`Death by a thousand cuts`: How Game became the latest victim of high street spending squeeze

Game has become the latest victim of the storm ripping through the UK`s high streets but the seeds of its downfall were sown long before the current squeeze in consumer spending.

The company stepped up its presence on the high street in 2007 when it bought Gamestation, adding more than 200 stores at a time when other retailers were starting to curb their expansion plans.

The acquisition, which followed a number of other buyouts including Virgin Games, left the company with a bloated estate but also a duplicated format, as Game and Gamestation were similar retail models.

As a result, Game was heavily exposed as the consumer spending squeeze tightened its grip across the retail sector in the last year, leading to a general decline in sales.

The group has recently suffered amid a trough in the console cycle - it has been a few years since Sony released the PlayStation 3 and Microsoft unveiled the Xbox 360 - and hardcore gamers are waiting for the next big thing to hit the market.

The Nintendo Wii attracts a more casual, family gamer, who use the console less frequently and is less inclined to invest in the hottest new titles on a regular basis, analysts said.

Like many retailers, Game has also suffered at the hands of competition from the supermarkets, which can often undercut other retailers because of their tremendous buying power.

Its demise represents a sad end to a company which in its heyday was a dominant player in the games market.

Established in 1992, the majority of the company`s 1,300 stores can be traced back to its former guise as Electronics Boutique.

But in the last four to five years its earnings have dwindled from around £100 million to an expected full-year loss of around £20 million as the likes of Tesco and Amazon have flooded the market with cheaper deals.

The retailer`s failure came after influential suppliers held the company over a barrel and the decisions of the past mix with the weak economy of the present to form an impossible climate.

Game`s performance has been spiralling downwards, with it most recently disappointing customers by failing to stock sci-fi game Mass Effect 3 after a spat with games giant Electronic Arts. Other suppliers have refused to sell on their products, including Street Fighter X Tekken.

Matthew McEachran, retail sector analyst at Singer Capital, said with the benefit of hindsight, the company`s decision to buy Gamestation - which included more than 200 stores - contributed to its demise.

Mr McEachran also suggested Game`s own model was weaker than its rivals.

He said: "We`re also cynical about the business proposition.

"If you go into a bigger HMV store, there`s a bit of theatre in the games section.

"If you go into a Game store, they`re just so soulless."

He added: "Game has a bloated cost base, a weak proposition, a pinch point in the economy, increased competition - it`s death by a thousand cuts."

Rhino Group bought 77 Virgin Games stores in 1993 and then rebranded them as Electronics Boutique in 1995.

Electronics Boutique acquired Game in 1998 and added a further 86 stores but did not rebrand to Game until 2002.

It opened its first European store outside the UK in Stockholm in 1998.

The company then acquired 217 stores from Gamestation, but retained the Gamestation brand.

Game and Gamestation have more than 600 stores combined in the UK, while the company also has stores in Portugal, Spain, France, the Czech Republic, Denmark, Sweden, Norway and Australia.

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