The Evolution of the Video Game Market -- Online

The biggest change in how video games have been bought and sold came with the rise of the digital age. Thanks to sites like Amazon.com, consumers were no longer limited by their physical locations.

For today's post, we're going to start to look at how much the digital age has affected the Game Industry with the use of online stores.

The Online Market:

The ability to buy products online grew hand in hand with the rising acceptance and availability of the Internet. Amazon.com originally started in 1995 and overtime grew to become one of the most popular online stores. The secret to the success of online stores was in how they were set up.

Unlike retail stores like GameStop, Best Buy and so on, online stores didn't have physical locations for consumers to visit. Instead they operated numerous warehouses that acted as fulfillment centers that cost far less to maintain compared to operating a physical store with full time employees.

Multiple fulfillment centers were needed to help cut down the cost and time of shipping items by being able to quickly process, package and ship the item. Buying a product was as simple as finding in on the site and having it shipped to you without the worry of driving to a store and finding it sold out.

Many retailers have online versions of their stores for greater accessibility and products.

This kind of accessibility was a huge boon to consumers and the model was quickly adapted by other online stores like Newegg and retail stores like GameStop. While this was great for consumers, developers were still limited by the constraints of physical goods until Steam arrived and the digital market was created which we'll be focusing on in the next part. With online stores, the advantages they offer, mirror that of the digital market

Advantages:

Online stores much like the Internet itself removed the constraints on information based on the customer's location. Now you weren't just limited by the copies of a game that your local store had and could buy games straight from your computer without ever having to leave your home.

Having less operating costs compared to a physical store also gave online stores more leeway in having sales and discounts on goods and long before the Steam sales started, sites like Amazon had consistent sales.

The use of the Internet also affected other areas of the video game market as consumers could also sell games on sites like Amazon, EBay and more. On a previous topic we talked about the rental market and how it moved to an online infrastructure thanks to Gamefly which wouldn't have been possible without the Internet.

What's interesting is how trading was primarily an advantage to the storefronts and less for the consumer; with online stores it's actually the opposite.

Disadvantages:

Consumers have really gotten the best part of online stores while the storefronts are the ones with a few disadvantages. The competition for online stores has grown immensely over the last decade and it's not just retailers with online stores that are competing, but sites like Amazon, Gamersgate, Green Man Gaming and more that don't operate physical stores.

Green Man Gaming was one of many new online stores in recent years and used promotions and discounts to get it notoriety.

With so much competition, it's becoming harder for online stores to stand out. This is why Green Man Gaming used coupons and discounts to draw people to it for the lower prices when they first started. These days it's  easier to set up an online store compared to the work that goes into and maintaining a retail store with high operating costs.

The only minor inconvenience for consumers is the fact that you do have to pay for shipping of physical goods, but many online stores have discounts or promotions to get around that. Similar to the retail market, online stores aren't going anywhere and will most likely become an even more attractive option as time goes on.

Shopping Anywhere:

The use of shopping online has become a very popular option for consumers and storefronts alike. And with Black Friday and Cyber Monday in a few weeks, will be another major showing for online stores. With the lower operating costs of online stores and the continued economic problems, it will be interesting to see if retail stores will become downplayed in favor of online stores as we enter the latter half of the decade.

Up next we'll be talking about the biggest change to the Game Industry -- Digital and how it affected everything about the industry.

(Reprinted from the Xsolla.com Blog)