Best Buy has seen a spike in profits of 85 percent over the previous year, and analysts agree that video games have a very large part in the retail chain's recent success. The boost in sales could lead to an expansion of video game shelf space at store locations of more than 50 percent over the next few years.
Tony Gikas, an analyst for financial company Piper Jaffray, predicts a good future for the video games market. Driven by the release of next generation consoles from Microsoft, Sony, and Nintendo, he estimates that retail store's square footage devoted to games will increase by 50-55 percent by the year 2007, with marketwide growth of 54 percent in the calendar year 2006.
Gikas and his Piper Jaffray colleague Mitchell Kaiser believe that Best Buy's expansion of its video game floor space might not only be due to the market's increased sales, but to partially replace compact discs, which have been in declide over recent years. While entertainment software, a category that includes video games, DVDs, and CDs, only represents 21 percent of Best Buy's sales, the category has an attachment to 50 percent of the stores transactions, making it a great traffic builder for the store.
These plans tie in nicely with Best Buy's "Consumer Centricity" plans revealed last year. The plan calls for conversion of certain locations into stores targeted at certain consumer groups. The company plans to convert up to 200 of its stores into "Centricity" locations by the end of 2006.
News source: Gamespot