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As store closures mount up, is there hope left for physical games outlets?

Forums - Gaming Discussion - As store closures mount up, is there hope left for physical games outlets?

0D0 said:
The_Liquid_Laser said:

It is true that the console makers subsidize the cost of consoles.  However, the stores don't make a profit on them either.  The margins are slim to none.  Selling hardware is not profitable enough for retailers by itself.  They sell the hardware though, because they can make decent margins on the software.  Take away the software and all of the sudden brick and mortar stores will stop selling hardware.  Then console makers are in deep trouble.  Not even Amazon would sell hardware without the software to go with it.

And of course there is a huge marketing advantage going through a brick and mortar store, especially a specialty store like Gamestop.  Take all of these advantages away and...crash.

Can you elaborate more on that. With more than 100m current gen consoles out there (PS4+X1), isn't that enough sells to justify the market, at least for Amazon and Walmart?

Did you read my post?  I explain every detail in the post.



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CaptainExplosion said:
Maybe if they went the route Amazon did.

To be fair, they do sell online....



The_Liquid_Laser said:
0D0 said:

Can you elaborate more on that. With more than 100m current gen consoles out there (PS4+X1), isn't that enough sells to justify the market, at least for Amazon and Walmart?

Did you read my post?  I explain every detail in the post.

I did, but could you add more? Do you have sources, numbers .. ?



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OP what country do you live in? I don't know about that other chain, but here in the U.S. Gamestop is the worst place to buy games. I think we're not witnessing the failure of physical games markets, but the failure of poorly run, chain stores, that offer up insulting amounts of trade-in credit for games.

I was so wrong about Nintendo this year. They had a great year, Poke'mon Let's Go was legitimately a big release. 

0D0 said:
The_Liquid_Laser said:

It is true that the console makers subsidize the cost of consoles.  However, the stores don't make a profit on them either.  The margins are slim to none.  Selling hardware is not profitable enough for retailers by itself.  They sell the hardware though, because they can make decent margins on the software.  Take away the software and all of the sudden brick and mortar stores will stop selling hardware.  Then console makers are in deep trouble.  Not even Amazon would sell hardware without the software to go with it.

And of course there is a huge marketing advantage going through a brick and mortar store, especially a specialty store like Gamestop.  Take all of these advantages away and...crash.

Can you elaborate more on that. With more than 100m current gen consoles out there (PS4+X1), isn't that enough sells to justify the market, at least for Amazon and Walmart?

His argument is that in an all-digital future, stores won't be willing to sell hardware because the big money is in software, which they won't get a cut of.  In general, he's not wrong. Hardware margins are low in most computing instances, not just video games.  So his theory is plausible.

There are two primary ways around this.  First, S, N and M would have to offer up their hardware at lower prices to allow for a satisfactory margin.  Probably not terribly likely.  The second way is one we're already seeing - You can buy digital download cards for games at both Amazon and Best Buy, and likely other retailers.  And if customer adoption of such a practice could be encouraged (i.e.: perhaps by offering a small discount on a game card bought in store vs. the console maker's online store), then this is something companies like Walmart and Amazon would absolutely love, because it drops storage and shipping costs to practically nil.



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As each year passes, I go digital more and more. Eventually I won't want physical anything.

I feel like physical games will still be around for a while in stores like Walmart or Best Buy, where there are other aspects to them. Even if they did stop carrying there as well, Amazon and the like would end up being the primary source.

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0D0 said:
The_Liquid_Laser said:

Did you read my post?  I explain every detail in the post.

I did, but could you add more? Do you have sources, numbers .. ?

Here is an article I found about how much profit a store can make on hardware and software.
https://nintendosoup.com/much-money-video-game-store-make/

Basically profit margins on hardware are 2% - 5%.
Profit margins on new software are 25% - 35%.

For a big retailer, new software is obviously where the money is at.  Now I have been told that these margins on new games aren't even enough for a specialty store like Gamestop to be successful.  But the margins on used games are more like 40% - 80%.

So any way that you slice it, the money is in the software.  The hardware is just there to get people to come to your store to buy the games.  If you take away the software, then hardware prices would have to increase, so that the stores could sell the hardware at a decent profit.  



0D0 said:
outlawauron said:
I mean, it's still a multi-billion dollar business and every console manufacturer is dependent on them to get consoles out. GameStop, Walmart, and Best Buy make up the majority of all US console sales.

They could get consoles out without Gamestop, couldnt they? They have walmart, amazon, best buy and many others round the world.

They could, but the question was is there was any hope for physical game outlets. That refers to Walmart, Best Buy, Target, GameStop, etc.



I honestly can't tell you the last time that i bought a game in-store. It's definitely been at least 3 or 4 years, though. Amazon gets most of my gaming business. Most of the other stores, i only buy from on Black Friday or if they have a good sale price on a game that i'm after. I always buy my physical games online, though.