A Twentieth Century business model can’t keep up with leaner competitors

THERE isn’t anything particularly wrong with the way management is running Game Group. Like-for-like sales are still falling, an inevitability when one considers the unbelievable hype that surrounded the Nintendo Wii last year, but the declines are starting to narrow. The firm’s decision to focus on market share also appears to make sense, as does its focus on high-quality, knowledgeable staff.

But the truth is that Game Group has a distinctly Twentieth Century business model, despite its focus on all things cutting-edge.

Winning market share is all well and good, unless your competitors include the likes of Tesco. There is no way that Game Group can win market share without squeezing its margins even further. Nor is its purchasing power a match when pitted against the world’s third largest retailer.

Similarly, while its focus on expert staff – who cost more to train and pay – might be laudable, it won’t necessarily drive sales. Today’s consumers get their advice from blogs and online reviews, not from sales assistants. The only way that Kesa’s Comet and DSG’s Currys have managed to survive is by cutting staff costs and reducing prices to compete with online rivals. If there is any long-term future for Game, it must do the same.