The Concerns Of Operating An Internet Video Game Rental Service.

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

Following a short stint into the world of gamers and running an internet business involving video game rentals, my partner and I quickly understood it was not an attractivebusiness opportunity after all!

Initially, we thought we could swipe some market share from the eight hundred lb gorilla, Gamefly , and have a profitablemembership company to run. This all turned quickly went sour when we burned through a ton of money and could not get our heads above water and stay afloat! The main concerns with this business model that make it hard to survive are as follows:

video games online rentals

1) Rapid Inventory an important part of this business, but other factors like game popularity and new versions increase 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 “punks” and petty thieves who rent from multiple services and claim the games get lost in the mail or use fraudulent credit cards, etc. The stealing approaches 5% in this industry and with the average cost of games being about $50-$60, the write-offs ad up rapidly.

3) Loss Games & Damage – The post office’s automated sorting machines have the nasty effect of bending mail at 90 degrees in the sorting process. While the video discs are reasonablysnapping en route to or from the customer. In Also, it is almost impossible to assess loss within the postal service and employee theft. The discs are packed in obvious reinforced envelopes with company logos printed overtly, so any thief would know what the item is and likely its value. Lost and damaged product accounted for another two to three percent cost.

online video game rental

4) Cost Of Mailing Increases Regularly – In the short time we operated the business over six we were facing a drastic change from the post office that would have shaved 10%off profits.

5) Speed Of Delivery – Being dependent on the US Post Office to deliver games timely would ultimately lead to annoyed customers and cancellations. Competing against other companies that had many distribution centers created a tough competitive wedge.

6) Duration Of Membership – typically six to twelve months – but we never made it that long because of the first 5 issues! Hardly long enough to capture any meaningful profit from this derelict group.

7) Competition – Customers who use these services are very impatient by habit and want to receive new games as soon as possible. This insures that companies that don’t have a geographic presence on both coasts and in other locations will have slower delivery turn-arounds for their clients. This usually needs more investment and management to run and compete with the larger funded companies or just stay focused on the regional geographic market and serve a limited customer base.

rent video games

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