Chains dreaming of a fight at Christmas

The UK games market is set to enjoy its best Christmas in four years, but price wars could wipe the smiles off retailer's faces, city analysts claim.

Games software sales are forecast to hit u600 million in 1996, up 18% on 1995's u509 million, according to Durlacher Securities. But the market still has a mountain to climb before it matches 1993's u797 million.

Discounting could undermine this year's sparkling sales figures, Smith New Court's Tim Steer, argues: "I don't have a problem with (Durlacher's) numbers, but the most important issue is margin, and are we going to have another discount war. Red Alert is the big one. If that gets discounted that is seriously bad news for margins. Comet seems to have started already.

The next two weeks will tell if the other retailers get stuck into a major price war."

PC format sales are outselling Playstation format by two to one, according to Durlacher, but industry insiders say Playstation sales are delivering the boom.

David Neal, sales director at Centresoft, said: "We are experiencing growth on growth, with the PC CD-ROM business growing steadily and a huge surge in Playstation."

But Playstation's dominance is straining credit limits, One Stop Beyond's Will Copeland reveals: "In 1993, we could spread our credit limits among four or five formats. Now we have one." The Norwich indie is the UK's biggest independent Playstation retailer, with 4% of all sales in the sector, according to Copeland.