Gamestop – company overview part 3

Here’s part three,  only 2 more left!

The retail section of the video game industry, due to its rapid expansion, is becoming increasingly competitive.  Gamestop enjoys a few competitive advantages over other businesses attempting to penetrate the video game retail industry.  These advantages include name recognition, defined relationship with suppliers, and an established business plan which includes reservations and used video game sales.  Gamestop emphasizes its concentration on the company’s advantages by stating, “Our disciplined approach to expansion, passion for gaming and superior customer service driven by knowledgeable sales associates, allow us to deliver superior returns and value to shareholders, customers, vendors and employees (Gamestop – 2006 Annual Report.)”

      The first advantage Gamestop enjoys is the name recognition the company has established.  Gamestop is recognized as the primary video game retailer in the world (Gamestop.com – Investment).  Gamestop has established the company’s name recognition through rapid growth and customer service.

      Over the past decade, Gamestop has used growth, both in the industry and in the company, to merge and buy out multiple of its competitors including Electronic Boutique, FunCo., and others (Reuters – Gamestop).  These mergers and buyouts have allowed Gamestop to eliminate the majority of the company’s neighborhood competitors and have also allowed the company to establish a hold on the smaller niche video game only stores.  Along with these buyouts, Gamestop has also rapidly expanded its store numbers by reinvesting profits and cash into new stores (Gamestop – Investor Relations).  As previously stated, Gamestop currently has over 5,000 stores.  This large number continues to grow at a much larger pace than any of its competitors (Gamestop.com).

      Along with rapid expansion, Gamestop has used customer service to establish name recognition which adds to the company’s overall competitive advantage.  One of Gamestop’s primary goals is to provide the best customer service available (Gamestop – Investment Relations).  By providing great customer service, the company has helped establish the neighborhood mentality of the stores.  Gamestop employees are expected to help all customers from the time they enter the store until point of sale.  They are also expected to be friendly and courteous at all times (Gamestop.com).  These techniques, which are popular in most businesses, are especially beneficial for Gamestop.  By being both helpful and friendly, Gamestop’s employees earn loyalty from their customers, which generate further sales. Further, by having smaller stores, Gamestop can use its great customer service techniques to further expand its competitive advantage by making customers feel welcome at any store, not only a customer’s “home store.”

      The second competitive advantage Gamestop enjoys is its defined relationship with the company’s suppliers.  Gamestop, as previously stated, has a great relationship with over 40 different video game publishers in the industry.  These defined relationships have allowed Gamestop the ability to gain certain exclusivities other competitors don’t always enjoy.  By working with these publishers and suppliers, Gamestop frequently receives exclusive release dates from developers and publishers.  This means that Gamestop will be allowed to sell certain titles before competitors, which further increases loyalty and revenue (Gamestop.com).  Gamestop also receives larger amounts of the popular titles than its competitors.  This is particularly important when publishers cannot publish enough games to meet current demand.  Gamestop often has a substantially larger number of these titles, which makes Gamestop the first choice for customers looking these games.  And the last benefit enjoyed by Gamestop and its suppliers is exclusive accessories.  Many games include accessories such as toys, plush dolls, strategy guides, etc.  Having exclusivity over these products, furthers Gamestop’s advantage as collectors and others will come directly to a Gamestop to find these exclusive and limited accessories (Gamestop.com).

      The final competitive advantage Gamestop enjoys is the company’s specialized business plan that concentrates on used video game sales and game reservations.  This aspect of the company’s business plan is possibly the most important aspect of the company, both from a consumer and revenue stand point.  The first aspect of the business plan important to Gamestops competitive advantage is its used video game sales.  As stated, Gamestop makes a substantial portion of the company’s profit through used video game sales.  The consumer also benefits greatly from these sales.  Customers are allowed to trade in games they no longer play for cash or store credit.  They can then use that money to buy other used games or new games. This allows customers to buy games at a much larger discount than they are able to at any other store, while allowing them to get rid of games they no longer play (Gamestop.com).  This symbiotic relationship between the customer and Gamestop furthers the company’s competitive advantage by providing its customers a means to buy the latest games without incurring the high cost commonly associated with video games.