GameStop 2011 Annual Report Download - page 29

stores, on our U.S. Web site and on Kongregate.com, which can be redeemed for discounts or merchandise. The
program’s paid tier also includes a subscription to Game Informer magazine, additional discounts on selected
merchandise and additional credit on trade-ins in our stores. This program is designed to incent our customers to
shop more often at our stores and to allow us to market directly to our customers based on their individual tastes
and preferences. Our PowerUp Rewards program provides members with the opportunity to earn one-of-a-kind
video game related rewards not available through any other retailer. Vendors also participate in this program to
increase the sales of their individual products. We also have loyalty programs in France, Australia and Spain. Our
various loyalty programs total over 22 million members.
In the last several years, as part of our brand-building efforts and targeted growth strategies, we expanded
our advertising and promotional activities in certain targeted markets at certain key times of the year. In addition,
we expanded our use of television and radio advertising in certain markets to promote brand awareness and store
openings. We expect our investment in advertising, including PowerUp Rewards, to increase as we continue to
expand our membership base and build our brand.
Information Management
Our operating strategy involves providing a broad merchandise selection to our customers as quickly and as
cost-effectively as possible. We use our inventory management systems to maximize the efficiency of the flow of
products to our stores, enhance store efficiency and optimize store in-stock and overall investment in inventory.
Distribution. We operate distribution facilities in various locations throughout the world, with each
location strategically located to support the operations in a particular country or region. In order to enhance our
first-to-market distribution network, we also utilize the services of several off-site, third-party operated
distribution centers that pick up products from our suppliers, repackage the products for each of our stores and
ship those products to our stores by package carriers. Our ability to rapidly process incoming shipments of new
release titles at our facilities and third-party facilities and deliver those shipments to all of our stores, either that
day or by the next morning, enables us to meet peak demand and replenish stores. Inventory is shipped to each
store at least twice a week, or daily, if necessary, in order to keep stores in supply of products. Our distribution
facilities also typically support refurbishment of used products to be redistributed to our stores.
We distribute products to our U.S. stores through a 362,000 square foot distribution center in Grapevine,
Texas and a 260,000 square foot distribution center in Louisville, Kentucky. We currently use the center in
Louisville, Kentucky to support our first-to-market distribution efforts, while our Grapevine, Texas facility
supports efforts to replenish stores. The state-of-the-art facilities in both U.S. locations are designed to effectively
control and minimize inventory levels. Technologically-advanced conveyor systems and flow-through racks
control costs and improve speed of fulfillment in both facilities. The technology used in the distribution centers
allows for high-volume receiving, distributions to stores and returns to vendors.
We distribute merchandise to our Canadian segment from two distribution centers in Brampton, 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 in Milan, Italy; Memmingen, Germany; Arlov, Sweden;
Valencia, Spain; Dublin, Ireland; and Paris, France. We continue to invest in state-of-the-art facilities in our
distribution centers as the distribution volume, number of stores supported and returns on such investments
permit.
Digital Distribution. We have developed proprietary technology to work in conjunction with developers,
as well as Microsoft and Sony to enable us to sell digitally distributed game content in our stores, through our
in-store kiosks and on our e-commerce sites. The downloadable content typically available today consists of
add-on content developed by publishers for existing games.
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