Are you stocking “the hottest ticket going”? If not, it’s likely not your fault—yet. More than 70 million gamers are playing “free” online video games, and the prepaid cards they need to purchase upgrades or power-ups—from a faster tractor to a magical sword needed to slay a dragon—are coming to convenience stores very slowly. And they’ll likely be awarded only to retailers who are willing to take a chance.
“For a retailer that is really interested in getting involved in [selling gaming cards] … they need to be able to market to the gaming companies a commitment to the category so that the gaming companies’ investment in the card inventory is worth it to them,” says Frank Squilla, senior vice president of sales for prepaid-card supplier InComm, Atlanta.
“The problem is that it’s very difficult to do that with a burgeoning industry that is not generating the profit dollars that the wireless [cards] do,” he adds. “So someone’s got to make a commitment before its time, and then the [gaming] companies need to be willing to accept that commitment. So it’s a little bit of a Catch-22.”
PAVING THE WAY
To date, 7-Eleven has mostly cornered the market with gaming cards. The company made hay with the prepaid card boom of the early 2000s by launching its prepaid gift-card “mall” in 2001. Today, the 3-foot section has doubled in size, and one of its latest additions—prepaid gaming cards—is seeing double-digit growth.
“These are top-selling products that our customers expect us to offer in the assortment,” says Brian Haynes, 7-Eleven’s category manager for prepaid services.
Today, the Dallas-based retailer’s set of prepaid gaming cards, established just this March, includes cards for Facebook- friendly games such as FarmVille, Café World, Mafia Wars and YoVille, as well as more hardcore games Aeria, League of Legends, RuneScape and Wizard 101, among others.
How many of those cards does Dodge Stores carry? Zero.
“We would like to offer it, and to the best of my understanding, we’re not able to offer it, yet,” says Thomas Faust, CFO of Dodge Stores, a 57-store chain based in Tupelo, Miss. “We have an office staff of about 50 people … and some of them are younger folks, and they said that’s the hottest ticket going. They’re bombarded all the time from their friends and their kids about getting this prepaid so they can have all of this gaming.”
The problem comes down to the Catch-22 Squilla was talking about.
“Everybody wants to be in it. It’s whether or not the gaming companies want them to be in it,” says Faust, who, like 7-Eleven, uses InComm as his prepaid-card supplier. “So there is a big sale that has to happen with those gaming companies in order to get them to approve other [convenience- store] chains, and that’s what our job is. Our job is to make that happen.”
SIZE AND SCOPE
Who says size doesn’t matter? 7-Eleven had a lot on its side as it worked— through InComm—with the gaming companies, most notably Zynga, the source of FarmVille, Treasure Isle, Mafia Wars and other online games. As a chain of more than 7,000 North American stores, 7-Eleven could provide a national presence in the United States and Canada.
So in May, in one of the broadest product promotions in its history, 7- Eleven announced its partnership with Zynga to offer FarmVille-, Mafia Warsand YoVille-branded items on many of the convenience retailer’s products in nearly all its U.S. and Canada stores. The campaign, the first retail tie-in for Zynga, allowed consumers to redeem exclusive virtual items within Zynga games during a six-week campaign beginning June 1. On the surface, it looked as if 7- Eleven had merely co-branded its Slurpee and Big Gulp cups—and other 7-Eleven products, from 7-Select chips to chicken tenders and a 4-pack of cake doughnuts to bottled water—with Zynga’s games. But to gamers, these cups and products were as good as cash. Some examples: FarmVille-branded Slurpee cups were worth a free “fun slide” online.
An order of hash browns was worth a “pepper shaker” weapon in Mafia Wars.
A 7-Select orange soda was worth a soda machine in YoVille.
As a part the promotion, 7-Eleven also unveiled an advertising campaign across satellite and local radio as well as print, online and outdoor. Also, vignettes featuring characters from MTV programs aired as the campaign hit stores.
“7-Eleven’s partnership with Zynga has launched one of the most unique campaigns in our company’s history,” said Rita Bargerhuff, 7-Eleven’s vice president and chief marketing officer, at the time. “It gives millions of loyal fans, who regularly play Zynga games, access to incentives on more than 30 products in our stores.”
Zynga executives realized the uniqueness and value of the deal as well.
“Through our promotion with 7-Eleven, we are expanding our reach and making our games more accessible to consumers,” said Vish Makhijani, senior vice president of business operations for Zynga, San Francisco, in a news release. “The opportunity to collect exclusive items for FarmVille, Mafia Wars and YoVille that are found only at 7-Eleven stores creates a unique way for players to get the best social experience in our games.”
MORE TO COME?
So where does that leave retailers such as Dodge Stores?
“The gaming card, in terms of prepaid, is one of the fastest-growing [products],” says Squilla. “The reality of it is, I don’t know, operationally, if a lot of [c-store retailers] are going to get approved by [their own] in-store operations to be able to take as much space for these cards as they need. … No one has allocated enough space to really tackle that space effectively.”
A representative of another prepaidgaming card provider, Leawood, Kan.- based epay, agrees that providing enough space in the right place is necessary, but he also underscored the importance of getting the word out about the products in stores.
“Epay … has focused our efforts with product providers to ‘push’ or ‘direct’ customers to our locations,” says Benjamin Stites, senior sales manager of national accounts for epay. “Using Web locators or location finders, we are actively working with gaming cards, wireless carriers and prepaiddebit providers to drive customers to our locations.
“If you only focus on merchandising inside the store, then you are limited to those customers that are entering your store. However, if you reach out to the video-game user, wireless-phone user, or prepaid-debit user and communicate to them where they can conveniently add value, then you’re actually pushing these users to the store.”
Epay’s system to provide access to online games—“gaming aggregators”— aims to minimize the space needed to merchandise its card selection.
“These are online entertainment companies that provide thousands of games through a single point of merchandising,” Stites says. “Not every retailer can merchandise 25 to 30 gaming cards, so our strategy enables the retailer to have access to thousands of games through merchandising just a few cards.”
7-Eleven cleared out prime shelf space “in the first gondola run of the store, so it is the first thing customers can see when they enter most of our locations,” says Haynes. “We also have prime locations with a display on the sales counter in more than 50% of our stores.”
The placement speaks volumes about 7-Eleven’s commitment to the category. “We are a destination for prepaid- card products. This includes wireless, music, gaming, third-party gift, Visa gift cards, GPR products and billpayment products,” Haynes says. “We will add new and delete slow movers as the customer and competitive landscape continue to evolve.”
Getting Your Foot in the Door
More than 70 million gamers play online each month, and prepaid cards allow gamers to purchase “power-ups”—or upgrades—to improve their character’s ability and tools. To get them on your shelves:
- Work with your prepaid supplier.
- Determine how much floor space you’re willing to provide and where.
- Develop a marketing plan to alert gamers. Some gaming companies will help by sending messages to their online community.
- Consider “Web locator” options to help consumers find your store.
- Accept that the road to profit in the category may be a slow one
InComm Grows Portfolio with Coinstar Purchase
In late May, InComm purchased Coinstar Inc.’s E-Payment services business for $40 million, effectively acquiring a comprehensive prepaid-product portfolio, including approximately 400 individual prepaid-card products from more than 65 unique issuers spanning various prepaid segments, including wireless, long-distance telecom, branded retail gift, financial services and digital entertainment.
“This acquisition will expand our retail opportunities, including broadening distribution in convenience stores, and will give more consumers easy access to the flexibility of prepaid products,” said Brooks Smith, CEO of Atlanta-based InComm.
The deal does not include Bellevue, Wash.-based Coinstar’s self-service coin counting units and Redbox self-service DVD rental kiosks.
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