GameStop 2012 Annual Report Download - page 23

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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, a digital PC game distribution platform available at
www.gamestop.com/pcgames, Spawn Labs and an online consumer electronics marketplace available at
www.buymytronics.com. 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 12 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 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; however, we also sell
downloadable software and subscription, time and points cards which do not involve physical product. Our
product offerings consist of new and pre-owned video game products, PC entertainment software, and related
products, such as video game accessories and strategy guides, as well as new and pre-owned mobile devices such
as tablets, phones and music players. Our in-store inventory generally consists of a constantly changing selection
of over 4,600 SKUs. We have buying groups in each of our segments 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 3, PlayStation Vita and PSP, Microsoft Xbox 360 and Kinect and the Nintendo DSi, DSi XL,
3DS, 3DS XL, Wii and Wii U. 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 generally driven by the introduction of new
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