GameStop 2013 Annual Report Download - page 24

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at www.gamestop.com, www.ebgames.com.au, www.ebgames.co.nz, www.gamestop.ca, www.gamestop.it,
www.gamestop.es, www.gamestop.ie, www.gamestop.de, www.gamestop.co.uk, www.micromania.fr and
www.gameinformer.com, the online video gaming Web site www.kongregate.com, our digital PC distribution platform
available at www.gamestop.com/pcgames, and our online consumer electronics marketplace available at
www.buymytronics.com.
• Increase Sales of Pre-Owned and Value Video Game Products. We believe we are the largest retailer of pre-owned video
game products in the world and carry the broadest selection of pre-owned and value video game products for both next
and previous generation platforms, giving us a unique advantage in the video game retail industry. The opportunity to
trade-in and purchase pre-owned and value video game products offers our customers a unique value proposition generally
unavailable at most mass merchants, toy stores and consumer electronics retailers. We obtain most of our pre-owned video
game products from trade-ins made in our stores by our customers. We also obtain value-priced, or close-out, video game
products at favorable prices from publishers, other retailers or distributors and can sell those products to value-conscious
consumers in our stores. Pre-owned and value video game products generate significantly higher gross margins than new
video game products. Our strategy consists of increasing consumer awareness of the benefits of trading in and buying pre-
owned video game products and value-priced video game products at our stores through increased marketing activities
and the use of both broad and targeted marketing to our loyalty program members. The supply of value-priced video game
products and trade-ins of video game products, and the demand for resale of these products, is affected by overall demand
for video game products and the introduction of new software and hardware by our suppliers. We expect the recent launch
of next-generation consoles and software to drive close-out availability and trade-ins of older video game products, thereby
expanding our supply of pre-owned and value 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 Plus and Nintendo network points cards, as well as prepaid digital and online timecards and DLC. We
believe we are the only significant brick-and-mortar retail seller of 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, during the 52 weeks ended January 28, 2012
(“fiscal 2011”). We will continue to make investments in e-commerce, digital delivery systems, mobile applications 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 grow our digital sales base.
• Store Opening/Closing Strategy. We have an analysis-driven approach to store opening and closing decisions. We intend
to continue to open a limited number of new Video Game Brands stores in targeted markets where we can take market
share from uncontested competitors, as well as in markets in which we already operate where we 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. 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 109 new Video Game Brands stores and closed 254 Video Game Brands stores in fiscal 2013, reducing our
Video Game Brands store count by 2.2%, in line with stated targets. 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 and
decreasing the number of stores we opened compared to previous years. We opened 285 new stores and closed 272 stores
in fiscal 2011, significantly increasing the number of stores we closed compared to previous years. We plan to open
approximately 40-50 new Video Game Brands stores and close approximately 170-180 Video Game Brands stores
worldwide in fiscal 2014.
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.