Why Does Everybody Hate Gamestop?
Gamestop is vilified for being the evil empire of games, controlling pricing and availability with an iron fist. Many think their top priority is to rip off the customer and see the management team as greedy beyond measure. I want to suggest that this is far from the case, and Gamestop is merely another corporation in the industry we all love.
I will analyze many of the criticisms leveled against the company and explain why they’re not fair. I will argue that you can criticize the game industry in general, but singling out Gamestop is unfair and unwarranted. (I realize I’m going to take a lot of crap for this one)
Does Gamestop really rip us off?
The chief complaint I hear from the gaming community is that Gamestop is ripping off customers with their pricing.
“They buy a game from the consumer for pennies on the dollar and then turn around and resell it for only $5 less than a new game. Gamestop isn’t like any normal company looking out for their customers and building goodwill, they just want to use you and lose you. They’re screwing both the developers and us, the consumer!” Sound familiar?
When we get into real financial statistics, however, it quickly becomes apparent this isn’t accurate. Let’s compare Gamestop to a company like Apple which has huge customer loyalty and is generally thought of as a company that does ‘the right thing,’ and has a target demographic that overlaps with Gamestop. Apple’s operating margins are 21%. Gamestop? 8%. Apple is making over 2.5x the profit as a percentage of sales in comparison with Gamestop.
Which one of you wants to sign up for Game Informer? Please! I’m desperate
It’s used specifically that’s the problem
Some criticism of Gamestop isn’t in reference to their overall margins. After all, they sell hardware and new games that have much lower margins and that decreases the average. It’s on used where they make the real money and where they really rip us off!
The real question is why is Gamestop the only legitimate used market participant? We have heard about Amazon, Wal-Mart and Toys R Us getting into the market recently to try to capture some of those Gamestop profits, but their lack of traction shows it’s clearly not a clear cut case of a company massively overcharging their consumers.
Gamestop has spent hundreds of millions of dollars building up a refurbishment facility so they can take almost anything a consumer wants to trade in. They do provide a service with used games that goes beyond merely repackaging it and turning it around on shelves.
In addition, the premium you’re paying by going to Gamestop and using their trade-in services is what you pay for the convenience of going around the corner and receiving a game the same day. If you’re willing to wait and go through the mail, you can get slightly better prices from Amazon, or far better prices on peer to peer marketplaces such as Amazon marketplace and Ebay.
Don’t look now Gamestop, but the competition is heating up
It’s not like Gamestop is raking it in; even a discount retailer like Wal-Mart earns nearly 6% margins, close to what Gamestop is earning. Customers frequently cite gross margins for used games which are close to 50%, but that merely shows the difference between the price Gamestop pays the consumer and what they sell a used game for. There is a ton of work that happens on the back end and at the end of the day overhead eats up a good percentage of that.
The used transaction model is required to subsidize Gamestop’s stores and ability to sell new games and hardware.
Prices are too high?
Maybe your criticism isn’t that Gamestop is abusing consumers with their used policies, but that prices in general are too high; $60 for a videogame? It’s not Gamestop that is setting prices, however, as retailers don’t only suggest a retail price, but essentially enforce it by charging a wholesale rate on which retailers can only survive by charging $60.
Gamestop has no value?
Some consumers argue that Gamestop is entirely unnecessary and digital downloading is the future. What we’ve seen, however, is that digital downloading doesn’t decrease price to the consumer, it just raises margins and product control for the developer.
Consumers have criticized rising Xbox Live and PSN pricing that has trended higher since launch. There are the occasional developers such as Valve who have frequently released free DLC for their games and charge a lower rate through Steam than they might be able to at retail, but they are the exception, not the rule.
A recent Steam patch includes a button that hires freelancers to burn down Gamestop stores!
It’s not like used games have no value to the consumer. The effective price of a game purchase when new is closer to $40, not $60, if you’re going to play through it and trade it in immediately. In addition, purchasing used games mean cheaper sticker prices for us up front.
So Gamestop is perfect?
There are plenty of legitimate complaints about Gamestop. They push their products on consumers in an offensive way at the register. They frequently withhold games from customers because they chose not to preorder something even if there are plenty of copies in stock. They aren’t always good about taking back used product that doesn’t function. The list of flaws is significant.
I’m not trying to argue that Gamestop is perfect. I think there are huge opportunities for improvement, and I’m excited about the opportunities generated by digital distribution. Regardless of whether the consumer receives a lower price, somebody is going to make more money from removing retail overhead and that means higher development budgets and better games. Digital distribution services also give more control to the developer so money goes to the creative talent and not just the publishers.
I’m only saying that Gamestop is maligned for being greedy when they’re not making a ridiculous margin and they don’t abuse the market. Competition has tried to eat their lunch, and Gamestop remains dominant because they offer an extremely streamlined and efficient service for used games that adds value and is hard to replicate.
They’re not perfect, but perhaps some of our animosity towards them stems from the fact that we always want more for our hard earned dollars. They may be the most visible target, but they’re not necessarily the right one.
I’m interested in your thoughts on the matter. Hit up the comments!
Nice writing style. Looking forward to reading more from you.
Chris Moran
Thanks, glad you liked it. Feel free to subscribe if it’s easier than going back to the site occasionally.
I don’t speak for everyone, but the basic problem most people have with Gamestop is the fact that they ARE an overbearing empire on the industry. It would seem that the gaming community has something of a Walmart problem on their hands: We want another place to buy and sell used games, but there are none! So now we have to sit there and listen to some Xbox fanboy they hired to tell us how great some game is, having no real knowledge of the game aside from what they saw of it on some G4 pre-screening, and how we’re pretty much wasting our time looking for any other game. Why? Because we have no other choice!
I remember when Gamestops first showed up and they had people working for them that were just typical everyday gamers who would actually take interest in what YOU wanted and what type of game YOU were looking for, and would use all the knowledge they had to help you. Now we’ve got people in there acting like used car salesman that are desperate to just get rid of games. The fact is that they don’t care about what their customers want anymore, they just wanna see your money in their pocket and you walking out with a game. ANY GAME!
Aside from this gross mistreatment of their customers, the fact is that they ARE controlling prices. So their profit margins are, what’d you say? 8%? So what? THAT’S STILL PROFIT THEY AREN”T USING TO HIRE PEOPLE THAT DONT YELL IN MY FACE PUSHING STREET FIGHTER WHEN I WANT MY MONEY BACK FOR PREORDERING FF13! That’s still profit they aren’t using to improve the quality of their stores rather than building up new stores every five blocks.
Again, I think you mislead from the actual argument with the whole profit margins thing. An 8% profit margin doesn’t seem like much, but when you take 8% of a multi-billion dollar industry that’s being almost monopolized by the company, well…you can see where I’m going with this. You can’t compare Apple’s industry of computers to Gamestop’s industry of video game retail by simply looking at profit margin percentages. Consider the industry. Apple doesn’t have the market on computers cornered, Gamestop DOES when it comes to their industry. So, the fact remains, they give us a very small percent of what our sold game is worth, IN STORE CREDIT, and then turn a profit with it IN COLD HARD CASH.
Usually business’ that have employees like this and a hopelessly failed system of store credit trade ins that DO rip off the customer either fail or get their act together and give customers what they want. Why? Because the customer lets them know it by fulfilling their needs elsewhere. The only problem is, we can’t do that. Because the only place in town to buy and sell your used games is Gamestop!
Maybe I’m just another angry customer, and I guess the reason for that is because Gamestop has taken a very big passion in my life and turned it into some corporate powerhouse that’s lost their essential love for gaming and become everything I hate: Starbucks.
I will end this note with a message that I whole-heartedly support:
Are you’re a fellow gamer that’s tired of castration by the gamer retail market that Gamestop has produced? Then let’s all do our part and BURN THE GAMESTOP
I kind of wonder if Gamestop started giving full-value for the games that are traded in, even if the games that are traded in aren’t from Gamestop at all?
I would think they’d lose a lot of money and go under quickly.
I understand being irritated about spending $60 on a game and getting maybe $15 trade-in value for it, but that’s why you kinda don’t buy games blindly. Read reviews, ask your friends, rent it somewhere! Blockbuster needs all the support they can get anyway considering their financial position (possibility that they may go under this time next year, from some financial reports I’ve read).
I mean, listen, retailers like Walmart and Best Buy aren’t allowed to give you your money back or a different game if you try to return that $60 game you just bought. That’s copyright law, not corporate policy. And that game isn’t going to increase in value as it gets older, in fact it’ll decrease anywhere you go. So Gamestop does you a FAVOR by giving you at least SOMETHING back towards another game, right?
I have talked to the employees of my local Gamestop about the trade-in values, and they told me up front that if anybody doesn’t like their trade-in values, then we don’t have to trade the game in, it’s that simple. These same employees that I had the pleasure of talking to actually knew quite a lot about video games, they play games as much if not more so than I do, and they were very cool about it with absolutely no fanboy-ish dribble or bias. I’m aware that SOME locations have employees that don’t know so much, but that’s true about ANYWHERE. There are good employees and there are bad employees, doesn’t matter where you go.
And of COURSE they’re going to try and sell you things while you’re at the counter, they’re a BUSINESS, they have to make MONEY and to do that they have to sell GOODS and SERVICES. That’s kind of the point. Corporate puts pressure on them all the time to do that, just like how Walmart’s corporate office puts pressure on its stores to sell Walmart credit cards and extended service plans. They want your money, it’s how they’re going to survive, so if you don’t want what they’re pushing, say so and make your intended purchase(s).