GameTraders wins franchise gong

GameTraders, a group of franchised retailers specialising in second-hand computer games, has won the retail category of the 2003 Excellence in Franchising Awards.

The award caps off an amazing three years for the group, which started with a small store in Mitcham, South Australia, and has since grown to a network of 18 outlets.

Prior to opening his first GameTraders outlet, managing director, Mark Langford, ran a computer games retailer in the Adelaide Hills. This business, he claimed, could not sustain itself competing on new titles with mass merchants. “It is impossible to compete with the discounts at your K-Marts,” he said.

“You would order in dozens of the new release titles that the kids couldn’t wait to get, then they would come in and show you that K-Mart was advertising it at ten dollars less. The margins were already poor without discounting, but you would have to discount to keep them from going to your competitors.”

Langford said he would often order in dozens of copies of a new title that would prove not to be as good as reviews had made it out to be.

“You would get stuck with them and sell them under cost to clear them,” he said.

Langford then had an epiphany of sorts while watching some of his young customers spend a fortune on Pokemon playing cards.

“The kids would drive their parents crazy buying these booster packs to try and get the cards they didn’t have,” he said. “So I started buying the ones they didn’t want and selling the ones they needed to complete the set. That’s how I got the idea for buying and selling second-hand games.”

Langford opened the first GameTraders outlet in Mitchem, South Australia, in June 2000. The retailer would act as a trading post for second hand games — featuring titles for new systems such as the Sony Playstation, Microsoft X-Box and Nintendo, as well as popular game formats from over the past 30 years such as Atari and Sega.

“We are unique because you can’t find 80 per cent of our stock at any other shop,” he said. “Other games shops might trade in recent releases, but we have over 1000 titles for 15 formats.”

Within three months, word of mouth had made the Mitcham store a success. Langford called in a franchise consultancy firm to evaluate expanding the business. Three years after opening the original GameTraders outlet, there are now a total of 18 operating in Australia — 12 in SA, four in Victoria and one each in Queensland and WA.

The franchise group has expanded to the point where Langford feels it necessary to reconsider selling new titles alongside the second-hand games.

“In the last three months we have looked at finding ways to do it properly — so that customers have the option,” he said. “We will mainly pre-order new titles, and might stock some of the titles that we are assured of being able to sell. We want to keep away from just being a new games retailer.”

Langford said that even as a second-hand outlet, GameTraders suffers from the false competition caused by software piracy.

“The main problems are those organised piracy groups that run off thousands of titles and sell them through the markets,” he said. “It has to be a concern for the industry — if publishers can’t get a return on their investment, they will go broke and we won’t have the titles.”

Langford said it was very easy to detect pirated or parallel-imported gaming titles by the quality of the disc and the packaging.

“To my knowledge we have never accepted a pirated game in any of our stores,” he said.

Langford now expects to expand the business further into Victoria, Queensland and WA, and is in negotiations with five potential franchisees.

“We have more resources on board now to handle the growth,” he said. “We will soon have a look at NSW and maybe even NZ.”