A big piece of gaming news this week that I just had to put my say into is the leak by GameStop employees of the details of a policy called “Circle of Life”, which basically is a quota set that each store, and its employees, must reach each month. These quotas are in all but one of the core categories GameStop deals in: Used Game Sales, Trade Ins, Rewards Cards, Magazine Subscriptions (which come with the higher grade rewards card) and lastly pre-orders.
Notice the one category that isn’t listed here: New Game / System Sales.
Now, this is where Gamestop makes most of its business – new products. The problem is the actual profit that is made off of such sales is slim for the volume. By contrast, if the company sells a used game or console, they get quite a bit more profit per unit than they would for the new game.
Let’s just run an example. Let’s say a new game is $60. The company may get it for, let’s say, $50 (again, we’re being simple with the numbers here.) The end profit from a sale? $10.
Now, let’s say they buy this game used from someone for $25 and resell it for $45. That’s still cheaper than the “new” price to the buyer, but what else does GameStop get? $20 rather than $10 profit from the sale. It would take 2 new game sales, with all the overhead that takes, to equal the profit made off of one used game sale.
The reports are that this has lead GameStop associates in many areas to simply lie about if they have a game or game console new in stock – rather than take a hit to their percentages (which in the case of a new game console could be hundreds of dollars which may be near impossible to make up) they will instead say they are out of the item, and will instead sell a used unit, keeping their numbers up.
I do find it interesting that pre-orders are on the list – this are new items being reserved after all, but that money is at least in their system and able to be spent – apparently quite a few people never come to pick up their pre-orders, enough for it to be profitable to go ahead and spend the money rather than hold it.
What I don’t get about this is if GameStop is going to focus so heavily on used sales now, then why bother selling new at all? Why not switch to a used-only model and make it all raw profit via the buy-sell-trade mechanism that most people think of GameStop as? It works for smaller stores (like the one I work at) and can work scaled up. It’s clearly done enough for GameStop for it to be a focus now.
It’s complex. It’s odd. It’s one of those things that just makes you think, what the fuck GameStop.