Gaming, at this time, is a recession proof industry. Yes, there are some gaming companies that are struggling or closing up but overall…gaming related companies are surviving the tough times other companies are facing. Gaming sales are up.

The US Commerce Department delivered the semi-shocking news that total retail sales for January rose 1 percent, defying a six-month decline in growth and marking the biggest overall retail gains in 14 months. Of course, that percentage climb paled in comparison to the US gaming industry. Reporting on US software, hardware, and accessory sales today, the NPD Group revealed that industry revenues stood at $1.33 billion for January, a 13 percent climb from a year prior.

Considering that people are purchasing games it is not surprising that GameStop, a game retailer, is doing very well.

For the 12 months ended January 31, 2009, GameStop racked up a company-best of $8.8 billion in sales, up more than 24 percent from the year before. Profits were also up, as the retailer reported more than $398 million in net earnings, an increase of more than 38 percent year-over-year.

That doesn’t make sense does it? People are losing their homes and jobs in record numbers yet people are spending money on games. How can that be? Diversification is GameStop’s savior.

Learn to Read the Small Print

If you read the article on GameStop’s profit there is one part that should have stood out, since it explains everything.

Regardless of new game sales, it’s the used game business that produces the most money for GameStop. While used games represented just 23 percent of the retailer’s sales in 2008, they accounted for nearly 43 percent of its gross profit.

GameStop’s used games sales represented 23% of the retailer’s sales but 43% of their gross profit. Time for a business lesson.

Gross Profit = Sales – Cost of Goods Sold

In plain English, gross profit equals sales minus costs directly related to sales. The used game sales buffed their gross profit because they have few costs associated with them versus new games and consoles that need to be advertised and marketed. As people are pinched pennies they exchanged their old games for new games or purchased old games instead of new games. People exchanging their games builds GameStop’s inventory and there is a demand by gamers for games, even used ones.

The beauty of this: as a gamer, if I want to get rid of an old game, GameStop is the place to go. GameStop has a lock down on used game sales that other retailers wished they had.

The Lesson for You

If you are in business, if you can, diversify your offerings but not at the cost of losing quality on current offerings. In other words, do not stretch yourself too thin. GameStop compliments their offerings, without extensively increasing expenses, by selling used games. How could this work online?

One of the common mistakes I see – people and companies are too reliant on third party sites. If all your traffic depends on third party sites you are in trouble. Instead, start your own site and have your site be a portal to the third party sites. Perez Hilton is a good example. His site is the portal then he sends traffic to other sites (Twitter, YouTube, etc.). When Twitter goes down his site still performs as normal. If Facebook changes their homepage his site is not dependent on that traffic. However, he can interact with Facebook users and send traffic to his Facebook profile or fan page. Perhaps make new friends which will come back to his web site, where the meat of his content lies.

However, if maintaining profiles on social sites is too time consuming, do not spend too much time over there. Instead, use the power you have worked hard for on your site to send traffic to members on those third party sites. That will make them happy, most likely draw more people to the profiles and to your site to see who you give props to next.

Depending on the goals you are trying to achieve, there are ways to strengthen your foundation. Think about what GameStop is doing. New consoles and games are not making them as profitable as they are; it is the used game sales that is making them profitable right now.