The Game Plan
Game’s Omni-channel Visibility for an Omni-present Threat
By John Wilson, Executive Editor
The digital image of three-dimensional Fortnite avatars—with the ability to change their “skins” and adapt weapons from a vast and other-worldly arsenal for combat in an online ecosystem—is a rich and apposite metaphor for the ongoing real-world battle between bricks-and-mortar and clicks-and-mortar retailers and ever-morphing organised retail criminals.
The battle is the result of the meteoric growth of video and online gaming sales, which are estimated to reach $138 billion worldwide this year in an industry that attracts more followers than movie goers and music fans combined, according to figures produced for the Gaming BAFTA awards hosted in April this year.
Analysts suggest that sales of the latest gaming blockbusters are just the beginning of the monetisation of the industry, with growth in mobile users and e-sports—multi-player video game tournaments played for spectators in major locations around the world for big prize purses—reaching an estimated 13.3 per cent with an additional value of $16.2 billion.
Gaming expert Samantha Greenberg, chief investment officer and partner at Capital Management, said the rate is only set to accelerate as more students and women engage in gaming, which for so long was the preserve of young, teenage males. That said, this market also continues to grow with more than half of all teenagers playing computer games for several hours each day, a medium that is cheaper to consume than cable television or going to the cinema, she suggested.
Although games are free to download and play, Epic Games, the developers of Fortnite Battle Royale, made an additional $1 billion from so-called “in-game” revenue, by selling players new skins—the avatars’ cosmetic armour—and weapons.
Samantha said Fortnite, in particular, hits on “the zeitgeist of what appeals to tweens and teens,” with its cartoonish look and elements of pop culture. “The game is training an entire user base on in-game monetisation and continual purchases, even after you’ve downloaded the initial game.”
As gaming emerges from its nerdy back-bedroom image and into the omni-sphere of respectability with sell-out stadium weekend events and players hooking up to battle it out 24/7, so do the risks associated with such stratospheric growth, not least underage sales, addiction, a thriving black market in stolen merchandise, and interference from cyber-criminals hacking into subscription software.
According to a study by payment provider ACI Worldwide and gaming research firm Newzoo, digital omni-space fraud is causing real-world problems thanks to, among other scams, criminal infiltration of subscription models so that cheaters, hackers, and trolls can prey on gamers’ simple desire to game. The research, published in 2018, suggests that one in three gamers now avoid paying for any in-play extras for fear of falling prey to hackers.
Game is the UK’s biggest high street and online gaming specialist brand renowned for its unparalleled reach in the latest and nearly new gaming products, whether it is the latest releases and consoles or pre-owned merchandise—“preloved” to the initiated. With 270 stores in the UK and 250 in the Spanish market, the business has arrested and reversed its losses through a transformational strategy of delivering operational efficiencies and putting the brakes on margin erosion due to a broadening of its market offerings.
The brand has increased its loyal footfall through events after it acquired the company behind Insomnia64, the largest UK live gaming event, which attracted almost 100,000 gamers to the National Exhibition Centre in Birmingham for a weekend of unadulterated console combat over the Easter and summer bank holidays.
Transformational efficiencies around revenue, margin, and shrinkage have been driven by Game’s head of risk, John Low, whose success inside the business owes everything to a gamer’s detailed hand-eye coordination, an end-to-end omni-potent and omni-channel focus, a forensic fascination for figures, and a mandate for management transparency. Externally, John operates a “dare to share” strategy through industry-wide collaboration, a concept many of his risk-averse peers struggle with.
“The greatest risk to any business is not taking any risks—the approach should be to manage and mitigate those risks in order to help the business move forward,” said John, who has worked for Game for the past eleven years.
“I believe in networking, collaborating, and syndicating. We are not sharing commercially sensitive intelligence, breaching corporate governance or [General Data Protection Regulation] rules, but we are sharing everything that we can with our peers in other businesses from a profit protection point of view. Criminals share everything openly, so why shouldn’t retailers? This is why I have actively reached out and engaged with the likes of ORIS Forums and the National Business Crime Solution (NBCS). I would encourage other people to do the same if intelligence is important to them in their roles,” added John, who chairs the ORIS Omni-channel Forum.
Hartlepool-born John, who stands more than six feet tall, has an easy, loquacious manner and an intense passion for the job that puts people both at ease and on guard at the same time, a unique social skill for someone in risk management because it has the tendency to both engage and encourage others to bring their best game to the party. Paradoxically both complex and straightforward, it is a skill that could be transferrable to football management to get the best out of his players for ninety minutes, but for the time being, his role at Game is still well and truly in play.
Also a member of the Institute of Risk Management, John’s military precision comes from his army background after eight years serving in both the UK and in Germany, ending up working in ammunition and ordnance before taking his first job in Civvy Street with M&B Brewery in the Midlands. He swapped pulling pints for the cut and thrust of retail when he started working for the Central and Eastern Co-op, where he joined the operations team covering everything from food to brand trails across all the businesses types—funerals, pharmacy, banks, and travel. He joined Game in an operations role, where he spent five years learning about the finer workings of the business before moving into the risk department.
“From day one I wanted an omni-channel approach to protect our profits. Many people confuse the terms, and the role they describe is that of multi-channel. This is because they don’t have transparency of all their sales channels or there is simply no inter-connectivity in their business where systems and departments talk to each other.”
“I have total transparency of the figures with the online risk department in the same team as those dealing with bricks and mortar from a profit enhancement point of view,” said John. “This is due to the fact that we have taken the business on a journey looking at the hierarchy of loss from a holistic risk-based point of view because all of the risks come together.”
Many retail businesses have a strict demarcation between physical and online risk, a silo approach where there exists little or no transparency in terms of overall loss. The Game plan, in contrast, is to have all the pieces on the board in full view. John’s holistic enterprise risk remit stretches across internal audit and information security, which encompasses data protection, profit protection, health and safety, and CNP (card-not-present) in the online space. All of these risks landed with his eleven-strong team because of his results-driven approach across the business.
“We are successful in both the physical space and online because we work and sit together—everyone is talking to each other, and they are all over the figures. Everyone is also trained in each other’s roles, so there can be no single point of failure—everyone and everything is inter-meshed.
“We have a clear line of sight of profit protection and enhancement, which is where and why the model has been transformational. We are all about maximising revenue, enhancing the margin, and controlling costs.
“We had issues in all these areas, but we have concentrated on the bigger numbers—going out and finding where our bigger losses are. As a result, we have saved 14 per cent from our revenue erosion and reduced margin reduction by 50 per cent, while stock loss has seen a reduction of 10 per cent. The ROI (return on investment) has consequently been phenomenal both online and in stores.
“We have managed to save millions for the business and enhanced revenues through introducing this omni-channel approach. We are doing well so far on the journey, but we still have a long way to go,” he said.
The journey could not have been undertaken without the buy-in from the board members of Game whom John has taken with him on every step of the journey.
“It is because we have delivered on everything that we asked for in the capex (capital expenditure), which is why I am religious about sharing detailed management-information (MI) reports,” John said. “It is through this process that we all recognise where the risks are. It is my raison d’etre to risk model what it looks like in both the operation phase and in terms of compliance.”
The irony that a computer-gaming specialist company is using the latest in artificial intelligence (AI) technology as part of its own protective arsenal, when it comes to industrial-scale serial refunding, is not wasted on John or his team. This is because the omni-channel requires forensic levels of detail and certainty to make sure that the lines between a good customer and seasoned and organised criminal behaviour are not blurred.
For example, Game’s unique position in the market is its dual sales channels on new and nearly new, which has its own inherent risks. However, throw into the mix the finer idiosyncrasies of the gaming industry—the rush for the latest new games and consoles—and that creates other internal markets peculiar to the sector. Game, for example, sees many market store entrepreneurs—both physical stall holders at Sunday markets and online—who purchase new games in bulk to sell on. Using the ability to return “pre-loved” games, they can return those that they have been unable to sell, but because, as days go by, the games are no longer the must-have item, returning them for a full price refund is no longer an option.
There are also the risks of stolen games being returned for refunds. In both of these cases, having the right information is critical in determining the business response so as not to deter the good return customers—those that buy a lot of product and occasionally return as opposed to the big returners who spend less.
“It’s all about knowing your data, so we go digging for the right information to make sure we are filtering the good guys from the bad guys. It’s a bit like deterring ‘wardrobing’ in fashion—those who buy an outfit for an evening out and then return it the next day for a full refund.
“People who use us like a library service for full-price refunds impact us because we lose the cost and the margin as we can no longer sell it for that value,” John said. As a result, the Game team has re-evaluated their returns policies and developed new processes so that they can enhance the experience for the good customer while deterring the bad.
John continued, “By ‘good customer,’ we are talking about those who spend a lot but return at a reasonable rate, far less than they purchase from us. So we have now taken this decision out of the hands of the individual stores because our team has the data that shows us who is doing what.”
The AI tool at play in this centralised function is Verify® from Appriss Retail, one of the world’s biggest providers of artificial intelligence or machine-learning technology, which has been helping retailers to map customer behaviours (both good and bad) since 1999. John, not surprisingly, was an early adopter of the technology not long after Appriss Retail emerged in the UK following the 2016 merger of Sysrepublic and The Retail Equation in the US. As a result of the data provided by the Appriss decision-making tool, John’s team has unearthed “customers” with between a 3,000 and 10,000 per cent refund “habit.”
“Verify has enabled us to conduct a top-to-toe audit of our losses. We spoke to them about a trial and gave them our data, and what they came back with was astonishing—it was industrial,” said John.
Tom Rittman, vice president of marketing for Appriss Retail, said, “We looked back at all of the Game data to understand the issue. While many statistical models guide the final decision, a simplistic explanation might be, has customer A, for example, purchased 100 games and made only two returns? Conversely, it could be customer B who has tried to process ten refunds, but his receipt data suggests that he has only ever made two purchases. This has enabled us to determine that when a return is made, we can automatically approve or decline based upon the additional data we have gathered. For example, geography is very important—this person is returning a product in Manchester, but the receipt says that the product was purchased at the person’s ‘typical’ store in London. We can make these decisions in milliseconds, as fast as a credit card transaction takes to go through.”
“We are looking at a variety of factors—what normal looks like compared to other behaviour. John is interested in all of the data that helps the Game business—who is buying online and refunding in bricks and mortar, for example. He has a real understanding and appetite for data and intelligence. He has a business grasp of the strategy rather than simply a security perspective,” Tom added.
John’s role is to engage with the team and the executives to help everyone to understand “the size of the prize” and bring the business in on budget. “When I do meet with the board, I have a plan to present to them based upon a carefully worked-out ROI,” he said. “When I first joined the business, I introduced scanners into every store so that I could get more regular transparency of stock as most of our loss was found during our annual count. I wanted to understand when and where our new releases were going missing, and this enabled me to engage better with our supply partners to ensure there where coordinated actions to mitigate and arrest the loss. Equally, I wanted to understand the entire logistics process, including net promotional discounts (NPDs) provided by the supplier. Here we have managed to make substantial savings because we make sure that we understand our data in terms of how and what they are claiming for.”
Knowing everything about the data means count, count, and count again. Stores now count more regularly, but they also subcategorise the counts in terms of which of the thirteen varieties of stock it is relating to.
John continued, “We insist that stock inventory is always correct so that we always get replenishment and stock availability accurate in order to optimise reverse logistics. That way, we are able to manage our losses in store and goods lost in transit (GLIT) so that we enhance margin and control our costs.”
So confident is John in the commercial benefits of his approach that he banks the savings the team brings to the business in the omni-channel budget. “What you focus upon, you get good at, and you can only improve on it. I provide the MI to the board every month because we want to show how our profit enhancement objectives can complement or even out-perform our other commercial objectives,” he said.
“I have never lost anyone in my team because they have been brought in for a purpose from other functions in the business, which brings different skills to the table,” added John, who is proud of his legacy so far, but the game is far from over.
The gaming market continues to morph and change in the same way that the game graphics are evolving. Game will be looking at different format stores and engagement models. With more channels to market—new releases and platforms for “pay-to-play” in the UK and overseas, including franchise events in territories including Egypt—Game will see itself continue its transformational journey with John and his team at the centre of the digital and physical action.
Rather like a gamer himself, John Low’s target is not just scoring points but also making them powerfully in a collaborative, transparent, three-dimensional, omni-channel quest to out-perform his competitors and, ever the player, even his own targets. John’s “game-on” avatar is ever-moving and reloading his arsenal for battles ahead, beyond the physical world and the omni-channel and into the multiverse that he no doubt is already planning to conquer as the commercial journey continues.