Some industries are virtually recession proof, but entertainment has rarely been one of them. Thus, video gaming, the fastest growing entertainment category, offers quite a surprise, and its biggest retailer, GameStop, provides some staggering numbers.

With 6,200 stores in 17 countries, GameStop enjoyed a 24 percent sales increase in 2008, including a 12 percent increase in same-store sales through its brands GameStop, EB Games, Electronics Boutique, EBgames.com, and GameStop.com. Although the average video gamer is a 35-year-old man, 65 percent of U.S. households actively participate in gaming, and GameStop’s customer segments even include the elderly.

A video game, entertains an individual for approximately 80 hours, offering a great value on a cost per hour basis, especially compared with other forms of entertainment. Thus, its attractiveness has grown beyond its core customer segment. The introduction of Guitar Hero and RockBand, games that encourage groups of people to participate in musical renditions, further extended the target market, as has the Nintendo Wii, which encourages users to exercise with Gold’s Gym Cardio Workout.

Despite their value, video games are expensive, with new games costing around $60. So GameStop sells used games and equipment and grants customers credit for used games they trade in to the store. By selling used games for less than the new games but buying those used games for about half of what it charges for them, it has achieved gross margins on used game sales that contribute 48 percent more to its bottom line than the new games do.

With all these appeals, GameStop also has become a destination for gaming enthusiasts.  Customers  hang out at the stores to chat with other gamers, discover the codes and tricks of a game, and find passwords to higher levels. Through online interactions, which facilitate the GameStop Web site presence, as well as in-store experiences, customers learn that GameStop is a one-stop shop for products and knowledge related to all things about video games.

Discussion Questions:

Why has GameStop been so successful?

Craig Guillot, “Masters of the Game,” Stores, July 2009.