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INTERVIEW: IAN SHEPHERD, CEO, GAME Raising the GAME


Having posted resilient Christmas trading results, GAME is now gathering its strength for another challenging year. James Batchelor speaks to the Group’s CEO Ian Shepherd about what’s in store for the retailer


2010 was a tough year for the industry. What do GAME Group’s Christmas trading results say about the market?


Our latest results show there is no question that the negative year- over-year movement the market saw throughout 2010 began to get better towards Christmas. We had a great software line-up complimented by Kinect and Move, giving people a reason to re-engage with games – both for themselves and for their Christmas shopping. And you can clearly see that over the Christmas period we’ve outperformed the rest of the market. If you think about the assets that GAME has, our scale and the offers and incentives we offer customers in-store, it’s a vote in confidence in the business model of the specialist. I think the fact that we have the pre-owned business model which, relative to multi-outlet competitors, is a real point of difference for us. That’s really important. Even in the run-up to Christmas, when you would think most people are buying games new as gifts, you still have a lot of trade-in happening. Around 50 to 60 per cent of the time, when we were selling a brand new game, we were taking in a trade-in against it. From that point of view, you’re building plenty of pre-owned stock, and it means our customers don’t have to worry about the full price of the new game because they know they’re getting some of that back. That gives us a very strong competitive advantage over companies that can’t do trade-in in the way that we can.


But the pre-owned scene has become much more crowded over the last year, with Tesco, Asda and Argos all starting their own trade-in schemes. What impact has this had on GAME?


One of the things I’ve learned since joining this business is how difficult it is to do pre-owned well. You’re spot-pricing thousands of SKUs from both a trade-in point of view and from a pre-owned sales point of view. Your operational processes have to be absolutely on the button.


GAME is a business that has been doing that for 15 to 20 years, so we’ve built up a real body of expertise and experience. That makes it quite a hard thing to replicate.


When you look on a store-by- store basis, at areas where our competitors have started doing trade-ins, if anything our own trade- in business has got bigger. I think that’s because those companies have added credibility to the concept of pre-owned. They have made consumers think about the benefits of pre-owned more, rather than just taking market share. They’ve actually made the market bigger and we’ve taken a good chunk of that.


Kinect and Move did their part to boost sales, but hardware was still in decline throughout 2010. Do you think the market would benefit from price cuts? I think it’s innovation that draws people into the market. Prices will come and go, and move up and down, deals will be done and all sorts of other things during the


IN NUMBERS: GAME’S TRADING UPDATE


 Total sales were down by 12.3 per cent for the 49 weeks ending January 8th in the UK and Ireland. On a like-for-like basis, declines in the UK business hit 9.7 per cent.


24 January 21st 2011


 However, UK and Ireland sales fell by a mere 0.5 per cent on a like-for-like basis during the Christmas period. Overall sales for these regions fell 3.3 per cent in the 49-week period.


 The Group’s combined like- for-like sales for the year were down 6.6 per cent with overall sales down 7.7 per cent. Christmas like-for-like sales fell 2.1 per cent and overall sales declined 4.1 per cent.


 Online fared well over the year, just 0.3 per cent down in total during the 49 weeks. International sales fell 2.2 per cent like-for-like over the year and 4.5 per cent like-for- like over Christmas.


 Annual profit for the financial year is estimated to be between £37m and £39m. GAME said it was on track


to “deliver more operational cost savings” than the £7m it had previously predicted.


www.mcvuk.com “


year, but fundamentally market growth comes from lots of customers being engaged and wanting to buy lots of product. And that’s driven by retailers bringing new people into the marketplace, as well as platform holders and developers creating innovative new content. For me, that trumps anything else in terms of driving growth.


Christmas was a vote of confidence in the specialist business model.


Ian Shepherd, GAME


The number of GAME Reward Card holders around the world


15m


What’s GAME’s take on GameStop’s global expansion? What have you done to fortify your position? You have to remember that we’re an international business as well, so we’re in lots of countries: Scandinavia, France, Spain, Portugal, the Czech Republic and Australia. International now accounts for 40 per cent of our revenue, so a big part of our business is what happens outside the UK. When I look at the global competitive environment, there are countries where we are head-to- head with GameStop and others where we aren’t. And in all territories, there are lots of places for customers to buy games: whether it’s online, at supermarkets, at electrical retailers or specialists. Customers face a lot of choices. Our job is not to second-guess competitors but to be putting ourselves in the position where we’re the No.1 choice for customers. The figures show very clearly that we’re the No.1 choice in Europe, but we’ve got to continue that.


And how will you accomplish this? We’ve got to look forwards: this is a market that’s going to evolve. The way people play, the types of games they’re playing and the way people


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