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Member since May 2011 · 2485 posts · Location: Brisbane
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Subject: Tales from the Game Store
A story that recently popped into my mind:

I ran an independent game store in a mid-size town, and was doing fairly well.  We opened up with an imported N64 (the first in town); we rented a Neo Geo CD system; we had arcade machines along the back wall, and we just happened to be at our peak when Final Fantasy Seven came out.

Now we had a long history of selling Final Fantasy games, we had a serious core customer group who relied on us for their RPG fix.  FFVII was going to be massive, and we had dollar signs in our eyes when we placed our pre-order for 125 copies.  This was the biggest order for a single game we ever placed, by far. 

We were stunned when, in an industry where ordering 20 means you get four, we got our entire order.  One hundred and twenty five copies, it was a huge deal for us.  We had pre-orders for every one, and a waiting list as well.  And at twelve dollars profit per copy, we were expecting a pretty decent week.

And then Wal Mart dropped the retail price to below our cost.  We sold 125 copies of the game at a dollar loss, then cleaned out Wal Mart and sold 40 more with the slimmest of profit, matching the other big retailers.  The biggest game launch in our four year history, and we didn't even make fifty bucks.
BLEARGH
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Member since Oct 2007 · 316 posts
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It's pretty well known at this point that Walmart actively sells loss-leading items in the hopes of making up the difference on other things bought at the same time. The markup on a box of spaghetti is probably nearly 100 percent, and it's unlikely that Gamer's Edge would have seen fit to get into the pasta business. This is by way of saying I don't think Walmart's per-unit cost for FFVII was any different from yours.

Of course, these chickens are coming home to roost now. Walmart was recently in the news for having too many SKUs to keep track of, and attracting customers who came in to buy only the discounted items and nothing else (which subverted the loss-leader incentive.) Walmart's model of operation is about to be eaten by online retailers in general, and Amazon's same-day delivery experiment in particular.
This post was edited on 2013-03-14, 23:18 by Kendrick.
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Member since May 2011 · 2485 posts · Location: Brisbane
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To be clear, Gord's store was Gamer's Edge.  Mine was Game Station X. 

And sure, that may have been Wal Mart's MO, but it was the first time it hit us.  We based our pricing on theirs - we constantly undersold them by five bucks.  This was the first time in a couple of years that they had undercut us - and on the biggest release.  It was a shot from the blue for us.
BLEARGH
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Member since Oct 2007 · 316 posts
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Quote by NFG:
To be clear, Gord's store was Gamer's Edge.  Mine was Game Station X. 

Careless error on my part, please forgive my assumption.

And sure, that may have been Wal Mart's MO, but it was the first time it hit us.  We based our pricing on theirs - we constantly undersold them by five bucks.  This was the first time in a couple of years that they had undercut us - and on the biggest release.  It was a shot from the blue for us.

Walmart has another trick in their box of womanly deceptions, in that they are able to manipulate availability of a product if it's made in high enough quantities. When something is sold in the tens of millions of units, then the overseas shippers will dedicate an entire cargo ship to it even when there are multiple wholesalers involved. When this happens, as the biggest buyer Walmart is in the position to control the timing and the location of the ship's arrival, and the speed with which it is unloaded. Walmart has been known to delay boats in that position for months and months, keeping a particular widget or doohickey in a retail purgatory while they take whatever action they want to put a competitor out of business.

Shoplifting is illegal and I don't condone or encourage it. But making Walmart spend money chasing imaginary shoplifting is always an exercise in karmic balance restoration.
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