“Dismal” result for UK’s Game chain

Having previously warned the market about the prospect of a disappointing Christmas with diminishing profits, amid what it described as “challenging” trading conditions, this week’s lacklustre update from Game comes as little surprise.

Despite a marginal improvement in the final three weeks of this period (its Christmas trading period), sales for the first half overall make for dismal reading. In a reversal of fortunes from this time last year, it is now the UK market which is proving to be a drag on performance, with Spanish sales actually showing some impressive growth (up 10.6 per cent over Christmas and 8.8 per cent in the first half overall).

Bemoaning the decline in the market for lower margin, older games consoles for its current malaise, Game is clearly pinning its hopes on a return to form for the more lucrative Next Gen consoles, which, after an initial surge, have seen hardware sales slow down significantly.

However, the fact that the Next Gen consoles were launched only relatively recently though means that Game should still be enjoying the fruits of a honeymoon period. The fact that sales have already begun to suffer this way is worrying, as is the trend for digital content increasingly becoming the dominant segment of the market. With take up of games on the new consoles also proving to be a slow burn, Game will need to hope that the pace and quality of software releases improves.

Far from oblivious of its potential fate, Game has been making valiant strides, to diversify its revenue streams, tapping into consumer enthusiasm for gaming by putting on popular events (a strategy which led it to the purchase of eSports organiser Multiplay early last year) and increasing its supply of pre-owned software and even pre-owned devices, such as smartphones and tablets.

Working on developing a unique selling point will be crucial to keeping customers coming through the doors, so this focus on the pre-owned market and events is sensible.

Furthermore, the impending release of Virtual Reality devices could provide a market stimulus at just the right time, though the likely price tags are unlikely to give them mass market appeal in the short-medium term and Game will increasingly be reliant on trade from serious gamers.

It is hoping its service credentials help it gain an edge for these types of products, though service is an area in which rivals, such as Dixons Carphone, have stolen a march.

Longer term, we could see Game diverge into more of an events-led business, with pre-owned software and devices as an important sideline.

  • David Alexander is a consultant with retail analysts Conlumino.

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