MCV spoke with Mark Langford, MD of indie game retail chain Gametraders, to discuss the retail perspective of grey importing.
So Gametraders has been importing its stock for a while now, is that correct?
Yeah, we’ve been doing that for probably a couple of years now. We really didn’t have any choice; we had to get games cheaper to compete with the big department stores who discount games. If we hadn’t done it, we probably wouldn’t be here. You need to have a decent margin, or at least a margin to pay your rent and your wages.
So we did it really out of necessity.
So then even if the RRP of videogames came down across the board, your strategy wouldn’t be liable to change since those same department stores would continue to discount?
We have to ensure that our pricing is similar to our competitors and importing games allows us to do this. And the funny thing is that people refer to them as ‘imported games’ at all, considering that they’re all imported from overseas. The product is no different (they probably come from the same factory), it’s just that we go through a wholesaler overseas instead of doing it from here. Games are dearer here – I’m not sure why, but for some reason the games are dearer in wholesalers here than they are in Europe and the UK, which is crazy. It really is.
Not all of our games are imported, however. We do source locally through wholesalers – we don’t deal directly with publishers. So we buy a lot of our games from the Australian-based wholesalers, but we also buy games from overseas locations if it’s cheaper than it is to buy them here.
Does that business model negatively impact Gametraders in any way, for instance preventing you from being able to get stock on day one?
Sometimes we can [get imported stock for day one], but often we can’t, so we source them from from the local wholesalers. So most of the imported games we get with better pricing is normally in the week or second week after release.
One reason we can get better pricing is when there’s been a wholesale price drop in Europe, when the game’s been out for a month or so and sales are slow. They’ll drop the prices to get traction on the sales again, and we can use that to get better pricing here.
It’s easy for people to look at this and just say ‘Well, they’re just looking to make more profit’, but the bottom line in retail is that you need to achieve minimum gross profit in retail just to remain in business. The rents in these shopping centres are anywhere up to a quarter of a million dollars per year (for the major ones). So you have got to have a sustainable margin – if you don’t it’s all over.
What we need to do is not necessarily get a better margin, but maintain the current margin to allow us to compete on price with department stores who operate as loss leaders. So hopefully you’ll buy some socks while you’re there.
What impact do you think it’ll have on the whole landscape that JB HiFi is openly importing games as well?
If we were only selling games (like The GAME Group) instead of also having lifestyle products, we’d be in trouble. Even that model is no longer sustainable (it seems to me). We’ve evolved our business over the last three years with a lot of secondary lines of pop-culture stuff, which is gaming-related wallets, keychains, tees, hoodies and all sorts of stuff. That’s become a very important part of our business.
If we were only selling games and doing trade-ins, we wouldn’t be here. It’s that simple.
We could see this coming. And we’ve been preparing for it. And new games are simply not a large proportion of our sales today. So we’re not 100% reliant on selling new games.
Any company which is competing only on price and has literally nothing else to offer the consumer except for the price difference won’t survive. JB obviously have a good business model with their consumer electronics range, and they have a low-cost structure such as a lack of service personnel, but they’ve also got the other side of their products where these same issues apply to them.
Thank you for your time!
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