Gods of Retail War 2014

RobertPassikoff
Robert Passikoff Founder and President, Brand Keys, Inc.

Posted on March 27th 2014

Gods of Retail War 2014



Watch out, GameStop, Walmart has a double-barreled shotgun pointed at you! Or a neutron ray gun. Maybe even the Sword of Sparda. Not literally of course, but in that Walmart kind of we-have-you-in-our-sights way they get when they sense a market opportunity.

Starting today, Walmart is focusing their aim on the used videogame business. Used videos are a sore spot between retailers and the nearly $25 billion videogame industry, a kind of Blades of Chaos weapon in the battle for profitability. Right now nearly 10% of those billions are spent buying used video games at GameStop. That represents nearly 45% of the retailer’s gross profits for the last fiscal year. At retail, new games go for as high as $90 each. Used games go for a lot less and the used games represent a much higher profit margin.

In this case, Walmart intends to make it easy for shoppers. Consumers trade in used video games for Walmart gift cards, which could end up being as much as $35. Walmart is counting on the fact that customers will use the gift cards to buy groceries, or clothing, or anything not currently available at a specialty retailer like GameStop. Kind of like earning an extra life, if retail was a video game.

Anyway, Walmart ran a kiosk test program like this half a decade ago, but it turned out to be hard program to institute. Apparently there are really complex logistics to trading in used video games. You wouldn’t think it would be that hard, but there you are. And if it’s hard for a company like Walmart, it’s probably really hard.

For example, you have to take a used video game’s overall condition into account. And then you have to be pretty precise at approximating its worth. This is a business we’re talking about, after all, not a game. Well, you get the difference. And because they're used, you have to know how to refurbish them, and after that you have to keep an accurate inventory of what you have. If you don’t do that you end up with thousands of used copies of Double Dragon II: Wander of the Dragons, which MetroGame Central called, “the interactive equivalent of irritable bowel syndrome and one of the most bizarrely awful video games ever made,” so you probably don’t want to have lot of those sitting on shelves in the back room. See? OK, not quite the Battle for Middle Earth, but hard, like we said.

But these complexities – and good and bad gamer reviews – also raise a question regarding actual demand. Not demand for used videogames generally. There’s a lot of that and that’s already been established. No, how about demand for a specific game itself? The game’s brand, their franchise, if you will.

For how video game brand and franchises leverage among the gamer community, we took a look at how consumers rated this year’s Major League Video Games in our Customer Loyalty Engagement Index. Here are the results. For what it’s worth, it’s worth noting how many of the top-11 games have Roman numerals or a subordinate title after their name, a pretty good indication that it’s not the first of the game’s brand offerings.
 

  1. Call of Duty: Ghosts
  2. Grand Theft Auto V
  3. FIFA 14
  4. Assassins’ Creed IV
  5. Tomb Raider
  6. The Last of Us
  7. Batman: Arkham Origins/Bio Shock: Infinite
  8. Battlefield 4
  9. NBA 14
  10. Madden NFL 25

This time around Walmart, the country’s largest retailer with nearly 5,000 U.S. stores and who has already has a credit-for-used-tablet-and-smartphone program in place, is teaming up with trade-in expert, CEx-change, hoping to add a secondary armament to their retail arsenal, a partnership to unlock some extra weapons to use against competitors. Walmart announced they’ll selling used video games later this year, so the proverbial line has been drawn in the digital sands of Retailing World.

Right now GameStop isn’t ready to call in the Army of Hades for backup but they have said that when it comes to the used video buy-sell game they are the top player for now. GameStop has an affinity program, which tracks consumer purchases and trade-ins and develops customized outreach, a kind of Batman Glue Grenade used to create a gamer loyalty bond with their brand. Real loyalty and engagement – something that can't be jimmied apart even with a Grand Theft Auto crowbar – can also help in changing consumer habits, like migrating them to Internet games.

So the war of the used videos games has been declared. We’ll see how it goes and who changes the rules first. One thing for sure: retail is a lot like video games. No matter how good you get, there’s always someone out there with some weapon looking to cut your margin!

RobertPassikoff

Robert Passikoff

Founder and President, Brand Keys, Inc.

Brand Keys is the world leader in predictive loyalty, brand & engagement metrics. Since 1984 we’ve specialized in correlated-to-sales measures, predictive of in-market consumer behavior. Our methodology is grounded in psychology, & provides an in-depth understanding of emotional and rational factors that bond consumers to brands. Decision-making is more emotional than rational, that ratio currently estimated to be 70:30. The ARF and other groups have independently validated our work. Brand Keys created the Customer Loyalty Engagement Index, the Brandweek Loyalty Leaders List, the Sports Fan Loyalty Index, & Women’s Wear Daily Fashion Brand Index. Our 1st best-selling book, Predicting Market Success, offered a 21st century perspective on predictive metrics. Our new book, The Certainty Principle, examines a predictive approach to Integrated Marketing ROI. In 2007, New York University’s communication school declared Dr. Passikoff “the most-quoted brand consultant in the United States.”

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