GameStop 2012 Annual Report Download - page 24

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platform technology and the reduction in price points as platforms mature. A new console cycle is developing as
Nintendo launched the Wii U in November 2012 as the next generation of the Wii. Also, Sony has announced
that the next generation of the PlayStation will come to market by the holiday period of 2013. We believe that
selling video game hardware increases store traffic and promotes customer loyalty, leading to increased sales of
video game software and accessories, which have higher gross margins than video game hardware.
Video Game Software. We purchase new video game software from the leading manufacturers, including
Sony, Nintendo and Microsoft, as well as all other major third-party game publishers, such as Electronic Arts and
Activision. We are one of the largest customers of video game titles sold by these publishers. We generally carry
over 700 SKUs of new video game software at any given time across a variety of genres, including Sports,
Action, Strategy, Adventure/Role Playing and Simulation. In 2010, we began selling digitally downloadable add-
on content developed by publishers for existing games.
Pre-owned Video Game Products. We believe we are the largest retailer of pre-owned video games in the
world. We provide our customers with an opportunity to trade in their pre-owned video game products in our
stores in exchange for store credits which can be applied towards the purchase of other products, primarily new
merchandise. We have the largest selection (approximately 3,100 SKUs) of pre-owned video game titles which
have an average price of $19 as compared to an average price of $41 for new video game titles and which
generate significantly higher gross margins than new video game products. Our trade-in program provides our
customers with a unique value proposition which is generally unavailable at mass merchants, toy stores and
consumer electronics retailers. This program provides us with an inventory of pre-owned video game products
which we resell to our more value-oriented customers. In addition, our highly-customized inventory management
system allows us to actively manage the pricing and product availability of our pre-owned video game products
across our store base and to reallocate our inventory as necessary. Our trade-in program also allows us to be one
of the only suppliers of previous generation platforms and related video games. We also operate refurbishment
centers in the U.S., Canada, Australia and Europe where defective video game products can be tested, repaired,
relabeled, repackaged and redistributed back to our stores.
PC Entertainment and Other Software. We purchase PC entertainment software from over 20 publishers,
including Electronic Arts, Microsoft and Activision. We offer PC entertainment software across a variety of
genres, including Sports, Action, Strategy, Adventure/Role Playing and Simulation.
Downloadable Content and Subscription, Time and Points Cards. The proliferation of online game play
through Microsoft Xbox Live, the PlayStation Network and PC gaming Web sites has led to consumer demand
for subscription, time and points cards (“digital currency”) as well as digitally downloadable content for existing
console video games. We sell a wide variety of digital currency and we have developed technology to sell
downloadable content in our stores and on our U.S. Web site. We believe we are the worldwide leading retailer
of digital currency sales and the sale of downloadable content for Xbox Live and the PlayStation Network. We
believe that we are frequently the leading seller of downloadable content for most major game titles.
Accessories and Other Products. Video game accessories consist primarily of controllers, memory cards,
headsets and other add-ons. We also carry strategy guides, magazines and gaming-related toys. In all, we stock
more than 300 SKUs of accessories and other products. In general, this category has higher margins than new
video game and PC entertainment products.
Mobile Products. In 2011, we began a new category of business which we refer to as Mobile. Our Mobile
business consists of the sale of new tablets and accessories and buying, selling and trading of select pre-owned
smartphones, tablets and MP3 players in our U.S. stores and in a majority of stores in our international markets.
Store Operations
As of February 2, 2013, we operated 6,602 stores, primarily under the names GameStop, EB Games and
Micromania. We design our stores to provide an electronic gaming atmosphere with an engaging and visually
captivating layout. Our stores are typically equipped with several video game sampling areas, which provide our
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