Thursday, September 25, 2014

Gamestop: The Circle of Life, Part 1

As per the voiced interest, here's another post about Gamestop.

It may surprise the 16-year-olds eagerly applying for the job, but Gamestop has a pretty decent turnover rate. That is, employees come and go pretty rapidly. What's scaring so many people away from this coveted "dream job"?

Many of you are not 16 and desperate for a job in video games, so some of the reasons for the company's turnover are pretty obvious: first, the company is not in a growing market, so there's got to be a lot of pressure on the employees. I mean, sure, the gaming industry is pretty strong right now, but how many people are actually buying their games at Gamestop? Mobile gaming doesn't need the brick and mortar stores at all, and neither does PC gaming at this point thanks to serviced like Steam. Even if you're a console gamer, you can probably find your games just as easily on Amazon. Or, if you really need to have it immediately, you can find games at Best Buy, Walmart, or, really, any place with an electronics section.

But Gamestop has managed to hold on to its niche despite saturating the market with its stores. In the end, nobody can really stand up to Gamestop's trade-in/used games model. Really, Gamestop only sells new games as a byproduct of this model.

A year or so after getting hired at Gamestop a district manager came by and asked me about something called the Circle of Life, as if it was something I was supposed to know. Apparently it was some sort of Gamestop mantra that, as far as I knew, was introduced the minutes prior. Anyway, it goes like this, though I may be mixing it up a bit:

Pre-orders > Trade-Ins V
^ Subscriptions < Used Games

To start, pre-orders are important, not because they result in sales, but because people often pay for their new games by trading in their old ones. Gamestop's profit from new games sales are pretty small, so it's kind of irrelevant. Still, the company puts a lot of pressure on its employees to pressure its customers to pre-order games. It was our job to convince customers that it was in their best interest to reserve games with us since it was the only way to guarantee yourself a copy.

That wasn't an outright lie, by the way. Not all the time, at least. Reservations did, in fact, affect how many copies of a game each store received. If they received more reservations, they were sent more copies. It was that easy. However, I had two main problems with this system:

First, if a game got a ton of reservations, then very likely that Gamestop was going to receive plenty of copies of the game--more than enough to cover reserved copies as well as any customer walking in off the street. So, if a game is clearly very popular and the seller knows it, then they also know that, really, this customer doesn't need to bother reserving the game--they can just come on in on release day and pick it up. It would honestly be kind of stupid for Gamestop not to sell to walk-in customers and lose out on sales just to make pre-order customers feel special.

The other problem, though, is that sometimes Gamestop doesn't actually bother to send enough games to cover pre-order customers. In fact, there were times when we didn't receive enough to cover pre-orders, and yet we were still expected to sell to walk-in customers.

You see, not everybody comes to pick up games they reserve. In fact, Gamestop likely has a massive "unearned revenue" line in its accounting ledgers from the untold number of people who reserved games and forgot about them. Sometimes the store managers were told by their district managers to actually rely on this tendency in order to deal with shortages without sacrificing potential sales.

If I had any faith in the reservations system at that point, that would have done it in.

Though the reservation system was pretty empty, it was still a cut-throat business to get those numbers. Our goal was to achieve a 20% reservation percentage, meaning one pre-order for every five transactions. Sometimes we would luck out when a regular customer would come in and pre-order several games at once. Most of the time, though, despite our best efforts, we would fall short of our goals.

It was a cut-throat business, but at the Gamestops I worked at we were always looking out for one another. There was almost always at least two people working, and if one person was having lots of luck and the other was just striking out left and right, it wasn't uncommon for the lucky person to direct a few pre-order customers toward the unlucky employee's register to help their numbers, especially if it was a pre-order customer that just walked up and asked for one without any effort on the employee's part. Likewise, if both people looked like they were going to end their day with zeroes, it wasn't uncommon for those employees to reserve games from each other to bump their numbers. Usually it was games that they were "going to reserve anyway" that they had intentionally held off reserving until just such an occasion, but there were several times when I ended up scouring through the upcoming games lists to find something, anything I might be interested in just so my partner wouldn't have to end the day on a sour note. Sometimes I'd reserve a game I knew I wouldn't get, hoping to simply transfer that reservation to something else later.

The worst feeling in the world, though, was having to cancel a reservation. Sometimes people would change their mind, or maybe they were moving, or they realized they wouldn't have the cash when it came out. It didn't matter the reason, though: a cancelled reservation counted against the numbers of whoever processed the cancellation. Theoretically a customer could reserve a game with one person and cancel it with another, leaving those employees with numbers of 1 and -1. If it was a particularly bad cancellation day (they happened), often someone would volunteer to be a martyr, accepting the cancellations on everyone else's behalf so that only one employee looked bad in the books.

The absolute worst, though, was when we'd get a call from another Gamestop letting us know that their customer had reserved a game at our store and wanted to transfer the reservation. Some stores had crappy salespeople and couldn't lock in a reservation to save their lives, yet their location was more convenient, so whoever was unlucky enough to answer the phone had to process the cancellation and take that hit while the jerks on the other side got to bump their numbers.

It's worth noting that reservations were a major point of contention between myself and the company. I'll get more into my battles of will later, but for now suffice to say that I had zero interest in the reservation system and was vocal about my disdain.

As it is, I've rambled about reservations longer than I thought I would, and I still have three parts to the Circle of Life left to explain. We'll get into trade-ins and used games, the backbone of Gamestop's success, next time.


  1. It sounds like you all used the same reservation overbooking mentality that hotels and airlines do — since on average fewer than 100% of people with a reservation will show up! it's logical to slightly oversell to maximize yield. Did you have to do anything special for the customers who preordered but couldn't get a copy because you sold out (for example, like when the airlines give vouchers for voluntarily giving up a seat on an oversold flight)?

    1. Nope, our response was simply apologizing and blaming it on "the factory" for not sending us enough.

    2. That explanation satisfied exactly nobody, by the way.