UK Retailers Worried Over Tax Hike Hurting Profits

UK Retailers Worried Over Tax Hike Hurting Profits

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Some smaller retailers are supposedly contemplating giving up new game sales entirely, as it simply won't be worth their time.

An upcoming increase in tax in the UK has retailers worried that they're going to be losing out on new games in 2011. Value Added Tax, or VAT, will increase from 17.5% to 20% on January 4th, and apparently, publishers are unwilling to move on the price they sell the games to retailers at, leaving the retailers in the position of either raise prices, or keeping them the same and cutting into their profit margins.

A senior buyer for one the large retail chains said that the lack of support from publishers and platform holders had left the chain without a strategy, with just thirty days to go until the increase. Independent retailers will be hit especially hard, with some even considering abandoning the sale of new games entirely. Game On managing director Matthew Brady said that unless publishers adjusted the cost price for games, there was no point in independent retailers stocking them, because the profit margins dropped to next to nothing.

If publishers are indeed unwilling to move on the cost price of games, it seems like a rather short-sighted move on their part, especially for those who are trying to encourage people to buy new games. It's already more profitable for retailers to sell used games over new ones, and this will the disparity between the two even wider, leaving retailers with very little incentive to push new stock. It seems like it would make more sense to reduce the profit margins on game sales slightly instead of potentially losing the sale altogether because the only way for the retailer to make any money was to sell a pre-owned copy.

Source: MCV

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Only small retailers? Tcha! I only see Game and Gamestation stores anyway. Independant retailers are a rare sight nowadays to begin with, I doubt the 20% VAT will make much of a difference.

Daystar Clarion:
Only small retailers? Tcha! I only see Game and Gamestation stores anyway. Independant retailers are a rare sight nowadays to begin with, I doubt the 20% VAT will make much of a difference.

Indeed, the only other places apart from those two are supermarkets anyway, and they sometimes sell games for incredibly low prices anyway in comparison.

Daystar Clarion:
Only small retailers? Tcha! I only see Game and Gamestation stores anyway. Independant retailers are a rare sight nowadays to begin with, I doubt the 20% VAT will make much of a difference.

We've got one 'small' retailer in my town. They are *technically* a chain store, but considering their stock and attitude, I find it hard not to treat them like a small retailer. Only 18 total stores across the country and most of them are around the Newcastle area.

Publishers won't do anything, then when it goes through and they stop stocking new games, publishers will complain about them pushing used games.

I'm calling it now.

I buy most stuff from CEX nowadays, though most of the things they stock seem to be stolen from the Game next door

Logan Westbrook:
Game On managing director Matthew Brady said that unless publishers adjusted the cost price for games, there was no point in independent retailers stocking them, because the profit margins dropped to next to nothing.

Game On has a managing director? Why would it need a managing director who is asked this sort of stuff when Game On is essentially a British ENN with less sketches and parodies and more funny shirts? Do you mean GAME? I'd understand if GAME said that.

OT: Publishers, we all have to make cuts. Britain is going to go straight through the fucking thornbush surrounded by radioactive, electrified barbed wire by doing what no-one likes. Raising Taxes and cutting spending everywhere. Makes me want to move somewhere else since Cameron doesn't understand the word "Sensibility" or "Restraint". Please tell me that the people who started this bloody economic crisis are in the showers of prisons trying to pick up the soap they carelessly dropped, because I am honestly sick to death of this.

I understand though that a 2.5% increase isn't that much, but it all adds up, and less profits means less of everything. Less special offers, less crazy but fun stuff, and probably less Job applications, and there is frankly no way of winning in this situation. Buy from Game retailers only? What about places like ASDA or Sainsbury's? We don't want them to stop stocking them.

Either way, Publishers, cut us a break, times are tough. And Activision? If you're going to keep putting up the prices for Call of Duty every year after this then you can slam your heads into a toolbox since you're clearly incapable of feeling.

Calumon: Umm... I'm kinda breaking flow here, aren't I?

Irridium:
Publishers won't do anything, then when it goes through and they stop stocking new games, publishers will complain about them pushing used games.

I'm calling it now.

One thing that could happen is that in such case publishers will be more likely to use (at least for PC games) tools like Steamworks , which will kill second hand market for those games.

Jack and Calumon:

Logan Westbrook:
Game On managing director Matthew Brady said that unless publishers adjusted the cost price for games, there was no point in independent retailers stocking them, because the profit margins dropped to next to nothing.

Game On has a managing director? Why would it need a managing director who is asked this sort of stuff when Game On is essentially a British ENN with less sketches and parodies and more funny shirts? Do you mean GAME? I'd understand if GAME said that.

Game On, in this case, appears to refer to an independent games retailer that's been open for about 13 years, and is based in Saffron Walden.

It's a 2.5% hike, which equates to about a pound on a £40 console game, less on almost everything else in store.

I imagine this will be a great time for them to push everything in store up by £5 however, as the sensible option would be to just not bother until the next price hike was needed, and advertise a 'VAT PRICE FREEZE' which always looks good in ads and store windows. This would save them countless man hours and stationery costs and price errors in terms of NOT relabelling every damn thing in the store.

One thing tho, when we dropped VAT to 15% to push forward the economy, everyone went 'pah! 2.5% that's nothing, I'm not going to be persuaded by 2p in a pound!'

Now it's gone the other way, it seems people are horrified at the massive price hike.

Rebel44:

Irridium:
Publishers won't do anything, then when it goes through and they stop stocking new games, publishers will complain about them pushing used games.

I'm calling it now.

One thing that could happen is that in such case publishers will be more likely to use (at least for PC games) tools like Steamworks , which will kill second hand market for those games.

Well from what I've seen there already is no second-hand market for PC games. There was, but its gone now.

SenseOfTumour:
It's a 2.5% hike, which equates to about a pound on a £40 console game, less on almost everything else in store.

I imagine this will be a great time for them to push everything in store up by £5 however, as the sensible option would be to just not bother until the next price hike was needed, and advertise a 'VAT PRICE FREEZE' which always looks good in ads and store windows. This would save them countless man hours and stationery costs and price errors in terms of NOT relabelling every damn thing in the store.

One thing tho, when we dropped VAT to 15% to push forward the economy, everyone went 'pah! 2.5% that's nothing, I'm not going to be persuaded by 2p in a pound!'

Now it's gone the other way, it seems people are horrified at the massive price hike.

Actually it's less than pound increase as the £40 price is VAT inclusive already putting the cost of the game at around £34.04 pre vat. If they kept the same £40 price the pre vat price after the hike would be £33.33.

Retail margins must really suck if they can't afford to eat 71p per unit.

Nevyrmoore:

Jack and Calumon:

Logan Westbrook:
Game On managing director Matthew Brady said that unless publishers adjusted the cost price for games, there was no point in independent retailers stocking them, because the profit margins dropped to next to nothing.

Game On has a managing director? Why would it need a managing director who is asked this sort of stuff when Game On is essentially a British ENN with less sketches and parodies and more funny shirts? Do you mean GAME? I'd understand if GAME said that.

Game On, in this case, appears to refer to an independent games retailer that's been open for about 13 years, and is based in Saffron Walden.

Naming dispute begins... now.

Calumon: 3 Jaffa cakes on the shop people! :D

Irridium:

Well from what I've seen there already is no second-hand market for PC games. There was, but its gone now.

Only place I can think of, besides CEX and similar chav-dens, for pre-owned PC games is Gamestation, and I wouldn't be surprised if they stopped taking games. Mind you, they're not bloody intelligent about it, either. I saw a preowned copy of Dungeons & Dragons: Online in a Gamestation once.

Amazon, eBay, Play.com etc still sell used PC games, but I really wish they'd disallow pre-owned copies of games like MMOs (Mind you, how would that system work?) and they're done by third parties rather than doing it themselves.

I don't think anything will really happen, truth be told. UK game stores need a royal boot up the arse and so do the publishers.

TheGuy(wantstobe):
Retail margins must really suck if they can't afford to eat 71p per unit.

Particularly considering that Asda, Tesco, HMV and GAME ate* the VAT decrease, rather than spend a load of money repricing their stock.

It would be fair play for them to eat the increase, really.

(then again, why are we pretending that videogames are where the VAT hike will hurt gamers when we also pay VAT on phone bills, consoles, PCs (and parts) etc. - all things that cost a fair bit more than £40, so 2.5% ends up being quite a few quid. Because a phone is somehow still a 'luxury item' in 2010...)

-
*Technically they dropped their prices and then rounded them back up again to the nearest pound (or 99p)

Nevyrmoore:

Jack and Calumon:

Logan Westbrook:
Game On managing director Matthew Brady said that unless publishers adjusted the cost price for games, there was no point in independent retailers stocking them, because the profit margins dropped to next to nothing.

Game On has a managing director? Why would it need a managing director who is asked this sort of stuff when Game On is essentially a British ENN with less sketches and parodies and more funny shirts? Do you mean GAME? I'd understand if GAME said that.

Game On, in this case, appears to refer to an independent games retailer that's been open for about 13 years, and is based in Saffron Walden.

There is indeed one here in Walden...

theres also one down the road in Bishops Stortford

I always support rich getting poor.

ionveau:
I always support rich getting poor.

What? What type of argument is this? There's no mention of 'rich getting poor', with the publishers refusing to compromise on cost. I'm sure this won't exactly kill the industry, but it won't result in some great power to the people movement. If anything, we or the shops will eat the cost. Take that, rich people! Fuck yeah!

Amnestic:

Daystar Clarion:
Only small retailers? Tcha! I only see Game and Gamestation stores anyway. Independant retailers are a rare sight nowadays to begin with, I doubt the 20% VAT will make much of a difference.

We've got one 'small' retailer in my town. They are *technically* a chain store, but considering their stock and attitude, I find it hard not to treat them like a small retailer. Only 18 total stores across the country and most of them are around the Newcastle area.

Grainger Games FTW

 

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