GameStop 2011 Annual Report Download - page 23

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rapid-response distribution methods in our efforts to be the first-to-market and consistently in stock for new
physical and digital video game products and PC entertainment software. 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 and capture significant
market share immediately following new product launches, we believe that we regularly receive a 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 sites prior to their release.
Expand our Mobile Business. In 2011, we began a new category of business which we refer to as Mobile.
We define the mobile category as buy-sell-trade of mobile devices, including gaming tablets, and related services
for those devices. We began to take trades of pre-owned iPods®, iPhones®and iPads®(which we refer to
collectively as “iDevices”) in our U.S. stores and in certain stores in other markets. We believe taking trades of
used iDevices is a logical extension of our expertise in buying, selling and trading of used video game products.
We use our centralized refurbishment center to refurbish these devices and then re-sell them in our stores. As of
January 28, 2012, we were selling used iDevices in approximately 460 U.S. stores and on our Web site at
www.gamestop.com. We also began selling a small variety of tablets in 200 of our U.S. stores which come
preloaded with several digital games designed for play on tablets. As the proliferation of smart phones and tablets
continues and those devices are increasingly used for playing digital games, the market for such devices and the
marketing of related games provides us opportunities to grow our revenues and profits.
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 4,500 SKUs, improve store
efficiency, optimize store in-stock positions and carry a broad selection of inventory. Our proprietary inventory
management systems enable us to maximize sales of new release titles and avoid markdowns as titles mature and
utilize electronic point-of-sale equipment that provides corporate and regional 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 systems
allow 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.
Operating Segments
We identified our four operating segments based on a combination of geographic areas, the methods with
which we analyze performance, the way in which our sales and profits are derived and how we divide
management responsibility. Our sales and profits are driven through our physical stores which are highly
integrated with our e-commerce, digital and mobile businesses. Due to this integration, our physical stores are the
basis for our segment reporting. Segment results for the United States include retail operations in the 50 states,
the District of Columbia, Guam and Puerto Rico, the electronic commerce Web site www.gamestop.com, Game
Informer magazine, www.kongregate.com, and a digital PC game distribution platform available at
www.gamestop.com/pcgames. Segment results for Canada include retail and e-commerce operations in stores
throughout Canada and segment results for Australia include retail and e-commerce operations in Australia and
New Zealand. Segment results for Europe include retail and e-commerce 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
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