GameStop 2012 Annual Report Download - page 21

introduction of new software and hardware by our suppliers. We expect that trade-ins will be negatively
impacted in the time period between recent and expected announcements of next-generation consoles and
the launch of these consoles. We expect the launch of next-generation consoles and software to drive
trade-ins of older video game products, thereby expanding our supply of pre-owned video game products.
•Expand our Digital Growth Strategy to Protect and Expand our Market Leadership Position. We expect
that future growth in the electronic game industry will be driven by the sale of video games delivered in
digital form and the expansion of other forms of gaming. We currently sell various types of products that
relate to the digital category, including Xbox Live, PlayStation and Nintendo network points cards, as
well as prepaid digital and online timecards and digitally downloadable software. We believe we are the
only significant brick-and-mortar retail seller of digitally downloadable add-on content for physical
games, which the electronic game industry calls “DLC.” We believe that we are frequently the leading
seller of DLC for certain game titles by out-selling online networks. We operate an online video game
platform called Kongregate.com and we acquired a digital PC distribution platform, Impulse, and a
streaming technology company, Spawn Labs, during the 52 weeks ended January 28, 2012 (“fiscal
2011”). We continue to make investments in e-commerce, digital delivery systems, mobile applications,
online video game aggregation and in-store and Web site functionality to enable our customers to access
digital content and eliminate friction in the digital sales and delivery process. We plan to continue to
invest in these types of processes and channels to grow our digital sales base and enhance our market
leadership position in the electronic game industry and in the digital aggregation and distribution
category. In fiscal 2012, we grew our digital product receipts by 39%. Our digital receipts have grown
from approximately $180 million in 2009 to approximately $630 million in fiscal 2012.
•Store Opening/Closing Strategy. The Company has an analysis-driven approach to store opening and
closing decisions. We intend to continue to open new stores in targeted markets where we do not currently
have a presence and can take market share from uncontested competitors, as well as in markets in which we
already operate where we have a demonstrated track record of successful new store openings and have
realized returns on invested capital that have exceeded our internal targets. We analyze each market relative
to target population and other demographic indices, real estate availability, competitive factors and past
operating history, if available. In some cases, these new stores may adversely impact sales at existing stores,
but our goal is to minimize the impact. On average, our new stores opened in the past three fiscal years have
had a return of original investment of less than two years. We will be aggressive in the analysis of our
existing store base to determine optimal levels of profitability and close stores where profitability goals are
not being met or where we can attempt to transfer sales to other nearby existing stores and increase overall
profits. We utilize our PowerUp Rewards loyalty program information to determine areas that are currently
underserved and also utilize our database to ensure a high customer transfer rate from closing locations to
existing locations. We opened 146 new stores and closed 227 stores in the 53 weeks ended February 2, 2013
(“fiscal 2012”), reducing our store count by 1.2%, in line with stated targets. We opened 285 new stores and
closed 272 stores in fiscal 2011, decreasing the number of stores we opened and significantly increasing the
number of stores we closed compared to previous years. We opened 359 new stores and closed 139 stores in
the 52 weeks ended January 29, 2011 (“fiscal 2010”). We plan to open approximately 65 new stores and
close approximately 250 stores worldwide in fiscal 2013, resulting in an expected reduction in store count of
approximately 2 to 3%.
Targeting a Broad Audience of Game Players. We have created store and online environments targeting a
broad audience, including the video game enthusiast, the casual gamer and the seasonal gift giver. Our stores
focus on the video game enthusiast who demands the latest merchandise featuring the “hottest” technology
immediately on the day of release and the value-oriented customer who wants a wide selection of value-priced
pre-owned video game products. Our buy-sell-trade program offers consumers the opportunity to trade-in pre-
owned video game products in exchange for store credits applicable to future purchases, which, in turn, drives
more sales. Our online properties, including e-commerce sites and Kongregate.com, continue to evolve to meet
the needs of consumers looking to research or buy traditional boxed product video games, download the latest PC
games or play browser and casual games on their PCs or mobile devices.
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