Mobile Gaming is a $50b Industry. But only 5% of Players are Spending Money (Part 2)
Bringing Digital Worlds to Life with In-Game Merchandise
In Part 1 we talked about how just 5% of players make up almost half of the $50b mobile gaming industry via digital in-app purchase (IAP) spending. In Part 2 we’ll reveal how in-game merchandise can unlock the other 95% of players who might not see the value in spending on digital goods.
I can’t tell you how bad I wanted an ocarina while playing through Zelda: Ocarina of Time as a kid. But before picking up the game, I didn’t even know what an ocarina was.
It’s human nature to desire something tangible from of our favourite digital experiences. At one point or another, we’ve all wanted to reach into another world–our favourite movie, tv show, or video game–and pull a piece of it out into the real world.
Looking at video games specifically, North Americans spend $13 billion per year on licensed collectibles, making up a significant chunk of the $20 billion US toys and collectibles market. You’d think this would mean that toy retailers are doing pretty well… but it may come as a surprise that in September, the eponymous Toys R Us filed for bankruptcy.
The toy, merchandise, and retail business in general, is evolving from stagnant online/offline shopping destinations to engaging multi-channel experiences.
This past year, Gamestop, one of the largest video game retailers with over 7,000 stores globally, recognized the need to fundamentally change their business. A new strategy was announced to allocate 50% of retail space in select locations to merchandise, and the company has publicly announced plans to grow this segment from $500 million to $1 billion in 2018. Merch and collectibles is their fastest growing product line–not games.
In addition, over 350 store locations will become Pokemon Go gyms where players can battle each other or restock on in-game items. To tie the experience together, Gamestop is selling exclusive Pikachu plushies to in-store visitors.
As the gaming world adapts, this presents a massive opportunity for game developers themselves to better serve an insatiable demand for merchandise.
What if players didn’t have to go to Gamestop or scour the web to get these products? What if real world products could be part of the gaming experiences they love, in the games where they already spend their time?
Shopify Gaming provides the tools developers need to create merchandise and enable seamless buying experiences for players in games.
Imagine if you could’ve unlocked the real life Ocarina of Time at the end of Zelda… would you have bought it? Unfortunately, technology wasn’t ready for that back then. But for today’s developers, it is.
Here are just some of the things you can do today with the Shopify SDKs for Unity and C++ engines:
In-Game Merchandise using Shopify
As we mentioned in Part 1 of this series, it’s time game developers had the tools to drive more value for 95% of players. In-game merchandise isn’t just a great opportunity to add a new revenue stream directly into games, it’s a new way to capture more passion and connection to your work.
Many of the players who don’t want to buy digital goods or watch ads still probably wish they could be more connected to your game world. Selling beautiful merchandise direct-to-consumer at the peak of engagement or to drive a peak of engagement can offer tangible value that both current and new segments of players are willing to pay for.
Using the Shopify SDKs for Unity and C++, merchandise no longer has to be a complex secondary revenue stream–it’s simple, low-cost, and direct. Best of all, it can feel natural and native to the core gameplay experience (ie. beat a boss, unlock the figurine).
In-game merchandise isn’t just a great opportunity to add a new revenue stream directly into games, it’s a new way to capture more passion and connection to your work
By simplifying merchandise creation and optimizing distribution, we can grow this $13 billion market drastically by helping developers introduce their merch in the right places, to the right audiences, at the right times.
However, with many on the Shopify Gaming team being game devs ourselves, we know first hand that there are tradeoffs to developing a merchandise strategy.
The Opportunity Cost of In-Game Merchandise
The most important thing to understand before getting started is opportunity cost–am I losing out on bigger opportunities for my game if I decide to implement in-game merch?
After working with a number of developers so far, we’ve boiled down the most critical considerations into three things:
1. Time to find or design high quality products
2. People to execute merch design, in-game integration, order fulfillment, and maintenance
3. Money to invest up-front in merch
To mitigate these risks, we’ve simplified set up into two steps:
1. Create your own merchandise for free in 5 minutes
2. Start selling in your game fast and make it customizable
Step 1: Create your own merchandise for free in 5 minutes
TL;DR creating your own merch takes 5 minutes on Shopify
No merch, no worries–you can create branded t-shirts, hats, prints, and more for free in literally 5 minutes using Shopify.
After your 14 day free trial, you’ll pay a monthly subscription fee of $29, which also gives you your very own online store (more details here).
Quick ROI calculation: The average cart size for in-game merch to date is $40–so if your margins are 30% then your break even is 2.4 sales per month. You’re also one big step closer to creating or growing your brand.
Shopify makes this all possible through third party print-on-demand partners, such as Printful, Merchify, and Gooten, available through the Shopify App Store. These apps are free to use, don’t require you to hold inventory, and handle all of the shipping and fulfilment for you.
They also give you full flexibility on your pricing strategy. You set the end price for players, they deduct the cost of manufacturing, and you keep the rest in profit. For example, say you’re selling a t-shirt for $18 and it costs Printful $8.95 to manufacture. On each sale, you would keep the difference of $9.05 in profit, or about a 50% margin.
These are just a few of the products you’ll be able to customize in minutes:
You’ll have to complete a few more steps to set your price and accept payments–we’ve laid out the whole process in the 5 minute video below:
If you’re looking for more customized products, such as plushies or vinyls, Happy Worker is a Shopify Expert partner that can get you set up.
With Step 1 complete, you now have your own online destination to sell branded products. Step 2 will show you how to put those products in front of the relevant audience.
Step 2: Start selling in your game fast and make it customizable
TL;DR In-game gift shop integration is a two day project for one developer
Now that you have products, you’ll need a place for them to appear in your game. The Shopify SDK for Unity was designed to leave this part completely up to your imagination, and we’ve seen a ton of creativity with user generated prints, hidden products throughout levels, and achievement based rewards. With native checkout using Apple Pay (Android Pay coming soon), physical IAPs are now as easy to complete as digital IAPs.
Note: We’ve made the assumption that adding physical IAPs will not negatively affect a game’s player engagement or acquisition metrics. The SDK allows for 100% customization–devs can build experiences based on their understanding of the core game experience and audience, and integrate physical IAPs accordingly.
Here’s what happens in the backend when a purchase is made:
Creating an in-game gift shop like in Snowman’s Alto’s Adventure, mimics the digital IAP experience and is the easiest concept for players to understand. It also involves the least amount of design and development work.
Based on past usage, one developer can tackle this project in two days–and the payoff can be immediate. Alto’s Adventure, a two-year-old game, doubled their 2016 merchandise sales in the first two months, with 75% of these new sales coming through the game.
Snowman no longer has to try to find an audience or do paid marketing to advertise their products on the Snowman Store–they advertise their game and let the experience do the rest.
Note: Unlike digital IAPs, Apple and Google do not take any revenue share on physical product purchases (nor does Shopify), meaning you keep 100% of the profits.
Check out the technical docs and example app here.
The Future of Interactive Commerce
In-game commerce will impact many industries beyond gaming.
The engines that games are built in today are the same engines that virtual reality and augmented reality applications are built in — 65% of all VR apps are built in Unity, for example. This makes game developers some of the most important entrepreneurs of our future.
As more industries adopt a VR/AR component to help customers experience their products, our physical and digital worlds will collide. Right now, this may sound like something out of The Matrix, but building a business that optimizes the customer experience will start to involve two main components: a game engine and a commerce engine.
That’s another topic for another day — for now, it starts with games. Bring your game worlds to real-life with Shopify Gaming today.
Daniel Asper leads Gaming & VR/AR partnerships at Shopify, focused on helping developers bring their game worlds to the real world world through commerce.
