Vicman
09-10-2005, 06:09 PM
I read this article titled "The Retail Game" a few month's ago and Melf inadvertedly reminded me of it in the PSX 10 Year Anny thread. IMO this is a must read to anyone buying games at the big game stores.
It's split into 3 parts: Part 1 Profit (http://www.gamerswithjobs.com/node/17063), Part 2 Policy and Method (http://www.gamerswithjobs.com/node/17217), Part 3 What's Next (http://www.gamerswithjobs.com/node/17407).
This 3 part article is one VERY interesting read and ultimately drives home the truth that everyone should know by now: Video Game stores, and retail stores in general, THRIVE ON IGNORANCE!
Here's a snippet from Part 1: Profit.
The Retail Game, Part 1: Profit
Elysium – Thu, 07/07/2005
"I want to talk about the foundation from which every action retailers take is born. In short, it's all about the profit.
If one were inclined to diminish specialty retail into three laws of business, much like Asimov's three laws of robotics it would be as follows. Law 1: Associates must make every effort to turn a profit on every sale. Law 2: Associates must satisfy promotional and corporate partnerships, except where such actions conflict with the First Law. Law 3: Make the customer happy, except where such actions conflict with the First or Second Law.
This obviously contradicts the traditional and increasingly anachronistic supposition that The Customer Is Always Right. It's simply not the case anymore. That's not to say that customer service is dead - though, it certainly seems to be gushing arterial spray from a wound the size of softball - but that the maxim has been altered to The Customer Is Probably Right, Unless You Can Convince Them They Are Wrong. And, even if the customer ends up being right, then the next goal is to make satisfying the customer as profitable to the company as possible.
If it seems to you like these assumptions put customers at odds with staff, then you're right.
So, let's talk about that primary law, the law of profitability. Assume for now, and I'll go into the details later, that it is beneficial to employees and more particularly management to make every point-of-purchase sale as profitable as possible. Then the question is what constitutes a profitable sale, and what does not. First, and obviously, the most profitable items that can be included in a transaction are those where the difference between what the company pays to stock and sell the item and what the associate sells it for is the greatest. This is why, ultimately, most specialty retailers would much prefer to sell a fifteen dollar used copy of Ratchet and Clank, than a brand new, full price copy of a niche game like, say, Xenosaga II or Forza Motorsports. This is because most stores pay as little as five dollars in trade value for the copy of Ratchet, meaning that the margin on that used game is probably double or more of what it is for the new title. Even though the total sale is dramatically less, a company that deals in used games actually makes more money off the lower priced title.
With this focus on the margin, it becomes fairly obvious why stores pay as little as they do for your trades, and why the used copies aren't marked down more. The goal is not in providing a 'fair' price for your games - you can almost always sell them for far more if you do it yourself - but in offering the closest value to what the market will bear. In my personal experience, I've seen time and again customers bring in their trade, be disappointed with the values, but then, and this is the important part, trade the games anyway. Like I said, the goal is not to make you happy, but to get you to engage in the transaction regardless.
After all, and I will go into this at a later date, the informed and savvy gamer hasn't been the target market for these companies in a very long time."
It's split into 3 parts: Part 1 Profit (http://www.gamerswithjobs.com/node/17063), Part 2 Policy and Method (http://www.gamerswithjobs.com/node/17217), Part 3 What's Next (http://www.gamerswithjobs.com/node/17407).
This 3 part article is one VERY interesting read and ultimately drives home the truth that everyone should know by now: Video Game stores, and retail stores in general, THRIVE ON IGNORANCE!
Here's a snippet from Part 1: Profit.
The Retail Game, Part 1: Profit
Elysium – Thu, 07/07/2005
"I want to talk about the foundation from which every action retailers take is born. In short, it's all about the profit.
If one were inclined to diminish specialty retail into three laws of business, much like Asimov's three laws of robotics it would be as follows. Law 1: Associates must make every effort to turn a profit on every sale. Law 2: Associates must satisfy promotional and corporate partnerships, except where such actions conflict with the First Law. Law 3: Make the customer happy, except where such actions conflict with the First or Second Law.
This obviously contradicts the traditional and increasingly anachronistic supposition that The Customer Is Always Right. It's simply not the case anymore. That's not to say that customer service is dead - though, it certainly seems to be gushing arterial spray from a wound the size of softball - but that the maxim has been altered to The Customer Is Probably Right, Unless You Can Convince Them They Are Wrong. And, even if the customer ends up being right, then the next goal is to make satisfying the customer as profitable to the company as possible.
If it seems to you like these assumptions put customers at odds with staff, then you're right.
So, let's talk about that primary law, the law of profitability. Assume for now, and I'll go into the details later, that it is beneficial to employees and more particularly management to make every point-of-purchase sale as profitable as possible. Then the question is what constitutes a profitable sale, and what does not. First, and obviously, the most profitable items that can be included in a transaction are those where the difference between what the company pays to stock and sell the item and what the associate sells it for is the greatest. This is why, ultimately, most specialty retailers would much prefer to sell a fifteen dollar used copy of Ratchet and Clank, than a brand new, full price copy of a niche game like, say, Xenosaga II or Forza Motorsports. This is because most stores pay as little as five dollars in trade value for the copy of Ratchet, meaning that the margin on that used game is probably double or more of what it is for the new title. Even though the total sale is dramatically less, a company that deals in used games actually makes more money off the lower priced title.
With this focus on the margin, it becomes fairly obvious why stores pay as little as they do for your trades, and why the used copies aren't marked down more. The goal is not in providing a 'fair' price for your games - you can almost always sell them for far more if you do it yourself - but in offering the closest value to what the market will bear. In my personal experience, I've seen time and again customers bring in their trade, be disappointed with the values, but then, and this is the important part, trade the games anyway. Like I said, the goal is not to make you happy, but to get you to engage in the transaction regardless.
After all, and I will go into this at a later date, the informed and savvy gamer hasn't been the target market for these companies in a very long time."