC entertainment software. We
strive to deliver popular new releases to selected stores within hours of release and to all of our stores by the next
morning. This highly efficient distribution network is essential, as a significant portion of a new title’s sales will be
generated in the first few days and weeks following its release. As the world’s largest retailer of video game products
and PC entertainment software with a proven capability to distribute new releases to our customers quickly, we
believe that we regularly receive a disproportionately large allocation of popular new video game products and
PC entertainment software. On a daily basis, we actively monitor sales trends, customer reservations and store
manager feedback to ensure a high in-stock position for each store. To assist our customers in obtaining immediate
access to new releases, we offer our customers the opportunity to pre-order products in our stores or through our web
site prior to their release.
Investing in our Information Systems and Distribution Capabilities. We employ sophisticated and fully-
integrated inventory management, store-level point of sale and financial systems and state-of-the-art distribution
facilities. These systems enable us to maximize the efficiency of the flow of over 5,000 SKUs, improve store
efficiency, optimize store in-stock positions and carry a broad selection of inventory. Our proprietary inventory
management system enables us to maximize sales of new release titles and avoid markdowns as titles mature and
utilizes electronic point-of-sale equipment that provides corporate headquarters with daily information regarding
store-level sales and available inventory levels to automatically generate replenishment shipments to each store at
least twice a week. In addition, our highly-customized inventory management system allows us to actively manage
the pricing and product availability of our used video game products across our store base and to reallocate our
inventory as necessary. Our systems enable each store to carry a merchandise assortment uniquely tailored to its
own sales mix and customer needs. Our ability to react quickly to consumer purchasing trends has resulted in a
target mix of inventory, reduced shipping and handling costs for overstocks and reduced our need to discount
products.
Growth Strategy
New Store Expansion. We intend to continue to open new stores in our targeted markets. We opened 421 new
stores in the fiscal year ended February 3, 2007 (“fiscal 2006”), and Historical GameStop opened 221 new stores in
fiscal 2005 prior to the consummation of the mergers on October 8, 2005. EB opened 415 stores in fiscal 2005 prior
to the consummation of the mergers. Between the consummation of the mergers and the end of fiscal 2005, we
opened 156 stores. We plan to open approximately 500 to 550 new stores in the fiscal year ending February 2, 2008
(“fiscal 2007”). Our primary growth vehicles will be the expansion of our strip center store base in the United States
and the expansion of our international store base. Our strategy within the U.S. is to open strip center stores in
targeted major metropolitan markets and in regional shopping centers in other markets. Our international strategy is
to continue our expansion in Europe and to continue to open stores in advantageous markets and locations in Canada
and Australia. We analyze each market relative to target population and other demographic indices, real estate
availability, competitive factors and past operating history, if available. In some cases, these new stores may
adversely impact sales at existing stores, but our goal is to minimize the impact.
Increase Comparable Store Sales. We plan to increase our comparable store sales by capitalizing on the
growth in the video game industry, expanding our sales of used video game products and increasing awareness of
the GameStop name.
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