DVD Empire, a large online retail store noted for its customer service and reasonable prices, has called it quits to selling video games and cites the reason for dropping this part of its product offering is due to "video gaming industry greed," according to a lengthy explanation posted on the official website.
The online retailer points its finger at game publishers as directly responsible for the decision to drop video games from its inventory. The extremely small profit margins made selling video games made it impossible to do business with publishers. DVD Empire’s complaints also give an insider’s look at how the game industry works in relationship to resellers.
"Video game manufacturers set the price using what is called MSRP (Manufacturers Standard Retail Price). Here is an example of the video gaming industry greed: they set the retail price at just $5 above the product cost (buy it for $54.99, sell it for $59.99). When we sell a game we make on average 8.3% gross margin. That does not take into account any of the cost to store the video game or labor to receive/ship an item. The only way we can make a profit on an item is to sell it over the MSRP, but unfortunately we are not allowed to do this. Take a $400 console; we only make $5 on the sale–that is a .01% gross margin (note the decimal point). The game companies make their profit selling to us. We make no profit selling to you."
One complaint of video gamers everywhere is the inability to return video games that are below expectations. DVD Empire also expressed concerns over this problem, but from a store’s point of view:
"This one blows our minds; we are not big enough to return products. The game industry releases many bad games, and word of mouth spreads fast to the consumer. All of those bunk games sit on our shelves. If we do end up selling them, we lose more money, due to the lack of price protection. They won’t let us return the bombs. So if we buy a bad title, we are stuck on an industry-induced money losing ride through the land of price drops. Of course, if the video game industry produced quality games, we wouldn’t have this issue."
DVD Empire also had some very harsh words for the quality of games coming from game publishers. "We all know how fast games devalue in prices; this is due to the fact that 80% of the games created are crap. So take the fact that we only make $5; now if the price of a game drops $20, we are now losing $15 every sale."
The bigger video game specialty stores, such as EB and GameStop, DVD Empire pointed out, get much larger discounts on video games–therefore allowing those retailers to remain competitive. However, as for DVD Empire, the games division is closing.
"We attempted for the past five years to make it work but decided to call it quits. It breaks our hearts. Everyone at DVD Empire is a huge fan of PC and video games, and we are truly sad to see this division go."
