fujishig

Just something I was thinking about because of the annual TRU B2G1F deals.

It's my understanding that the profit margins for retail stores on video game software is relatively low (not as low as hardware, but still). I know that it depends somewhat on the volume of orders a store does... Wal-mart will probably pay less per copy of a $60 game than a mom and pop store that orders much, much less. But I do remember a few years ago, Best Buy had a killer deal on the new Grand Theft Auto for something like $35, and EBGames and the like refused to pricematch, saying they'd lose money.

So what happens when a game gets a pricedrop? Do the stores get a refund from the game companies, or do they just eat the loss with every copy still on the shelf?

Mainly wondering because I always thought TRU had some kind of deal with the publishers in order to do their B2G1Free deal. Doesn't make a whole lotta sense since they include every game from every publisher, but Deep Discount does something similar, I think, with their 20% off sale. But others have been saying that it's a way to clear off inventory... however, aren't they taking a huge loss, especially on new games, if that's the case? Especially with the lack of advertising this sale had, it wouldn't have even worked as a loss leader to get people into the store.

DodgingCars

It depends on the retailers and the vendors (game publishers), but in general, the retailers get a refund credit for inventory on hand at a certain date and then all product shipped after that date (usually before the street price drop) is at the new lower cost.

I think DVDEmpire complained that they didn't qualify for price protection credits (the credit received for price reductions) while the major retailers did -- which is one of the reasons they claim they left the game selling business, because they couldn't compete with walmart, target, and best buy when they were treated differently by the publishers.

BravesMG

That makes sense. A new Play and Trade opened up near my house and I've been talking with the new owner quite a bit. He says it's almost impossible to compete with the EB Games across the street because he simply doesn't have the startup cash to order enough of every game to make money. He's only got about 10 Wii games, 15 or so PS3 games, and no 360 game older than about January. He's actually let me watch him order new stuff from the vendors, and the biggest problem I see is that as a franchise they're not getting a discount on their franchise volume orders outside of what they own. So he owns two stores in Boise, and only gets volume discounts on what those two stores purchase. He's basically getting the new games at right around 54.99 cost at the rate he purchases.

But he also says he got terribly burned by All-Pro Football. He said they were offering huge volume discounts with no future adjustments based on price drops. I think he said they cost him like $39.99 to start, he got quite a few and sold almost none, and now there was a price drop to something like $39.99 and he's just hoping to break even.

fujishig

Just curious, how does he make money if he only gets 5 bucks profit per game? Is that just a miniscule part of his business?

DodgingCars

Publishers also work directly with major retailers to run deals, advertisments, product placement in the stores, etc.

Publishers pay places like Target when they run a "Buy 2 get 1 Free" deal (that's why they're usually publisher-specific). They also pay to place titles in a certain area, pay to advertise in the newspaper circulars, etc.

The mom and pops don't get these things, generally. Also, mom and pops usually don't qualify to buy the games from the publisher directly, so they buy through a distributor, which means they are usually paying more $ per title than the big retailers. If the game is sold to Target for $55, then the mom and pop is usually buying from a distributor for $57.

DodgingCars

You should see DVD sales. The markup is even less -- but there seems to be more price competition there too.

BravesMG

He said almost his entire business is based around used games. They give about the same for trades as EB, and they do actually discount their sale a bit more than EB. He basically described new games and hardware as what gets people in the store, and then they push the used games as hard as they can.

fujishig

That actually makes sense... and I guess is a reason why Best Buy and CC both tried to get into the used games business (though it seems unsuccessfully). It seems like you need to update the used game buy in prices daily, especially with all the websites around looking to exploit used game trade ins.