GameStop 2007 Annual Report Download - page 20

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developed. Based on reports published by NPD Group, 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 150 million units of recent
generation technology, including approximately 3.2 million Sony PlayStation 3 units, 7.3 million Nintendo Wii
units, 9.1 million Microsoft Xbox 360 units, 10.5 million Sony PSP units, 41 million Sony PlayStation 2 units,
14 million Microsoft Xbox units, 12 million Nintendo GameCube units, 17.5 million Nintendo DS units and
36 million Game Boy Advance SP and Game Boy Advance units. 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
1.2 billion units. According to the International Development Group, the installed base of hardware systems in
Europe is approximately 101 million units. As the substantial installed base of video game hardware and software
continues to grow, there is a growing demand for used video game products.
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:
Continuing to Execute Our Proven Growth Strategies. We intend to continue to execute our proven growth
strategies, including:
• Continuing to open new stores in our domestic and international target markets; and
• Increasing our comparable store sales and operating earnings by capitalizing on industry growth and
increasing sales of used video game products.
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
and gift givers 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 believe 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 provides 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.
Building the GameStop Brand. Substantially all of GameStop’s U.S. and European stores are operated under
the GameStop name, including stores acquired from EB. Building the GameStop brand has enabled us to leverage
brand awareness and to capture advertising and marketing efficiencies. Our branding strategy is further supported
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