The Pitfalls Of Running An Online Video Game Rental Service.

After a brief stint into the world of gamers and running an website business involving video game rentals, my partner and I quickly realized it was not an attractivebusiness opportunity after all!

Initially, we envisioned we could steal some market share from the 800 lb gorilla, Gamefly , and have a solidmembership company to run. This all turned quickly went south when we burned through a copious amounts of money and could not get our heads above water and stay afloat! The main concerns with this business model that make it difficult to survive are as follows:

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1) Dramatic Inventory a key area of this business, but other factors like game popularity and new year releases augment the depreciation factor. Most games decrease in value 25% out of the gate and are worth 30 to 50 cents on the dollar within one year!

2) Theft – The demographics of this market attracts a lot of “undesirables” and petty thieves who get games from multiple services and claim the games get misplaced in the mail or use fraudulent credit cards, etc. The shrinkagefrom $50-$60, the write-offs ad up rapidly.

3) Missing Games & Destruction – The post office’s automated sorting machines have the nasty effect of bending mail at right angles in the sorting procedure. While the video discs are pretty, many of them end up breaking en route to or from the client. In Furthermore, it is almost impossible to determine actual loss within the postal service and employee theft. The discs are packaged in obvious reinforced envelopes with business logos printed clearly, so any thief would know what the item is and likely its value. Lost and damaged product accounted for another 2-3% expense.

online video game rental

4) Expense Of Mail Climbs Regularly – In the timeframe we operated the business over 6 months we were facing a drastic change from the post office that would have cut ten percentoff earnings.

5) Speed Of Delivery – Dependence on the postal service to deliver games timely would ultimately lead to annoyed clients and cancellations. Competing against other businesses that had multiple distribution centers created a tough competitive edge.

6) Duration Of Membership – usually six to twelve months – but we never made it that long because of the first five problems! Hardly long enough to capture any meaningful profit from this derelict crowd.

7) Competition – Gamers who utilize these services are very impatient by habit and desire to receive new games as soon as possible. This means that companies that don’t have a geographic presence on both sides of the country and in other locations will have slower delivery turn-arounds for their renters. This usually needs more capital and employees to run and compete with the larger funded services or just stay focused on the regional geographic area and serve a limited customer base.

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In closing, if you are considering starting a new video-game service you should think about the ramifications of the business model. Unless you have a genius video game programmer that can accurately estimate new game demand, and an optimal distribution set up with multiple locations for speedy delivery, and a load of cash, then this business is probably not the best option for your investment.