RazerStore London Opens – Profitable Store Targeted

Dec 14, 2019
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Today marks the grand official opening of Razer’s (HKG:1337) “RazerStore” in London’s West End tourist district, the first one in Europe and the biggest one yet with over 3,700 square feet to play with. This marks the sixth retail store dedicated to the brand with two in the US (Las Vegas and San Francisco), two in Hong Kong (Causeway Bay and Tsim Sha Tsui) as well as one in Taipei (Taiwan). I was lucky enough to get a quick tour around the new shop before the crowds were unleashed (Razer were expecting up to a couple of thousand people today!) and the store comes across nicely with a huge amount of Razer branding and equipment all over the place.

As with everything Razer these days, you get a sea of RGB along with the brand’s ubiquitous black and green colours everywhere. Equipment is all on hand for people to interact with and get a feel for with everything from all the peripherals the brand is known for like its mice and keyboards as well as headsets, gaming keypads/controllers and of course its “Blade” series of laptops. T-shirts and backpacks obviously round out the retail space, which doesn’t feel huge in all honesty but at the same time, Razer equipment is quite small so it’s not like they’d need a warehouse to showcase it all.

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The ground floor is all of the equipment for sale along with some steps where people can sit and plug in with power sockets as well as USB ports while the downstairs is likely where a lot of fans/gamers will also head. Here there are a couple of rows of desks for gamers to play Fortnite (with Razer gear obviously), a streaming booth and some consoles with Razer controllers. Multi-screen displays take up a fair amount of wall space, as do prints telling you to game longer and harder with Razer equipment etc.

All in all, it’s a decent retail experience. Quite dissimilar to the Apple (NASDAQ:AAPL) retail one but in a familiar kind of way. Where Apple is all light colours and airy atmospheres, Razer knows its audience and is primarily targeting it at hardcore gamers so thumping music, black paint and RGB everywhere is the order of the day.

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Having a chat with a member of staff, I was told that the RazerStore’s are great in that they offer Razer a physical presence in major cities to market their goods as well as get more people hands on with their gaming equipment. This makes them less reliant on reviewers etc, but that these are no glory loss-leaders and the stores themselves have quite quickly reached profitability after launch (one apparently within 6 months). Given London’s location as a major global city with a large and wealthy population, it seems likely that this shop should reach profitability relatively quickly too, the real question however is whether this is really the area the company needs to hit profitability.

To a certain extent, Razer does need to keep its hardware business growing, when it had its IPO a couple of years ago, almost 100% of its revenue came from hardware sales. As Sam covered in Razer’s earnings report recently, that has been diversifying and now it only gets 85% from hardware. Services growth has been huge in percentage terms (110% year on year) but it is only contributing about 10% of total revenue. With that being the case, making sure that the hardware is front and centre of mind for gamers continues to be important so in that sense, opening stores continues to be important for the company although the profitability of any individual store is unlikely to move the dial overall on its earnings.

Initiatives like the Razer Phone which got an initial release and 2nd version were expensive for the firm to produce and there is no sign of a Razer Phone 3 yet which either means the company threw in the towel here or is shifting its release cycle. This is still a possibility although if it goes another 6 months without a release I think it’s fair to say that it isn’t going to be carrying on with this line of business. Perhaps we will get a hint of its plans here in its full year earnings.

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Still, the firm has plenty of cash and equivalents, sitting pretty on almost $530 million as of 30th June 2019. Considering it raised over $600 million (once the institutional option exercise was taken into account) at its IPO and has closed the loss it’s currently making it seems to be in reasonably good shape, while continuing its diversification and pushing into more financial services related activities around payments in Asia. For now, the new RazerStore opening looks like it has been a success with a huge queue on launch day.

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