You may not be familiar with Ingram Entertainment, but the company plays a crucial role in the retail side of the video game and entertainment industries. Ingram is the nation’s largest distributor of DVD software and a leading distributor of game software, servicing over 10,000 retail accounts. In 2008 the company processed approximately 108 million units of DVD, Blu-ray, and video game software.
In advance of the second annual Game Supply conference, February 10, in San Jose, California, IndustryGamers caught up with Bob Geistman, Senior VP, Sales & Marketing of Ingram Entertainment, who will be providing some insights to attendees on Ingram's viewpoint on the state of the video game industry. Geistman is also chairman of Entertainment Merchants Association (EMA), co-producer of Game Supply.
IndustryGamers: As a vital link in the supply chain between the publishers of video games and retailers, how would you characterize your trading partners response to the economic crisis of last year?
Bob Geistman: In 2009, our trading partners responded to the economic crisis by bringing in less depth and breadth of product and focusing primarily on new releases and top-selling catalog titles. Subsequently, the lack of depth in titles led to increased turns for the retailers and increased reorders with us. We also saw our trading partners taking fewer purchasing risks due to the economic recession, choosing instead to stay with the tried and true franchises, such as Activision’s Call of Duty series.
IG: In an emerging lean supply chain, how have you served your trading partners with value added services of sales, marketing and distribution?
BG: Since product has been harder to place at retail, we have made an effort to provide more information to help retailers make better purchasing decisions. Along with managing inventory levels more closely, IEI partnered with publishers to offer more presale and incentive programs. In the past year, we did more bundling of products on behalf of the publishers and customers to increase margins and sales, and add value for the consumer. We also partnered with publishers to offer more financial incentives to encourage sales, and increased our third-party logistics services.
IG: Recognizing the last 100 feet at retail to be most critical, how do you ensure effective execution at the store for your publisher clients?
BG: In conjunction with the publishers, we implemented early ship agreements with our retailers that allow them to compete on a level playing field with publisher-direct retailers by having product on shelves when they open for business on street date or conduct “midnight” launch events. We expanded our ASN (Advanced Shipment Notices) capabilities for retail as well, allowing them to have greater visibility of incoming shipments. Over the past year, we made further enhancements to our packing documents to include street date information and early shipping policies. Lastly, we employ third-party merchandisers with select accounts to assist with in-store inventory management and merchandising.
IG: In the current turbulent times, what are a couple of opportunities for transformation of the industry supply chain to become lean?
BG: There are two ways the supply chain can become leaner and more efficient. First, publishers need to more widely embrace early shipping, which will enable distribution to consolidate multiple shipments to retailers to decrease logistical expenses. This will also reduce reconciliation, A/P, and other labor expense for retail. Second, we need common street dates. Common street dates lower the supply chain cost and level the playing field at retail, and allow the entire industry to more effectively market new releases. In the heavy selling season (fourth quarter), we need to have extra product of the anticipated top-selling new release and catalog titles as close to retail as possible for rapid replenishment, not only for distributor customers, but for publisher-direct retailers as well. Currently, no one in the supply chain wants to take on the inventory risks associated with bringing in extra product. This means that publishers should share the risk of placing additional inventories that they already have made by allowing distributors to return unsold product on mutually agreed to titles and quantities.
IG: In your opinion, what are the obstacles to progress for the video game industry that had a setback for the first time last year?
BG: The industry made real progress on common street dates in 2009. Unfortunately, some retailers did not honor the street dates, which was a setback for the industry. The EMA is currently evaluating a means for the publishers to track these violations so repeat offenders can be more easily identified and addressed. Though not necessarily new for 2009, we continue to experience product shortages and allocations, which is a continual source of frustration.
IG: How can information and information technology help address these frustrations?
BG: Information and information technology can expand vendor-managed inventory for games. As an example, Ingram Entertainment provides full category management services for over 5,000 retail DVD departments. Again, publishers need to share some of the risk and expenses distributors face in stocking product, and in managing and merchandising retail departments. The industry also needs to work toward better adoption of standard EDI transactions. And, the industry needs to quickly adopt benefit denial technology to help reduce retail shrink concerns, decrease labor costs, increase consumer access, and reduce packaging costs.
IG: This is an industry where a very large number of publishers, about 25 of the top 30, represent a small market share. What suggestions do you have for them to achieve cost efficiencies?
BG: I know this is easier said than done, but putting out fewer but better games would be a start (i.e., quality over quantity). They should also recognize what their core competencies are, and possibly outsource those functions that are not core to what they do or work together to reduce redundancies.
IG: How do you envision strategically positioning your enterprise for the emerging digital delivery of video games?
BG: We recognize that we are a physical goods distributor. As with video products, we will continue to monitor emerging delivery technologies, maintain a dialogue with all of our vendor partners, and study industry models and forecasts. In the short term, we will continue to provide our retail partners with products that allow consumers to obtain downloadable content through retail products such as Microsoft’s “Live” points cards.
IG: Any closing thoughts?
BG: The video game industry still lacks many standards that other industries rely on to get product to consumers in an efficient and timely manner. By adopting standards, the game industry can increase sales, lower expenses, and better satisfy our retail customers, and more importantly, the consumer.
