ASDA admits to selling games below cost price
Specialist retail responds with accusations of market "trashing" and confusing consumers
ASDA has admitted to selling key videogame titles at below cost price in order to deliver "good value for money" to its consumers.
In response to a GamesIndustry.biz story earlier this month, in which Chips MD Don McCabe accused supermarkets of "bully boy pricing" following their discounting of FIFA 10 by more than 50 per cent of its RRP, Duncan Cross, ASDA's games buying manager commented: "It might surprise Don and others, but we aren’t making any money on FIFA 10 because the price we have had to pay to the supplier is more than we are charging our customers.
"I am sure the other supermarkets are in a similar boat, so to criticise them as 'bully boys' doesn’t make sense to me – how can you be a bully if you are selling something for less than you buy it at?"
McCabe however says these comments "illustrate my point exactly."
"Any idiot can sell something for less than they bought it for and have fantastic sales but it doesn't exactly make a business," he added.
"We've all known it's been going on for years and years and I think certainly over the recent weeks we've seen evidence of very low pricing on some of the videogames. It makes it difficult because people perceive that's what you can buy it for and therefore we must be making humongous profit, but now [Asda has] admitted to selling at below cost.
"I'm not surprised they're doing it but I'm surprised they're admitting it."
The latest game to be sold at a discounted price was WWE: Smackdown vs RAW 2010. Over the weekend, ASDA sold the Xbox 360 version of the game at GBP 25 while Tesco offered the PlayStation 3 version for the same price.
These are pricing strategies that are "distorting the market" according to McCabe.
"It's destructive pricing. We all like competition but it's about playing fair a little bit. At least try and make a little bit of profit so we can compete on service and quality of range and good staff. But if they're going to give it away then the consumer is ultimately going to go for the lowest price.
"It's very difficult for me to explain to a customer why ASDA can afford to sell something at GBP 25 because obviously they wouldn't sell at a loss, says the customer, so why is your price GBP 35-40? And it does distort competition - it really does.
Writing on the ASDA Aisle Spy blog, Duncan Cross also responded to McCabe's previous comments the supermarkets would ultimately "reduce choice and screw suppliers."
"This is simply not the case at ASDA," he said. "We've been growing our games range consistently for the past five years and now stock more titles from more suppliers than ever (over 350 lines)."
McCabe dismisses these figures though - "350 units. Wow. There's something in the region of 20-30,000 games available in the UK marketplace. I think in our particular range we carry 2500 SKUs in any one shop and across the company we probably have in the region of 6-7000 SKUs."
And ultimately the supermarkets' special deals makes life very difficult for the specialist retailer, he adds.
"It's no longer just a situation of looking at a title, working out how good it is, working out what market it is, and then buying a quantity for your customer base. Now you've got to think, who's going to trash the market, and if they trash the market what effect is it going to have on my stock holding?"
Asda however insists its one objective is make its goods and services more affordable for its customers.
"Our customers continue to tell us that computer games are an expensive product in today's economic climate so we are working hard to try and offer them consistently good value for money within the games category.
"Given the amount of units sold through the supermarkets on this title it would appear the majority of customers feel that ASDA (and indeed the other supermarkets) are offering terrific value for money when compared to other retailers on this title," concluded Cross.