GameStop 2007 Annual Report Download - page 28

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Our stores communicate with our corporate offices daily via e-mail. This e-mail allows for better tracking of
trends in upcoming titles, competitor strategies and in-stock inventory positions. In addition, this communication
allows title selection in each store to be continuously updated and tailored to reflect the tastes 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 have invested in significant management training programs for our store managers
and our district managers to enhance their business management skills. We also sponsor annual store managers’
conferences in the U.S., Canada, Europe and Australia, 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 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 inform customers of available resources, including Game Informer, to increase a customer’s enjoyment of the
product upon purchase.
Vendors
We purchase substantially all of our new products worldwide from approximately 75 manufacturers and
software publishers and approximately five distributors. Purchases from the top ten vendors accounted for
approximately 80% of our new product purchases in fiscal 2007. Only Nintendo, Sony, Microsoft, and Electronic
Arts (which accounted for 21%, 17%, 16%, and 11%, respectively) individually accounted for more than 10% of
our new product purchases during fiscal 2007. 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 few purchase contracts
with trade vendors and generally 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 relationships with our
vendors.
Competition
The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences
and frequent new product introductions. In the U.S., we compete with mass merchants and regional chains,
including Wal-Mart Stores, Inc. (“Wal-Mart”) and Target Corporation (“Target”); computer product and consumer
electronics stores, including Best Buy Co., Inc. (“Best Buy”) and Circuit City Stores, Inc. (“Circuit City”); other
video game and PC software specialty stores located in malls and other locations; toy retail chains; mail-order
businesses; catalogs; direct sales by software publishers; and online retailers and game rental companies. In
addition, video games are available for sale and rental from many video stores, such as Movie Gallery, Inc. (“Movie
Gallery”) and Blockbuster, Inc. (“Blockbuster”). 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.
Competitors in Europe include Game Group plc (“Game Group”) and its subsidiaries, which operates in the
United Kingdom, Ireland, Scandinavia, France, Spain and Portugal, and Media Markt, which operates throughout
Europe. Competitors in Canada include Wal-Mart, Best Buy and its subsidiary Future Shop. In Australia,
competitors include Game Group, K-Mart, Target and JB HiFi stores.
Seasonality
Our business, like that of many 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 2007, we generated
approximately 40% of our sales and approximately 58% of our operating earnings during the fourth quarter. During
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