Serial entrepreneur Anand Khemani cut his teeth on fashion and music in his late teens before turning his attention to gaming In 2000. Two years later, he bagged his first game product license. today, Khemani is the official distributor for 9 global gaming titles in india and runs 10 stores of his own. The success of “Games The Shop” has changed the way people used to buy games in this country. here is Khemani’s story in his own words, as told to Nivedita Jayaram Pawar
Gaming is a huge phenomenon. It’s a $40 bn industry globally (including console gaming that is $25 bn strong). If you include mobile gaming, the figure reaches a mindboggling $70 bn! The gaming industry in India is roughly Rs600 crore. We are a billion-plus population but not too many companies deal in games here.
My journey in the gaming world began 12 years ago when I started spending more and more time saving the world online! I even travelled to a few countries to experience gaming. Those days, gaming was restricted mainly to PC games. There were just a few stores stocking some international titles. But by and large, it was very scarce. My liking for gaming soon grew into a passion. I realised that most of the good and reputed games were not available in India. This set me thinking – maybe it could be a good business.
I went to the Mecca of gaming – E3, the annual video-games conference and show at the Los Angeles Convention Center.
The first year I was there, I tried to meet some of the game publishers but none gave me an appointment. I returned to India only to try my luck again the next year. This time, though I did manage to get an appointment, no one turned up for the meeting! I was a nobody for them to entertain. They said we could talk over the phone or email. I pursued them and finally met them several years later.
I got my first break in 2002 when I got the distribution and licensing rights of Conflict Dessert Storm from Square Enix. That was the first title for my company Express Interactive, a publishing and distribution house for gaming products in India.industry. Some of the titles we handle include GTA, Prince of Persia, Sonic, WWE and many more. Those days, we were the distributors to retailers like Crossword, Planet M, Croma, mom-and-pop stores, book stores, resellers and wholesalers. However, there was a huge difference in the way games were retailed in the West versus in India.
Internationally, there are game specialists or dedicated game stores that not just retail all types of games and accessories but also advise consumers on specific games for different age groups and preferences. A game specialist also pre-orders games for an enthusiast. However, we never had anything remotely like this in India.
Also, I was not very happy with the way the games were displayed in the stores. They were stacked along with scores of movie DVDs and books. Unfortunately, the box of a game product looks very similar to a movie box. Unless you are a gaming enthusiast, you won’t be able to differentiate. We did educate our retail partners but the pace of the scale up was just not satisfactory. I realised that gaming was not a focus business for these retailers. It was not their bread and butter. Gaming was only used to attract customers into the stores. The percentage of revenue generated from gaming was almost negligible and hence it never became their priority.
Taking the plunge
I realised there was an opportunity for a stand-alone existence of gaming in India. Around this time, our licensing and distribution business was growing in volume. I then decided to take the next big leap – launching our retail store. I began with talking to some mall developers about leasing space for a game store. This posed a huge challenge initially. The first question I got asked by the mall owners was: “Are you a brand?” Some wanted to know if we were an international company! It was not just the rentals they were looking at, but also value addition and improving the profile of customers coming to the property.
The mall developers would meet me, see my proposal, hear me out and then turn me down. This went on for quiet some time. They were not convinced about the business model or the power of gaming. In 2009, I approached the R City Mall at Ghatkopar, Mumbai. It was an up-and-coming mall and I was impressed with the way it had shaped up. Luckily, they agreed and leased us a great spot on the entertainment floor, sandwiched between the cinema hall and the food court. It was a corner store. After all the waiting, we couldn’t have asked for a better launch for our first retail store – Games The Shop.
Baby Steps in Gaming
Our first store was spread across of Rs30,0000, including fit-outs and stocks. We were able to break even in the first six months. Interestingly, we had to prepone our store launch. We were ready with the store in August, though the launch date was around Diwali in October. However, we began receiving a lot of enquiries from curious malls visitors. We had started stocking up and generally getting things up in the store when people would come in and enquire when we would be opening.
I was informed by my store manager that people were curious and wanted to buy right away. I decided to check the scene myself. So I went to the store. After the fifth such enquiry in a span of 15 minutes, I walked up to the mall developer’s office and informed them of my decision to launch the store that very day! I realised that people were excited to see a store dedicated to games which were hitherto stocked under piles of books or behind the music counter. That was a great beginning for us. Just after a month of launching, we were getting customers from as far as Bandra and Napean Sea Road.
One of the major challenges in the gaming sector is the store size. Most of the malls have large store formats. Like the white goods segment, the gaming business too is a “thin margin high volume” category. The huge import duties depress the margins further. So it was imperative for us to have the correct store size. A large store will render the business unprofitable due to the high rentals and increased operating costs. Convincing the mall developers to lease us a small space was a huge task. Moreover, the smaller stores come at a premium.
Opening the second store even after a successful store at R City wasn’t easy. We were back to square one. Mall developers were hesitant to rent us the space as we were just “one store old” in the business. The rentals were exorbitant and there were very few malls in Mumbai. Luckily, the second breakthrough came in December when we got an offer to open in Express Avenue Mall in Chennai.
Consumer Insights
It’s a myth that Indian consumers don’t know much. Rest assured, they are very aware and on par with their international counterparts. I disagree with people who say Indian consumers are only looking for bargains. No, they are not. They are actually looking for the right value. They will not buy a product here for $120 which is being retailed at $60 in the US, but they are willing to pay a little premium on account of the duty structure and the transportation cost. So, we are not a subsidized market as many of us would like to believe.
Indians are also experimentative and ready to experience new products, otherwise we wouldn’t have been a success. There are many customers who don’t think twice before spending Rs25,000–30,000 for an Xbox. They are looking for the right advise, right product, right price and the right experience. They are also very demanding and want to know why they can’t have the games at the same time they are launched in the US.
Reta il Presence
Currently all our 10 stores are company-owned. We have been getting a lot of enquiries for franchisees but I wanted to first understand the business myself. Today I am more confident to venture into this route. All our stores are located inside a mall. We realised early on in the business that gaming as a category is impulsive in nature. If you want to be profitable, it’s important to be present in a mall. Only malls can give you the impulsive customer. Going ahead, we are also looking at standalone properties.
Our store size ranges from 200 to 600 sq.ft. depending on the locality and the catchment we are catering to. Anything between 300 and 400 sq.ft. is the ideal store size for us. The business becomes slightly unviable when we cross this size structure. Typically, each outlet is manned by four employees. All our stores have a watchman. This is not for reasons of pilferage but to enhance customer experience. It’s always nice to have someone open the door for you and take care of your luggage while you shop. The average investment in each store is Rs30,0000–40,0000.
At the store level, we make sure that we employ people who can speak English. The age also matters since we deal with youth and games. A 40-yearold store manager may not be the best person to handle a games store. We employ people in the 22–30 age bracket. The first seven days of the job are spent in training at the office. This is where they are introduced to all the titles we represent, operating instructions, franchise history, etc. We also have an in-house game specialist who is stationed at the new store for the first 20 days. The new staff gets trained under him.
Store Dynamics
At Games The Shop, all our products are stacked face up according to the category – PS3, X box, Strategy, Action, New releases, Top 10, etc. Customers can visualise the product very easily. There is a great emphasis on touch and feel. Customer experience is of utmost value for a format like ours. The area at the centre of the store is left free and uncluttered to facilitate easy movement. Our staff is trained in the nuances of the game and instructed not to force sell. People walk in with different budgets and it’s important to make the customer feel like a king within his own budget. This ensures that he keeps coming back to us.
From the very first store, I decided to invest in a very robust supply chain software. It was a lot of investment and a tough decision. We were only a store old and didn’t know whether we will break even at all. From a distributor stand point, I had seen what challenges the retailers went through when they grew to 50 stores. They were profitable but their system was unable to support the pace at which they were growing. Looking back, I realise it was one of the best decisions I ever made. Today, all our stores are connected to an IT system. I can track the products being sold at any of my outlets sitting in my office. The replenishment happens immediately, minimising the turnaround time. Human intervention is minimised. In the event of a product that’s unavailable at a given store, the staff can guide the customer to our nearest store that has the product.
Games The Shop stocks products that cost as low as Rs99 and going up to Rs35,000. The average ticket size is Rs1,500. Price is never a constraint for gaming enthusiasts. They know exactly what they want. In our business, the footfalls could range from 100–300, with a conversion rate of 60–65 percent.
Challenges
The biggest challenge we face is the high import duty on gaming products. This pushes the prices really high, sometimes making the product unaffordable for the India consumers. We represent nine publishers for gaming software. Luckily, we have been able to convince them on the price sensitivity of Indians. In the gaming segment, we at Games The Shop are almost on par with global pricing – sometimes even below it when it comes to these nine game softwares. However, we end up paying almost 25–30 percentthe hardware front. The import duties on gaming products is 25–30 percent in India. That’s why the consumer ends up paying more.
India is a long-tail market – you have a customer at Rs3,000 as well as Rs30,000. A product priced at Rs30,000 may not see a huge spurt in sales. However, when the same product is repositioned at Rs20,000, we see a fresh set of customers. The same product sees another set of customers when it gets repositioned at Rs12,000. So price does play an important role.
Retail real estate is another challenge. A lot of mall developers still fail to see the potential in the gaming segment. They feel they should get a bigger revenue from us since we are in a high turnover business, even though our store is only 300 sq.ft. We work on pure rentals. The revenue-share model doesn’t work for us since we operate on very thin margins.When we launched Games The Shop, we had no experience of retailing. There were no players in India from whom we could learn. So we turned to the West. I met companies that were into gaming retail. We understood the business model, the challenges, inventory control, accounting package, the peculiar nature of the business, etc. It was not easy travelling frequently abroad, but I wanted to make sure weproducts. This segment is highly prone to piracy. People can download it from the Net at no cost. Secondly, from the retail perspective, I can grow real fast if GST is implemented.
Marketing Matters
We steered clear of the typical marketing strategies. Instead, we employed innovative strategies like bringing the Indian professional wrestler Khali to launch one of the wresting games. That was something unique which gave the brand a good thrust. We even bagged the best retailer award from the Oberoi Mall. We also did some midnight launches in which we decked up the entire store with just one product. We got a look-alike of the game protagonist to interact with customers.
We run offers from time to time. Sourcing games that are unavailableamong the initiatives we take to keep our customers happy. Gamers are a crazy bunch. Everyone wants to be the first to get their hands on a new game. We pre-book new games for our regular customers. We also invest in game goodies like t-shirts, coffee mugs, figurines, etc. You need to talk to the youngsters in their own language. We are in a unique position as we are also the suppliers to all our competition! So we are exactly aware of what’s available, what’s out of stock, if they are cutting corners, and so on.
Customer awareness
The gaming fever is now spreading to tier II cities. Ahmedabad and Pune markets have been a revelation. We are looking to open in Raipur and Indore in the coming months. Initially when I got into this business, people couldn’t decipher what exactly I was into. I had to tell them I was in the business of CDRoms or cassettes! Now I don’t have to resort to such things. We have come a long way.
Women are slowly being attracted to the power of gaming. Internationally, they constitute almost 45 percent of the customers. Games act as a bonding mechanism apart from being recreational. During our Chennai store opening, I was pleasantly surprised to see a grandfather shopping for games for his grandson. Mumbai is the best market for us, but I am equally delighted with the response we got from Chennai and Bangalore. Over 70 percent of our customers belong to the age group of 10–22. Now that bracket is growing to 25–35 year old.
Going Ahead
I want to open 50 stores by 2015. Currently, we have five stores in Mumbai, two in Pune, and one each in Ahmedabad, Bangalore and Chennai. We will be launching in Hyderabad soon. We are also now ready to expand to North.
The Indian gaming industry is growing 30 percent yearly. It’s good, but is that enough? I think we have the potential to grow 200 percent. This business is no rocket science. All you need is a little passion for gaming. in India for game enthusiasts is were on the right footing. For this industry to grow, the government should seriously consider abolishing the duty on gaming more than the international price on 300 sq.ft. with an initial investment Today, Express Interactive is a leading company in the gaming
