GameStop 2008 Annual Report Download - page 22

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Interactive Software Inc., Call of Duty World at War and Guitar Hero World Tour by Activision and Madden
NFL 2009 and Rock Band Special Edition Bundles by Electronic Arts.
•Increase Sales of Used Video Game Products. We will continue to expand the selection and availability of
used video game products in our stores. Our strategy consists of increasing consumer awareness of the
benefits of trading in and buying used video game products at our stores through increased marketing
activities. We expect the continued growth of new platform technology to drive trade-ins of previous
generation products, as well as trade-ins of next generation platform products, thereby expanding the supply
of used video game products.
•Increase GameStop Brand Awareness. We intend to increase customer awareness of the GameStop brand.
In connection with our brand-building efforts, in each of the last three fiscal years, we increased the amount
of media advertising in targeted markets. In fiscal 2009, we plan to continue to increase media advertising to
increase brand awareness over a broader demographic area, to expand our GameStop loyalty card program,
to aggressively promote trade-ins of used video game products in our stores and to leverage our website at
www.gamestop.com.
Operating Segments
We identified our four operating segments based on a combination of geographic areas, the methods with
which we analyze performance and how we divide management responsibility. Segment results for the United
States include retail operations in the 50 states, the District of Columbia, Guam and Puerto Rico, the electronic
commerce website www.gamestop.com and Game Informer magazine. Segment results for Canada include retail
operations in stores throughout Canada and segment results for Australia include retail operations in Australia and
New Zealand. Segment results for Europe include retail operations in 13 European countries.
Our U.S. segment is supported by distribution centers in Texas and Kentucky, and further supported by the use
of third-party distribution centers for new release titles. We distribute merchandise to our Canadian segment from
distribution centers in Ontario. We have a distribution center near Brisbane, Australia which supports our Australian
operations and a small distribution facility in New Zealand which supports the stores in New Zealand. European
segment operations are supported by six regionally-located distribution centers.
All of our international segments purchase products from many of the same vendors, including Sony
Corporation (“Sony”) and Electronic Arts. Products from certain other vendors such as Microsoft and Nintendo
are obtained either directly from the manufacturer or publisher or through distributors depending upon the
particular market in which we operate.
Additional information, including financial information, regarding our operating segments can be found in
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” elsewhere in this
Annual Report on Form 10-K and in Note 17 of “Notes to Consolidated Financial Statements.”
Merchandise
Substantially all of our revenues are derived from the sale of tangible products. Our product offerings consist of
new and used video game products, PC entertainment software, and related products, such as trading cards and
strategy guides. Our in-store inventory generally consists of a constantly changing selection of over 4,500 SKUs.
We have buying groups in the U.S., Canada, Australia and Europe that negotiate terms, discounts and cooperative
advertising allowances for the stores in their respective geographic areas. We use customer requests and feedback,
advance orders, industry magazines and product reviews to determine which new releases are expected to be hits.
Advance orders are tracked at individual stores to distribute titles and capture demand effectively. This merchandise
management is essential because a significant portion of a game’s sales are usually generated in the first days and
weeks following its release.
Video Game Hardware. We offer the video game platforms of all major manufacturers, including the Sony
PlayStation 2 and 3 and PSP, Microsoft Xbox 360, the Nintendo Wii and DS. We also offer extended service
agreements on video game hardware and software. In support of our strategy to be the destination location for
electronic game players, we aggressively promote the sale of video game platforms. Video game hardware sales are
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