GameStop 2008 Annual Report Download - page 28

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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, at which we operate an intense educational training program
to provide our employees with information about the video game products that will be released by publishers in the
holiday season. All video game software publishers are invited to attend.
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 several distributors. Purchases from the top ten vendors accounted for approximately 80%
of our new product purchases in fiscal 2008. Only Nintendo, Sony, Microsoft, and Electronic Arts (which accounted
for 25%, 13%, 13%, and 11%, respectively) individually accounted for more than 10% of our new product
purchases during fiscal 2008. We have established price protections and return privileges with our primary vendors
in order to reduce our 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”); 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 operate 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 2008, we generated
approximately 40% of our sales and approximately 56% of our operating earnings during the fourth quarter. During
fiscal 2007, we generated approximately 40% of our sales and approximately 58% of our operating earnings during
the fourth quarter.
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