Trading updates from both HMV and Game in the past week would suggest the gaming market in the UK was dying. But looking across Europe Gamestop, is thriving. Why? What can one learn from the other? The key appears to be in integrating the stores and online offer. Difficulties in the UK

Both Game and HMV have reaped the rewards of their presence in one of the most dynamic and fastest growing retail sectors during the boom years. However, both announced dreadful results this week. Game’s like for like sales dropped 12.2% in the 44 weeks to 4 December with total sales down 14.7%. HMV’s game sales fell 12% in the first half of their 2010/11 financial year. Both may point to the lack of major gaming launches in the year, and it is true that the recent launch of major titles and hardware should help boost trading over Christmas, but both figures are below our own estimates for performance in the market in 2010. If such retailers are to turn things around they cannot afford to remain so reliant on the next major game or piece of hardware as their only source of sales growth. Another way

Elsewhere in Europe, the outlook is not so grim. American giant Gamestop has stores in 12 European countries including France, which it entered via the acquisition of Micromania in 2008. Despite worse recessions than in the UK in many of these markets and the same lack of major launches, such stores are still seeing strong sales growth.

Gamestop’s success can be attributed to some innovative practices. Online has proved key to its strategy and it has sought to embrace online gaming, downloads and social media, going so far as acquiring Jolt, an ISP dedicated to online gamers and Kongregate, a site for playing free online games made by independent developers. An unusual move for a bricks & mortar player, but one that fits in with its strategy to be a leader in offering downloadable content. Such content is also available in store with outlets offering advice to consumers trying to find the content they are after. The acquisition of Micromania has also encouraged another area of innovation. Micromania’s strong loyalty programme is being rolled out across the group so that rather than the traditional points cards, members must pay a fee to join a club. In exchange they are guaranteed access to exclusive material and the latest game demos.

Despite its successes to date, Gamestop does not want to stop there and is running trials of a new format store as well as rolling out concessions in places such as department stores where suitable standalone store sites are not available.

The need for direction

Game has been stuck in limbo throughout much of the year, following the departure of its CEO and COO at the beginning of 2010 but it needs to get things in order quickly, otherwise rumours of a potential takeover by Gamestop could come to fruition. Its launch of concessions in Comet outlets appears a good move but more can be done to entice people into its own outlets and to make people aware of the gaming world beyond the major launch titles. HMV’s diversification into related product areas, such as electricals and clothing, seems somewhat questionable given the competition that already exists in these areas. There is little doubt that the gaming sector is a tough one at present but money can still be made with a vast potential audience now available to target. Opportunities are there to be taken.

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