The Retail Game, Part 2: Policy and Method

Last week I spoke at some length on the basis from which game retailers work, which is to separate you from your money in the most profitable fashion possible. Fundamentally, this revelation should not have been particularly surprising in any substantive way beyond the operational specifics as to how these companies achieve that goal. Nor, should a company putting forth its best effort to be profitable be immediately considered offensive or disingenuous. The fact that these specialty shops are moving necessarily from the slim margins of new product to the high margins of preowned does no inherent disservice to the consumer. Their pricing, products and promotions either appeal to consumers or don't. In the end customers retain the right to take their money elsewhere, and the integrity of the free-market is conserved - or at least that's true when there is no deception at the point-of-sale, which is, sadly, not always the case.

Let me state from the beginning, so there is no confusion: At no time during my employment with either Gamestop or EB was I ever directly encouraged by management or corporate to deceive our customers.

That's not to say deception doesn't happen. As I pointed out last week there is intense and increasing pressure from these corporations to operate their locations at a profit. It's a necessity, particularly as Gamestop's acquisition of EB will leave the company 3000+ stores strong in the U.S. alone. They simply can't afford to have any significant percentage of locations losing tens of thousands of dollars a year.

It's a situation that the company has struggled with before, where in September of 1996 NeoStar Corporation, then parent company of Software Etc. and Babbages, filed for voluntary reorganization under Chapter 11. The problem with NeoStar was complex, but at least some significant portion of the issue surrounded its ambitious and rapid expansion following the merger of Software Etc. and Babbages matched against poor profitability for, what was then, primarily mall based locations. The number of stores under the NeoStar banner at the time the company filed for protection numbered 707. This new merger with EB will put Gamestop at nearly five times that size.

NeoStar was eventually liquidated and restructured, after closing nearly a third of its locations, as Babbages Etc., and then in June 2000 Barnes & Noble purchased the company and reformed it yet again as Gamestop, Inc. Barnes & Noble has sent sold the majority of its shares back to Gamestop leaving it a largely independent, though closely affiliated, coporation.

Although Gamestop has worn many faces in the years leading to its current market dominance, most of the executive management and directors for the current company have been involved since well before Software Etc. and Babbages merged. From Dick Fontaine, to Dan Dematteo, to David Carlson, to Len Riggio, though the corporation has changed identity, its top executives have not. The impending merger with EB will certainly propel the new bolstered company into Fortune 500 status, and having lived through the crisis of Neostar before, the lessons learned will intensify the need to operate profitably, at all costs.

The mandate isn't necessarily explicit for store managers, but it's certainly implied. Become profitable, or you and your staff lose their jobs.

So, when you walk into your local retailer, understand that customer service is only important to the degree that it's profitable, which may go some length toward explaining why labeling oneself as a gamer is probably a burden if you want a job with EB or Gamestop. It's been noted and lamented that once these stores were a place where likeminded clerks well versed in the gaming canon could expound endlessly on virtually every product. Such is certainly no longer the norm, and those gamers who do find themselves employed are often quickly shocked at how little of the job revolves around interacting in any positive sense with fellow gamers.

Not only has the clientele for these specialty chains changed as gaming becomes more ubiquitous, but the influence from vendors and publishers has also increased dramatically. High profile shelf space is purchased for startling amounts by publishers anxious to draw customer attention. Incentives are put in place to encourage employees to talk up certain games, as are disciplinary actions for those who do not reach reserve and sell-through quotas for corporate partners. As often as not, when an employee is pushing a game reserve, hot new title, guarantee, or used item down your throat, it is not out of genuine enthusiasm, but because they are being carefully tracked. He who can move the promotions gets the hours.

So, having gamers as employees is seen more often than not as a liability. Of the successful managers I knew, almost all agreed that an applicant who strongly promoted their knowledge of video games in an interview was usually dismissed. The magic word is: Salesman. Having a strong background and dedication to sales is the emphasis for employment at these locations, as the point-of-purchase becomes, by necessity, a higher pressure environment. I've seen people hired on with absolutely no knowledge of the product being sold, who first think of solitaire and Pac-Man at the mention of video games, into even store management positions, their designed goal having less to do with be product-savvy and more to do with their ability to make a customer walk out the door with something preowned, a warranty, a subscription to some magazines, and a reserve on a game they didn't even know they didn't want.

And in this higher pressure environment where salesmanship and performance is a premium, abuse naturally happens. Like I said at the start, these companies never tell their employees to be deceptive, but they don't necessarily require the full truth, and they don't tend to punish strong-arm sales tactics. The culture is such that employees and management often do whatever it takes to meet expectations.

Take for example preowned and refurbished systems. Among the former managers and staff of EB in my area it was widely known that the return and failure rate on in-house refurbished systems was tragically high. More often than not we expected to see a refurbished system exchanged within a day or two, either as completely non-functional or defective when customers played longer than a few minutes. I grew to dread selling refurbished systems, as it regularly created a situation where customers had to come back multiple times to resolve their issue. Considering EB has a strict no money back policy on all systems sold - I can't speak toward Gamestop's current policy on system return, though I suspect it's the same - we were put into the position of having to often simply exchange one broken system for another until either the customer found one that worked well enough, or upgraded to a new system (which, we were not encouraged to offer for the lower margin). I've seen customers come back as many as three times with three different refurbished systems that did not work.

The problem, I suspect, begins at the trade-in level where value is offered for broken systems which are then sent out to be refurbished. Unfortunately, there is no dialogue between customer, employee, and the refurbishment center, which means when it arrives to be repaired and ultimately resold, the technicians have no idea what exactly is broken. So if, for example, the system tends to stall after more than a few minutes of playing, then the technician doesn't know the conditions under which the defect occurs. I can't speak to the methodology of the refurbish center or its technicians, but I must assume it's not very thorough. EB has spoken of internal steps toward resolving this matter and improving the quality of the product, but as yet I've seen little or no improvement.

However, if you ask the salesman behind the counter whether the refurbished systems are a good buy, most of the time he will tell you it's just as good as new. Since internally refurbished units still count toward that higher profit margin preowned sector of sales, then talking you into the refurb and away from a brand-new system significantly helps their personal performance as well as that of the store. And, of course, you're far more likely to purchase extended protection (usually offered at only half the length of that for a new system) on a preowned system. You're more likely to do this because a good salesman will point out that the system with the warranty is still less money than new, because the system is no longer protected by the original manufacturer, and because you probably have less confidence in preowned product and are more open to the idea.

And once you've taken that refurb unit home, the worst case scenario for the store becomes that it doesn't work, you bring it back, and either exchange it for another refurb unit - which you can count on being pressured into - or you upgrade the purchase to a new system and pay the difference. Getting your money back is virtually impossible unless you are a regular customer worth keeping happy, or you complain loudly enough (loudly enough meaning directly to corporate, not raising your voice).

Let's consider another example. You, as a customer, walk to the front counter and ask if I have a copy of, say, Fable. I look up the inventory on my computer and see that I have seven new copies and two preowned copies. Care to guess which copy I'm going to pull off the shelves and put in your hands? Am I likely to tell you you're actually buying a used copy of the game? Well, if you're dealing with me in particular then, yes, but I was not under any obligation outside my personal ethics to do so. Now, if you ask the salesperson whether the game is used, they are supposed to answer honestly, but it is not information they have been coached to volunteer. It is not precisely misrepresenting the product with signs all around the store promoting preowned product, and the obvious fact that the employee must retrieve pull the disc and replace it back into its case - though that is increasingly done with new product as well - should be evidence that the game is not new, but a talented salesperson will be subtle, and have you on your way before it ever occurs to you that you might not have an unused copy of your game. And, of course, if you are clever enough to point out they are offering a used product, then a good salesperson will fix you with a surprised and innocent look and remind you that you'll obviously want to save five dollars on your game; that way you can protect it for a year with our Guarantee and still save some dollars.

The policy and directive is that if a customer is buying an item and the store has it used for less money than there is no excuse for the sales staff to let that customer leave with new product. An inability to convince you, the consumer, that used is in your best interest represents a lack of competence for a salesperson, and if they do not meet standardized quotas in the percentage of their total sales toward preowned then they can and will be disciplined or fired.

This all raises the question, then, is used product as good as new? Well, it can be, but often isn't. As we've already seen in the case of internally refurbished systems, there can be a high failure rate for preowned systems. The percentage isn't dramatically better for non-refurbished preowned systems- those systems that are traded in to stores as working. When those systems are traded in, at best they are checked to make sure they actually power up and start up a game - though many employees and locations will just take the customer's word for it - but many systems will start up fine and exhibit defects after stretches of continuous play. It's entirely accurate to say that preowned systems, even in the best of situations, are a far less reliable purchase. It's one of the genuine cases where a salesperson is being honest when they say you'd be a fool to buy one without an extended warranty of some kind.

Games are a trickier issue. The best way to know ahead of time if you can rely on a preowned game is simply check its condition before buying it. Be that guy. Don't count on the staff to have only taken in games in resalable condition. It's a far better risk to take in every game and resell as many as possible, swallowing the occasional return (which, considering the inflexibility of return policies, means an exchange for the same or equally priced item) and counting on people not being careful about their purchase.

The culture of these retailers is changing from what many of us remember toward a dramatically more sales driven environment. While these companies may not encourage deception at the store level, the high pressure to perform in critical areas will often bring out a deceptive, or at least not entirely forthcoming, nature to the individual employee sales tactics. It's no longer about an employee selling his favorite game, but his selling the game Publisher X has paid large sums of money to have him sell. It's no longer about staffing gamers to appeal to a gamer clientele, but staffing salespeople who will appeal and successfully sell to moms and dads who will buy whatever they are told their kids want. It's not about selling the highest quality product, but trying to move the lower quality, higher margin product and suffering the repercussions as they arrive. And, as the two biggest companies in this specialty retail industry prepare to merge in the third quarter of 2005, you can only expect those patterns to strengthen.

Next week: tips on how to take back your power as a customer, and some clarity on what to actually expect from Gamestop's purchase of EB.

- Elysium

Read Part 1: Profit - here
Read Part 3: What's Next - here

Comments

Holy crap, dude. The reasons why I have been hesitant to re-enter my local EB, since I got a slightly bad taste in my mouth from buying a used copy of Red Dead Revolver, have been made clear. You are the giver of wisdom, Elysium. I will sing of thee, and offer burnt stuff to the deities in your name.

Great second article Elysium; I think you're maintaining a good and fair tone throughout the series so far.

Nice nice nice! Great read. Can't wait for part 3.

GameStop's policy is a little different both on policy of trade in condition and refund for defective system/games. Either way you are allowed to return it for money back if it doesnt work.

That's why I made that distinction, Edwin. I haven't been with them since they changed their policy. Hopefully that policy will maintain after absorbing EB.

I'm impressed not only with the fair and objective tone of these articles, but also the clear and engaging way in which you present your information.

I would like to tell you to try and sell these to some publication, but given the state of gaming journals and magazines these days, I can't imagine what market there would be for them. Which is a damn shame.

Great stuff.

He who can move the promotions gets the hours.

Oh boy does that touch a nerve.

I'm lucky enough that the guys at our local EB know me and have stopped pulling this garbage with used games. The only used games I'll buy are rare games, I picked up Tatics Ogre for the GBA, paying $35.00 (full price) for a used game.

Elysium, did these practices shock you? I think you would expect the company to try to push the higher margin products since that is in their best intrest.

Reading these articles and my short experience in sales has led me to do anything I can to stay out of sales for the rest of my life. It just makes me feel dirty.

Great post Elysium. Looking forward to part III

Great work again Elysium. As it is often said: Informaiton is ammunition; and you are providing us with a cubic ass load of it

Elysium, did these practices shock you? I think you would expect the company to try to push the higher margin products since that is in their best intrest.

It was the methods employed to reach these goals that I found surprising. Here are some things that, maybe not shocked, but annoyed or disturbed me.

1) Presumptive sales - the common and sanctioned practice of adding a charge to the sale first and then explaining it as if you simply must purchase it - common with warranties.

2) Give 'em used - The practice of ringing up used copies of games without asking or pointing out that they are used. I have not basic problem with used product, but it's not straightforward.

3) Hiring practices - The number of employees I saw brought in who knew nothing about video games over gamers was a bit surprising. Also, the active recruitment and near immediate employment of women seemed at first a positive, until it became clear that most gamers seem far more likely to purchase promotional offers from women. I want to stress that I'm not implying a corporate aim of sexual harassment or hiring based on gender - though I knew several individual managers that seemed anxious to higher women because they believed they were better at moving the promotions.

4) Disparity of facts - The difference between what associates promised customers, and what they either knew to be true, or didn't know at all. It's very much a 'say anything' culture of sales.

Those are just a few of the things that 'shocked' me.

Theoretically, could a game store that had true knowledgeable staff and honest to goodness customer service actually survive in today's marketplace?
Probably not in a major mall that's for sure.

How far out of your way would you go to shop in a store like the one I describe?

How many of you even go to stores anymore vice simply ordering online and having it delivered to your home or place of work?

I have often dreamed of running an independant specialized video game store, including a LAN room and demo stations for whatever game systems. Somewhere gamers could come and shop, socialize, and organize events. Throw in a cafe and a pub as well, while we are dreaming. I fear there is simply not enough demand for this in any given geographic area and until we can all jack into the matrix and meet at the virtual www.gamerswithjobs.com lounge, my dream will remain unrealized.

Edit: changed link

I have often dreamed of running an independant specialized video game store, including a LAN room and demo stations for whatever game systems. Somewhere gamers could come and shop, socialize, and organize events. Throw in a cafe and a pub as well, while we are dreaming. I fear there is simply not enough demand for this in any given geographic area and until we can all jack into the matrix and meet at the virtual http://www.GWJ.com lounge, my dream will remain unrealized.

My brother and I have talked about this, as well, and unfortunately came to the same conclusion. Locally, there have been a couple of attempts to open a LAN room or "Internet Cafe", but they fizzle only after a few months. You'd need some kind of hook to convince people they'd be better off playing at your establishment than at home. That, and you'd need GG-like resources to keep the machines on the cutting edge (which could be your hook, but I can't see how it'd be profitable)....

Incredible series, Elysium! Have you given any thought to shopping this around, or are you simply content to share it with us, your loyal goodjers? And do you guys think these articles will get noticed by the gaming retail establishment?

And do you guys think these articles will get noticed by the gaming retail establishment?

I think if they do, then they will make every effort to have them pulled.

Elysium wrote:
And do you guys think these articles will get noticed by the gaming retail establishment?

I think if they do, then they will make every effort to have them pulled.

In related news, my new pair of black-market brass knuckles are quite snug about my fist.

The most irritating thing is that they are looking for people with sales experience yet this is a retail job that pays minimum wage and not full time. Is the job market that bad?

Also, dont forget for those of you thinking that starting up your own shop is a great idea, you will absolutely have no purchasing power with distributors. Yes you will have to lobby to get distributors to send you copies. Your little shop will be competing with Wallmart and the Gamestop/EB conglomerate for first run boxes. Your shelf space = inifinitly small compared to their thousands of stores.

Very enlightening Elysium, thank you.

I concur with Lobo's sentiment. Let the bastards come, we shall be ready

1) Presumptive sales - the common and sanctioned practice of adding a charge to the sale first and then explaining it as if you simply must purchase it - common with warranties.

My local EB store started to do that with the game 3$ warranty. At first they would ask me if I would like it... but that only happened only once. Now they just add it and hope that I would not notice it.

2) Give 'em used - The practice of ringing up used copies of games without asking or pointing out that they are used. I have not basic problem with used product, but it's not straightforward.

Gamestop did this to me few times and I never came back after that. One time when they did that to me and I said that I wanted a new copy... the reaction I got as if I insulted the employee. Other times when they ring up a used copy, they try to charge me as if it was new. May be it was, and the store opened it for display. However, I consider a new copy... the one that has been factory sealed and to be only opened by me! So far the good thing is that no matter how hard they try to reseal the game to make it look like it was factory done... you still can tell that it wasn't.

What a fantastic article! I pay good money for gaming magazines that don't touch on subject matter like this. Thank you for your insight and great writing.

I'll take this moment to lodge a gripe that those around me hear all too often. Why, why, why by the throne of Midas does EB deflower every copy of a new game, paste it with a half dozen stickers, throw them on the shelves to let Cheeto-fingered tykes grope them while gawking at the screenshots on the back and with a straight face try to tell me it's a new game?

If I were a car salesman and in front of the customer proceeded put the dash back into their vehicle, pasted three bumper stickers on it, told the neighbor kids to take their hands off the car and to play somewhere else...I think the customer might take offense. Then again, car buyers are exclusively adults affluent enough to purchase a car and also with a sense of entitlement higher than that of the average age and demographic of a game buyer. EB takes advantage of their customers.

Perhaps I'm too anal, but to me the only difference between a used and a new game at EB is the story from the sales clerk.

Sorry for the rant (not really) and I'm looking foreward to more excellent writing!

An excellent piece of writing, Sir!

You argue all of your points cogently and well. I believe that the quality of this piece exceeded that of the first; I'm curious to see if you can maintain the momentum. And, yes, I believe you have been very fair and even-handed.

Thanks!

"I have often dreamed of running an independant specialized video game store, including a LAN room and demo stations for whatever game systems. Somewhere gamers could come and shop, socialize, and organize events. Throw in a cafe and a pub as well, while we are dreaming. I fear there is simply not enough demand for this in any given geographic area and until we can all jack into the matrix and meet at the virtual http://www.GWJ.com lounge, my dream will remain unrealized."

We as a community should take this dream and work to fullfil it. We can all toss our pennies into a fund and in a few years start this up. We obviously have the experiance around this site.
Damn it we could make it work. Lets make a dream happen.

Elysium continues to pwn!!!

Looking beyond Part III, I am waiting for the Part IV explaining how to further reclaim back my power as a customer, and what methods of shoplifting I am best off to employ at EB in order to maximize my chances of walking away with free merchandize while minimizing chances of prosecution!

I keed, I keed.

I have often dreamed of running an independant specialized video game store, including a LAN room and demo stations for whatever game systems. Somewhere gamers could come and shop, socialize, and organize events. Throw in a cafe and a pub as well, while we are dreaming.

Around here, such an establishment will be mobbed by delinquent and destitute inner city youths, looking to bum their time away playing for free on your demo stations.

However, I consider a new copy... the one that has been factory sealed and to be only opened by me!

EB, and apparently the law, do not agree with you on this point. If you find a manager or associate who will discount the item for you, consider yourself lucky until they are forced to stop.

Even though everyone knew what I meant, I changed the link in my previous post so that is wasn't pointing to some other site.

We as a community should take this dream and work to fullfil it. We can all toss our pennies into a fund and in a few years start this up. We obviously have the experiance around this site.
Damn it we could make it work. Lets make a dream happen.

The name could either be Gamers With Jobs, GWJ or my favorite: Goodjers.

Goodjers or Goodgers?

BTW, what would be a female form of this word?

Gorilla.800.lbs wrote:

Goodjers or Goodgers?

BTW, what would be a female form of this word?

Why, "Good," of course.

Goodger is unisex... or asexual... or something like that. We don't discriminate.

Ugh, the notorious Big Business rears its ugly head again. I have basically no respect for companies that run their business as you described here, Elysium. Ethically I find such practices detestable.

Unfortunately that's the way of the future. Capitalism is no longer "the great equaliser" (where theoretically anyone can be rich); it is now simply an excuse to rob people of as much money as is humanly possible.

Maybe we should form a GWJ posse that rides around and harrases these gamestores? Sort of stick it to the man! We've got intimate knowledge of games and hardware, which we can use to club clueless sales staff in various degrees of unconsciousness. Afterall, what could be more irritating than a group of potential shoppers who act like they know everything and in fact do!

BTW Very insightful series of articles. The belly of the beast exposed, as it were.

Lord_Xan wrote:

Maybe we should form a GWJ posse that rides around and harrases these gamestores? Sort of stick it to the man! We've got intimate knowledge of games and hardware, which we can use to club clueless sales staff in various degrees of unconsciousness. Afterall, what could be more irritating than a group of potential shoppers who act like they know everything and in fact do!

That's more or less what happens now I ask staff a question, they have no idea, so they make something up...which I then promptly call them on. I've had so many humorous encounters, it's almost scary.

Tell us a story, DrunkenSleipnir. PLEEEASE!