British video game retailer Game has escaped administration but the fate of Australian stores is still unknown as the local managing director scrambles to find a buyer.
The development comes as Woolworths signalled its intention to abandon the video game market yesterday, with its Dick Smith chain selling off games and accessories with markdowns of up to 90% in some categories.
Both incidents highlight the precarious nature of bricks and mortar video game sellers, even as the industry itself remains one of the fastest growing in the world. Buyers are turning to alternative forms of shopping, such as digital distribution and imports, as local prices remain higher than overseas.
Game has been rescued from administration by private investment firm OpCapita, which specialises in turnaround operations in the retail sector. Under the terms of the agreement, Game’s UK operations will be sold to OpCapita’s Baker Acquisitions, and all stores will remain open.
However, the fate of Australian stores remains unknown. PWC confirmed it has not been appointed by the local division as a part of any sales process.
Game was contacted this morning, but was not available to comment prior to publication.
Game operates 95 Australian stores, all of which continue to trade. Local managing director Paul Yardley has told the Australian Financial Review the company is still searching for funds.
“Australian sales for the fiscal year ended down 4%,” he said. “But GFK numbers for the video games market showed it was down by mid-teens for the year. So while going backwards is something a business never aspires to do in revenue, in the context, gaining market share is a strong result.”
“We are in close contact with the administrators in the UK…but ultimately it’s for the local management team to select that partner and financier.”
The new deal with OpCapita only applies to the UK business, leaving the Australian business without a buyer so far.
According to Game’s latest financial report, the Australian division recorded turnover of $33 million.
Meanwhile, Woolworths is clearing out of the games business, yesterday beginning a sale on games and accessories with some new titles regularly fetching $90 discounted to just $1 or $5.
Anticipation of the sale grew last week when a price list leaked to trade press, with a spokesperson telling the AFR the company decided to accelerate its consolidation of games after a business review.
“There are games stores and online gaming specialists, so we’ll leave that market largely to them and just have a very core range of titles and much tighter purchasing strategies.”
Both incidents highlight a growing problem for local games retailers. More shoppers are buying titles from offshore sites, specifically designed to cater to Australian buyers with prices up to 50% lower than those in bricks and mortar stores.
Harvey Norman set up its own offshore-based games site late last year, while JB Hi-Fi, EB Games and GameTraders attempt to control the domestic web and bricks and mortar sectors.
More shoppers are also opting for digital distribution, which now makes up a sizeable chunk of the overall game retailing market.
The latest PWC Entertainment and Media Outlook report cited games as the highest growth area, predicting revenue of $2.5 billion in 2015, from the current $1.6 billion.