Teens and youth have long represented the core video game consumer. But two new growth areas excite Paul Raines, COO of market-leading retailer GameStop.

One group - the "new gamers" - is comprised of those who haven't actively used video games before. Half are over the age of 35, and 40 percent are female.

The other, much larger group is the Latino consumer.

According to Raines, the bicultural, bilingual Hispanic is directly contributing to some of the retail chain's biggest sales growth. These consumers are also helping GameStop formulate a plan to welcome those who prefer to speak Spanish into its stores.

"We've gained considerable knowledge of the Hispanic consumer from our stores in California, Texas and Florida," says Raines, who last week visited the chain's Hialeah Gardens, Florida store as part of a public relations effort involving Hispanic media. As a local television station prepared to interview Raines, the Costa Rica-born executive conducted a live Spanish-language interview with WSUA-AM "Caracol 1260" in Miami on his cellular phone.

GameStop's highest-volume stores are located along the U.S.-Mexico border in Texas. The strong performance at those locations has already led Raines and his team to discuss GameStop's expansion into Mexico.

In Miami, two GameStop stores have surpassed $4 million in annual sales, thanks to massive tourist traffic. Raines wouldn't reveal which stores performed so strongly, out of concern that a "big-box" competitor such as Best Buy or Wal-Mart would react by bumping up Hispanic outreach at nearby stores. GameStop operates 50 stores within a 25-mile radius of downtown Miami.

While a greater number of Hispanics are shopping at GameStop, marketing to the Latino consumer has not yet been seen. According to Raines, the entire gaming industry is just becoming aware of the potential growth it could see by actively targeting Hispanics.

"On the Hispanic marketing front, gaming is really a nascent category," says Raines.

That being said, GameStop is unlikely to break the bank with any large-scale Spanish-language advertising efforts anytime soon. While Raines says it's company policy not to disclose GameStop's total U.S. marketing budget, he admits that it is "surprisingly small."

English-language newspaper inserts are seen twice a year - on the Friday after Thanksgiving and on December 26. A highly limited run of Spanish-language print advertisements are distributed via direct mail in high-density Hispanic ZIP codes on those days.

"A lot of that has to do with loyalty," Raines says. "Gamers trust our brand."

For those that aren't heavy users of video games, GameStop will use co-opted advertising dollars with game distributors such as Activision. There are also some online advertising and e-mail campaigns in the mix for the retailer. GameStop does not advertise on radio or television as of yet, in any language.

Much of GameStop's Hispanic focus is currently being placed on the hiring of bilingual associates. "We have between 600 and 800 stores that are in areas where the Hispanic population is greater than 40 percent," Raines notes. In-store signage at all of these stores is still an unmet goal; at the Hialeah Gardens store GameStop employees were heard conversing in Spanish with customers but all of the signage was exclusively in English.

Unlike most retailers, GameStop doesn't discriminate by income where it will open up its stores. In greater Los Angeles, the chain enjoys a location in the tony Century City Shopping Center. It also operates a store on Wilshire Blvd. just west of MacArthur Park - an area saturated with lower-income, first-generation Latinos.

"A lot of retailers look at income as a primary factor, but we look at it as a tertiary factor," Raines says. "We sell 'value,' and entertainment product that can appeal to those with modest incomes and those with higher incomes. That is one reason why we are skewed into a lot of urban centers."

Additionally, the Latino gamer has become so important that Raines has already had successful chats with companies such as Activision on the creation of games designed to appeal specifically to Hispanics.

On October 29 DJ Hero will be released for the Nintendo Wii, Microsoft Xbox 360 and Sony PlayStation 2 and PlayStation 3 consoles. The game features a controller with a rotatable turntable, cross fader and effects dial and is modeled after the Guitar Hero controller.

Raines hopes the success of DJ Hero will lead to the development of a Rock Band game featuring a Latin music superstar such as Shakira or Juanes.

Given the overall growth trends, such titles could come sooner rather than later for an industry that's ready to tap into a market it already attracts.

GameStop operates in 17 countries, including Spain. But COO Paul Raines says the market is so different from the U.S. that it hasn't been able to leverage its operations there into expanding its Hispanic marketing outreach. Instead, it's looked to its Puerto Rico stores for guidance. For more details, read Hispanic Market Weekly's Special Report on the Puerto Rico marketplace in the July 13 newsletter.

GAMESTOP AT A GLANCE

GameStop is the world's largest video game retailer. It operates more than 6,100 stores in the U.S. and 17 other countries, including Spain and Brazil, under the GameStop, EB Games and Electronics Boutique banners.

GameStop is headquartered in Grapevine, Texas - midway between Ft. Worth and Dallas.

GameStop enjoyed 2008 global sales of $8.8 billion. Publicly traded on NYSE as "GME," GameStop saw first quarter 2009 net earnings of $70.4 million - a 13.4 percent year-over-year increase.

WHY 'USED' SALES ARE GOOD FOR NEW PRODUCT GROWTH
GameStop sells used games in addition to new titles. This has been key to achieving growth in the Hispanic market, as Latinos have been shown to overindex on the acquisition of titles for the older Sony PlayStation 2 console. "Sony has a legacy as a brand in Latin America, and when these Hispanics come to the U.S. they see it and can acquire it for a very good price point," Raines notes.

More importantly, Raines sees it as a great entry point for the Latino consumer who will then grow to like gaming so much that they'll later buy the latest and greatest offering.

According to GameStop research, seventy percent of used game credits go into a new title. Fourteen percent of all sales are driven by those used game credits. "The used game business is driving new business growth," Raines says.