We are focused on the gaming market in the UK and Spain and have four key strengths to help future growth:
GAME Digital’s strategy is to drive profitable growth and enhance shareholder value by continuing to build on its market leading position as an omni-channel specialist retailer of video games in the UK and Spain.
The Group aims to achieve this by providing the gaming community with access to a wide range of new and pre-owned content and products across the complex gaming spectrum. The Group’s activities are focused on building customer engagement with the aim of positioning itself at the centre of the supplier-customer relationship.
The Group seeks consistently to achieve a high level of market share in new console physical content by focusing efforts on driving sales of new content together with its key suppliers through marketing events, first-to-market offerings and exclusive content, all delivered by dedicated in-store and online teams. The Directors believe the Group’s key suppliers recognise the intrinsic value of the marketing and interest around a product or release that can be generated by the Group’s marketing and advertising platform, which continues to increase with the advancement and increased use of social media. Moreover, the Group seeks to continue to benefit from the commercial support provided by its suppliers. This support is underpinned, shaped and driven by the Group’s customer insight, which enables it to respond to specific supplier needs and provides real time market intelligence which aims to assist suppliers with strategic decisions, business planning and customer engagement.
The Directors believe that the Group’s specialist “destination stores” and its strong relationships with key suppliers position the Group at the centre of the supplier-customer interaction and the Group seeks to continue building on its share of new console physical content market.
The Directors believe that a key growth driver of the video game market will be the advancement of digital content within the video gaming community and that digital content will contribute an increasing proportion of the GAME Digital’s revenue over the medium-to-long term. The growth of Microsoft Xbox Live, PlayStation Network and PC gaming websites has led to increased consumer demand for DLC, digital subscriptions and digital platform currency. The Directors believe that there is scope for significant growth of GAME Digital’s digital range.
GAME Digital continues to invest in digital delivery and in-store digital infrastructure to grow its presence in the digital content market. We seek to offer more digital content, digital currency and digital subscriptions and are collaborating with suppliers to expand our offering of digital content for sale across all channels.
When the time is right, we may also consider making investments in (or acquisitions of) other digital content, services, technologies or distribution platforms or providers. If our Directors believe such investments would accelerate the Group’s strategic priorities and would broaden and enhance GAME Digital’s current product or service offering, we will investigate those opportunities.
In addition, the Directors believe that GAME Digital’s stores (which are its largest channel for the sale of digital content) will continue to play an integral part in customers’ education and discovery of digital content, and that we are well-positioned to continue to provide an important marketing and incremental sales platform for suppliers’ digital content. We will continue to focus on enhancing customers’ in-store digital experience (for example, by providing digital touchscreens) and the GAME app, to enable digital content discovery and facilitate transactions.
Our digital strategy incorporates a plan to access every digital gaming segment, including console and non-console digital content (such as browser, cloud, casual, mobile, social and PC), with the primary focus being on the console and PC digital segments of the digital gaming market.
The Directors believe GAME Digital’s broad range of payment methods, reward programmes and service expertise provide a strong customer proposition and encourage loyalty, as customers discover and embrace digital gaming. We have developed (or are in the process of developing) systems to support and enhance the delivery of digital content, such as Codebank and GAME wallet, and we will seek to build on these capabilities. The Directors intend to continue to focus on, and invest in, digital infrastructure to seek to be at the cutting edge of this segment of the video game market, to take advantage of developments in digital technology and to drive the size of the market and the industry’s performance.
GAME Digital’s market share of pre-owned is strong, with a 39 per cent market share of the UK pre-owned physical content market in 2013**. By 2017, the Directors expect the pre-owned segment of the Group’s business to be substantially larger as a proportion of its profits after tax than it is currently due to the increased mix of pre-owned devices, which include tablets, phones and other technology. The Group’s pre-owned products typically generate substantially higher gross margins than new products as the Group has greater control over the pricing of such products.
GAME Digital carries a wide selection of pre-owned physical content and hardware for both current and previous generation platforms and formats. The Directors believe that the Group’s trade-in model and pre-owned product offering provides the Group with a competitive advantage in the video game market and offers customers an attractive value proposition generally unavailable among some of our competitors (including supermarkets, toy stores and consumer electronics retailers).
We seek both to increase our share of the pre-owned market and to drive the size of the market in absolute terms by increasing consumer awareness of the benefits of GAME Digital’s trade-in model and awareness of the growing range of additional pre-owned products which we will accept. These include new technology products, the service we provide to customers who wish to trade products in, and the ability to receive cash or credit towards new gaming or gaming-related products for purchase in store or online.
We see an opportunity to broaden our pre-owned product offering into other technology products, and expand our offering of pre-owned tablets and smartphones (which was estimated to be a £300 million market in the UK in 2013, which is approximately the same size as the pre-owned video game market in the UK***). In addition, GAME Digital seeks to increase consumer awareness of the product-level protections that we offer on pre-owned products, which broadly mirror the protections offered on new products, through in-store education, targeted marketing communications and campaigns.
As at 26 April 2014, the Group had allocated a dedicated space for its pre-owned technology product offering in eight existing stores in the UK under the brand “GAMEtronics.” We have also re-branded two of our UK stores under this brand. GAMEtronics specialises in the trade-in and re-sale of gaming and technology, including PC components, smartphones, tablets, MP3 players, TVs and satellite navigation devices. The GAMEtronics proposition focuses on attracting customers with a wide range of trade-in options, focused on a wide range of technology products, with the aim of increasing footfall and providing customers with trade-in currency (either cash or credit), thereby encouraging new content and console purchases. Our strategy is to increase the range of re-sellable technology products, such as phones and tablets, and dedicate greater storage space to pre-owned products in all its UK stores in the medium-term. The Directors believe that these initiatives should enhance customer loyalty, increase the currency available to spend both in-store and online, and increase profit margins in the medium-term.
In keeping with our goal to be at the centre of the video gaming community in the UK and Spain, we are focused on broadening our product and service offerings to make sure we can accommodate the evolving needs of gamers in the UK and in Spain and drive value from this. In addition to the hardware and content, we offer- accessories, toys, collectibles, clothing and other gaming-related merchandise, as well as product warranty coverage.
In Spain, the Group has recently launched a credit service to enable customers to pay for a product in instalments.
We are also developing GAME Marketplace to enable individual vendors to offer gaming products alongside the GAME Digital’s products (for which we will charge a commission). Once launched, GAME Marketplace will enable customers to purchase products directly from third-party sellers both in stores and online. GAME Marketplace will broaden our in-store and online product offering without introducing additional inventory risk. The Directors believe this will lead to increased revenue, customer conversion and customer loyalty and retention.
GAME Digital has considered undertaking, and may in the future undertake expansion on a selective base of its online and physical presence into new markets to broaden its customer base. The Group has a third-party multicurrency and multilingual platform that would allow us to expand our online presence. The Group expects that any capital commitments to any such expansion, if any, would be minimal.
* Source: OC&C
** Source: OC&C
*** Source: OC&C
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