Absolutely the same story in my line of business, bookselling. Books, like games, are 'non-core' business through and through to supermarkets. A bookshop, by definition, has to carry a large stock of titles that sell relatively rarely but one would nonetheless expect to see on the shelves. Supermarkets don't have that headache. We do, at least, make a decent margin on these books, although the infrequency of those sales means it cannot alone sustain a business. A big seller is the kind of thing that supermarkets will bother to stock. To compete with them we have cut our prices to the point where profits are negligible even if we sell hundreds of the thing.Dio wrote:The Wal-mart model (which both Asda and Tesco largely run to here) is wafer-thin margins with huge turnover - you can easily see this from their profit figures. For 'non-core' business they are quite happy to sell at low single digits over cost price. VAT amplifies this effect by nearly 20% as well. Frankly, they're happy just to get customers through the door and buying their groceries where they can make a bit more money because they've squeezed the suppliers.
Only the biggest high street stores can approach the volume discounts they get, and none of them can touch the cost base the supermarkets operate on - they absolutely need their 15-20% margin per item to cover much higher fixed costs and a larger variety of stock.
For example, the latest Harry Potter paperback was priced so aggresively by Tesco that if they were on the same terms and margins as us they would actually make a loss on every book sold. As Dio says, it's all about getting punters through the door and buying their fruit and veg there.
The end result is that we don't sell anything like as many units as we'd like and what books we do sell, of the big titles, we don't make much on at all. Something like three quarters of our profit comes from backlist titles. All those 3 for 2 offers are to get folks in the door, not much else.
Games retail doesn't really have the same notion of backlist sales. Games come and go so quickly - a month after Otogi came out I couldn't find it on the shelves anywhere. Second hand sales is the only equivalent they have. It wouldn't surprise me if that's the only thing that keeps most games retailers in business. I don't think the margins on new games are good enough on their own.
