Last December, one of my kids (yes, I have kids, scary but true) decided to spend his Christmas money by preordering a Pokemon game at GameStop. He wanted to do this so he wouldn’t spend the money before the game’s release date. He paid the $35 and got a receipt so that he could pick the game up when it came out in March. Yesterday the game was released. My wife went in to pick up the game for him and they asked for another $5.48. It turns out that since December, the price of the game had gone up by five bucks and despite the fact that my kid paid his money and got a piece of paper saying he bought the game and only had to wait until it was released to get it, they would not give her the game until she paid the additional money.
When I’m not writing about my car or books about how to do the wrong things the right way, I work at a company in Kent dealing with inventory and purchasing. In one way or another I’ve been dealing with inventory work for the last five years. So I know a little about it. I understand vendor relations, pricing, iventory management and everything related to those processes. And regardless of what you’re selling, these processes are very similar.
While a case could be made that the retailer is being charged more for the game and thus must pass that cost on to the customer, let’s talk a little about pre-orders. The only real advantage to a customer for pre-ordering something is that they are guaranteed to get it even in the event of a sellout. However, from a retailer’s standpoint, a pre-order has all sorts of advantages. As a retailer, a pre-order means you have a guaranteed sale. This item isn’t going to use up valuable shelf space. It also means getting the money before the item is sold which can often make or break a small business. It’s a lot easier to buy inventory if you already have the customer’s money. So if you’ve already paid for an item months before you actually get the item, you’re doing the company a big favor. They don’t have to stock the item in hopes that it will sell. They don’t have to put a price tag on it. They don’t have to spend time putting it out on the shelf. They don’t even have to pay for it with their own money. They have yours.
Now, given all of that, let’s take another look at this situation. A 15-year-old kid takes thirty-five dollars cash and gives it to GameStop in December. Sometime between December and March GameStop buys a the game from the software developer. It’s more than they expected to pay for it, but odds are it’s still under the thrity-five dollars they pocketed back in December. I know this because you can buy the same game from Amazon.com for $32.54. So GameStop’s increase in purchase cost did not exceed the purchase price. It only cut into their profits. And yes, those profits are needed both for business and for overhead, but as I mentioned before with a pre-oder there’s almost no overhead. The employee simply needs to open the box they came in, pull out a game, and hand it to the customer. Still, instead of just eating the five dollar profit loss, GameStop’s current policy is to stick the additional cost to the customer, even when that customer is a fifteen-year-old-boy. They do say that whenever this occurs, an automated service calls all the pre-order customers to notifty them of the price change, but my kid never received such a call.
This is a short sighted way of dealing with customers. Yes, it avoids a small profit loss on a new and popular game, but what GameStop isn’t paying attention to is the one thing that is most important in business: Customer Relations. Someone who pre-orders a game isn’t likely to be just a casual video game player. The sort of customer that pre-orders is an avid gamer and the sort who probably spends more money than average on games and gaming devices. A customer like this is likely to spend more than five dollars every time they walk in the door. Not to mention the fact that a customer like that probably uses the Internet more than average and is likely to tell others about their experience. When you look at it like that, maybe taking that five dollar hit wouldn’t be such a bad idea. Instead what has happened is that GameStop has five more dollars than they would have and has lost the business of my family. In the twenty-four hours since then, my wife has told everyone in her family, on her Facebook page and on her Twitter. And now I’ve posted this.
-Jack
