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Retail limps to the finish line after a tough 2012

Defying predictions, retail chains survived 2012 - but it only gets tougher from here

You can't win 'em all. If I had one truly confident prediction to make, as 2011 entered its final stretch, it was that at least one major retail scalp would be claimed during 2012. US chain GameStop, while worthy of deep skepticism in the long term, looked secure enough - but the UK high street, filled with a proliferation of game and media retailers all fighting over scraps of the same diminishing market, was clearly a blood-bath in the making. The breathing space created by the collapse of giant entertainment retail chain Zavvi (formerly Virgin Megastores) in 2009 was coming to a close - there was no way every major player would survive 2012.

"Gibbs has expertly navigated the retailer away from the OpCapita kiss of death - and has even pushed the chain in new, important directions"

My prediction looked like it was on pretty solid ground by March, when GAME started to tumble over the cliff. Starting with Electronic Arts at the end of February, publishers and platform holders lined up to stop supplying the chain with stock, wary of impending administration and an inability to pay bills. By March 19, GAME's shares were suspended on the stock exchange; on the 26, the chain went into administration. 277 stores were shut immediately with the loss of over 2000 jobs. Sometimes, a prediction coming true really doesn't put you in any mood to crack open a celebratory drink.

That's probably just as well, because in the end, my prediction didn't come true. Today, you can still walk into GAME stores across the UK and buy games and hardware from any major company - including EA and all the rest of those who (understandably and perfectly reasonably) pulled the rug out from under the retailer back in March. This defies pretty much all expectations. After it went into administration, few expected GAME to find a buyer that would keep the business running - and many of us nodded grimly when the buyer that eventually stepped up was OpCapita, a company with something of a reputation for buying troubled businesses and hammering them into the ground, extracting what profits it can before dumping them back into administration. It did that to UK retail chain MFI back in 2008, and only last month, the same fate befell electrical goods retailer Comet. Few expected anything different for GAME.

If we're cracking open anything, then, it should be a toast to GAME's boss, Martyn Gibbs - who had left the chain back in 2011, only to be brought back as CEO after the OpCapita buyout. Thus far, Gibbs has expertly navigated the retailer away from the OpCapita kiss of death - and has even pushed the chain in new, important directions by embracing digital distribution to a degree, with GAME customers now able to buy Steam codes in-store for redemption online. It's a far cry from only a couple of years ago, when embattled retailers were putting pressure on publishers to drop Steam entirely from their titles and threatening a boycott of those that didn't - having apparently decided that the best way to deal with technological progress and market change is to sit down in the middle of the road and throw a good old-fashioned temper tantrum. Now GAME, at least, seems to understand that the future will happen with or without it, and is making efforts to carve out a spot for itself in that future.

"It's not hard to imagine a scenario where HMV slips into exactly the same kind of problems in early 2013 which GAME experienced in early 2012"

All the same, it's very tempting to repeat the same prediction, 12 months down the line. GAME isn't out of the woods yet - the company doesn't have credit insurance, for instance, a situation which can cause huge problems for a retailer (it's cited as one key factor in Comet's collapse, which must cause sleepless nights for management at the similarly OpCapita-owned GAME). Yet GAME is now actually in quite a healthy state compared to other retailers in this market. If you were to place a small wager on a high street brand to disappear in 2013, it would more likely be HMV - a chain which resoundingly failed to capitalise on GAME's difficulties (suggesting strongly that in the absence of GAME, customers went online rather than hunting out another high street option) and which has just posted a loss of £37.3 million for the first half of its year, which ended at the end of October.

HMV's situation is precarious, to say the least. It's posted losses fairly consistently for some years, its sales are in steady decline and it admits that it's likely to breach its agreements with its banks in early 2013. In order to keep itself stocked up for Christmas, HMV has had to accept help from its suppliers - to the tune of some £40 million, according to a report in the Telegraph this week. It's not hard to imagine a scenario where HMV slips into exactly the same kind of problems in early 2013 which GAME experienced in early 2012 - in fact, it's tough to come up with scenarios where that doesn't happen. Not so long ago, the retailer saw videogames as being a way to sustain its business in the face of tough challenges in the music and movie sectors; now, it's videogames that are the toughest sector of all.

Meanwhile, the sales reports continue to clock in every month, each month revealing a fresh decline. The wider industry knows perfectly well that reports from the likes of NPD are no longer of any particular relevance to the performance of the game sector as a whole - we're long past the point where digital revenues could be treated as a rounding error on physical product revenues. However, those reports are the slowing beeps of the cardigraph attached to the retail sector, which - despite the best efforts of more forward looking chains like GameStop and the newly reinvigorated GAME - threatens to flatline any year now.

2012 was a landmark year in that regard - not because of GAME's administration or HMV's deepening woes, but because of the huge shift in attitudes to digital publishing. The old idea of launching a physical, boxed game and then putting it onto digital services later on for a second burst of revenue is dead in the water - if you deal with a publisher who suggests this, back away very slowly and don't break eye contact, because they're incompetent to a degree that verges on outright insanity. Day-and-date releases for digital versions are now absolutely essential. Yet other titles go even further, and 2012 was a year in which many of the best-regarded games actually launched first as digital titles - with games like Journey and The Walking Dead being conceived and created as digital launches, with disc versions following on as an afterthought (other games, like the vastly successful Xbox Live edition of Minecraft, have no physical version at all). The commercial success and high regard in which these games are held demonstrates clearly that retail's worst nightmare is coming true - consumers are embracing digital, and the physical artefact is becoming less important to them.

"Retail's worst nightmare is coming true - consumers are embracing digital, and the physical artefact is becoming less important to them"

This is not to say that there's no future possible for physical games retail. We'll always need devices to play games on - despite the incessant wibbling of self-styled futurists and tedious ideologues, I don't for a single second buy the idea that multi-purpose slates are going to replace dedicated gaming hardware at the more committed end of the market. Moreover, there'll always be demand for special edition versions of games that come in unique, well-designed packaging that's designed as a physical statement about the games you love rather than just a box to hold them in. Merchandising, too, has immense potential that remains woefully untapped in the West - it's worth looking to Japan, one of the only places where games retail is still thriving, and noting that game retailers there are often merchandise stores first and software stores second. I may have bought my copy of Minecraft digitally, but I'd certainly walk into a store with a really cool Creeper plush toy in the window (I'm not very good at this whole "being an adult" lark).

For the sake of all the jobs involved - especially at such a tough time to be unemployed - I'm very glad that GAME, HMV and the rest of the retail market survived 2012 more intact than I expected. The prognosis, however, hasn't changed. Game retail needs to find and exploit a niche - to understand where it fits in the future, because right now, it doesn't fit well at all. 2013 is going to be an even tougher year than 2012 does. I'm making the same prediction again - we're going to lose a major high street games (or media) retail brand in 2013. While writing this piece, I realised that I couldn't actually remember when the last time I bought a game in a shop in the UK was; in a few years' time, I suspect, glumly, that we'll all be saying the same.

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Rob Fahey avatar
Rob Fahey: Rob Fahey is a former editor of who spent several years living in Japan and probably still has a mint condition Dreamcast Samba de Amigo set.
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