GameStop digital sales have CEO Paul Raines and President Tony Bartel on the offensive – proclaiming digital downloads on consoles as the next growth driver for the company. The company grossed $730 million dollars in digital content last year, with the bulk of the revenue earned from console games and console DLC.
CONSULGAMER assembled the most important components of several discussions below.
Educating Customers Boosts GameStop Digital Sales Figures
While Xbox One and PlayStation 4 have significant storefronts to drive digital sales, GameStop is seeing success by acting as an educator of the market, letting consumers know about digital content and cross-selling customers recommended products.
“When you’re standing in line at a midnight release, or when you come in and buy that product, or when you preorder the product, we’ll inform you about the downloadable content that’s available, said GameStop President Tony Bartel. We’ll give you the opportunity to buy it. You can preorder it. Do whatever you want. But we’ll aid in discovery because that’s what GameStop does.”
Consumers still want the recommendation of experts, and customers are still coming to GameStop to purchase digital goods.
Customers Buy at GameStop Because They Don’t Have Credit Cards
A sizable portion of GameStop digital sales comes from customers who do not have credit cards to buy digital games online on console storefronts – significantly children and teenagers who have yet to get credit cards.
“More than 60 percent of the payments for digital content [at GameStop] are not with credit cards,” said Bartel. “It’s trade credit, cash, gift cards, and things like that.”
Gamestop is also the only retailer where customers can immediately trade-in games and use those credits to purchase digital games. The company’s used games acquisition process gives the company an exclusive audience to sell digital content to.’
“Last year, there were over $1 billion of trade credits given to consumers at GameStop,” said GameStop CEO Paul Raines. “70% of the time those trade credits go to a new sale, and a lot of that is digital.”
GameStop Drove Initial DLC Adoption
Raines credits much of the growth in DLC across the console game industry to GameStop’s capabilities to educate the market and drive sales. GameStop’s 6,500 stores worldwide serve as important marketing channels to educate consumers of new products like DLC.
“It’s no surprise that DLC began to grow when GameStop jumped into it, that’s because we provide unrivaled customer acquisition,” said Raines.
GameStop employees will suggest DLC purchases to customers when they purchase regular packaged games as well as used product, something online storefronts on consoles still do not do.
“Pretty much every title that comes out now has DLC attached to it, and our customers, maybe 20-40 percent of them buy the digital bundles that go with the game,” said Raines.
GameStop Digital Sales Earn Similar Margins with Minimal Inventory Risk
Finally, despite only selling customers digital codes, GameStop earns similar margins on console DLC compared to new packaged video games.
“The way we’ve always articulated it is that [margins on DLC is] software-like,” said Bartel. “They’re very close to what we make on software. In some cases they’re a little less or a little more, but the other nice thing is that we carry no inventory, obviously.”
CONSULGAMER notes that the margin earned on DLC is still far smaller than GameStop’s margins on used video games, and the inability for consumers to sell back DLC to GameStop may slow down the company’s trade-in business.