WHY DOES PRE-ORDERING MATTER?
You may or may not be aware that video game retailers make a very small profit on selling new games.
Example: When Halo 2 was released it retailed for $59.99 CND (Regular Edition) and $69.99 CND (Limited Edition). EB Games Canada purchased their units at about $53.99 CND per unit for the regular edition and around $65.99 CND per unit of the Limited (numbers are very rough as I’m going off memory, but it was about $6 profit on a regular and $4 on a limited).
Preordering games that are sure to sell gives the retailer data of guaranteed sales (the average pickup rate on games was around 75% - meaning 75% of those who preordered actually came back to purchase the title). Guaranteed sales in high numbers helped buyers adequately stock stores based on the demand.
If Store A gets 100 presales on GAME X and Store B only gets 25 presales on GAME X it helps the inventory control team allocate units to where it’s wanted. That’s the company line, and the quote you’ll get from all clerks and managers.
But the real reason they need this data is to project how many units of GAME X will be traded in and then resold at a profitable cost. If you as a customer preorder your games, the company places you in an invisible category of Return Customers. They assume if you’re willing to put your $5 down for, what can only be best described as a promise, you frequent that chain.
If you increase the amount of PRESALES for GAME X (100) divide it by the pick-up average (75% / 100 = 75 projected purchases for GAME X) and factor in the average trade % (which in my day was around 25% within the first two months) you can assume you will get around 18 units back within the same release window for that store.
In Canada the average cost of a used game that has just been released is $5 less than it is new. For the sake of argument lets say a new game that costs $69.99 would cost $59.99 used. MATH TIME!
Store A sells 75 units of GAME X at a profit of $6 per title = $450 profit (ignore shipping, ect.)
18 units return and trade in for an average of $30 = $(-540)
18 units resell for $59.99 each = $1079 Now that’s one store and one title. Imagine that number in over 3000 stores worldwide and using hundreds of titles per year.
This is part 1 of a two part article.
http://www.tacticalcenter.net/viewtopic.php?id=11enjoy.
In Part Two of EXPOSED! THE UGLY TRUTH IF PRE-ORDER PUSHING, I answer the big question… what does EB Games do with that preorder deposit you forgot you had sitting in their computer?
