Gamers downtrade

By Nicola Mawson, Contributing journalist

Johannesburg, 07 Jul 2009

While gaming software sales are holding up, consumers are buying cheaper games, and cut-price older consoles are selling better than new-generation ones, say retailers.

Patrick Raymond, CNA merchandise executive, says the segment performed surprisingly well last year, despite consoles and games being high-cost items.

However, the industry has since started a downturn, with prices moving up on the back of a weaker rand, he says. Prices have gone up "dramatically" in the past few months, Raymond notes. Nintendo`s Wii console, for example, went up R1 000 in the past two months as the exchange rate fluctuated. This resulted in a drop in sales.

Raymond says consumers are resisting buying premium games, opting instead for budget versions. In addition, games that were released a while ago, but are now at more affordable price levels, are seeing good uptake.

CNA has seen resurgence in sales of PlayStation 2 (PS2) consoles due to the lower price and the broad base of games available, says Raymond.

Until April, electronic games had been outselling other items, such as books, CDs and DVDs. However, while software sales are holding up, console sales have gone down.

From 29% growth in hardware between March and April, consoles are now growing at about 12%, while games are holding growth at 18%, Raymond points out. Conversely, music sales are holding up, bucking local and international trends.

The company, a subsidiary of retail group Edcon, has about 10% of the gaming market share. Raymond says the unit has been doing reasonably well due to Edcon`s credit offerings.

Nothing new

Look & Listen merchandise manager Grant Webster says the gaming industry in general has seen a lack of recent releases, but he expects good content to buoy the industry as festive season titles start hitting the shelves.

July, however, is a gaming month and Webster expects sales to improve as people stay home, away from the cold.

Within the industry, there has been a move to promote budget items, such as the Sony PS2. This is due to retailers pushing these items to clear out inventories, Webster adds.

He says this has opened gaming up to a new market, as well as encouraged people to downtrade from the more expensive consoles to cheaper ones.

However, when the economy begins to recover, Webster expects people to buy a new console, which will then result in game sales for both the new and older consoles.

Internationally, gaming is a bigger segment than DVDs, says Webster. In SA, adding hardware to software, gaming also outsells DVDs, although DVDs have been less hard hit by the economic crisis.

Bucking the trend

Musica MD Ralph Lorenz says, in the half-year to February, gaming sales at Musica were 15% higher year-on-year.

However, turnover growth in CDs was down a percent and DVD sales growth was up a percent in the same period.

Lorenz says Musica has continued to gain market share in music and DVDs. In gaming, market share has remained constant at 8%, as management focuses on maintaining margins rather than "chasing volume at a loss".

Musica has also seen consumers focus on lower priced games and software sales, which are being driven by PC and PS2 games, while sales of hardware consoles are slower, says Lorenz.

In May, independent research company GfK, which measures sales at the till point, said retail sales in the gaming segment have experienced almost 30% year-on-year growth in the past 12 months.