What Should GameStop Do With Its Game Stores?
The writing is on the wall for store-based video game distribution, and no one is more aware of it than GameStop. Their own long-term strategy from their 2015 annual report is “to have 50% or more of our operating earnings for the 52 weeks ending February 1, 2020 (“fiscal 2019”) come from sources other than physical gaming”. Achieving this will entail a number of pivots outside of strictly selling physical video games—consumer electronics, digital goods, and memorabilia will all be in the mix. Expansion at this stage is smart. However GameStop should not lean too heavily on concepts outside their core brand strength. These concepts may help create cash flow for the future, but focusing on new ventures at the expense of developing their current video-game centric store base would be a mistake. Instead, the company should double down on its commitment to the gaming community and turn its stores into experiential lifestyle centres that encourage consistent foot traffic and build brand loyalty, giving them a better platform for new and old products alike.
Technology may be the future, but look at Radioshack’s future
Since 2013, GameStop has made a noticeable push into consumer electronics, rolling out separately branded outlets with strong supplier partners. These new chains are Spring Mobile, a front for AT&T and Cricket wireless products, and Simply Mac, an Apple products and services store. Success has been forthcoming in that brief period of time. Electronics and mobile devices already account for 7% of total revenues for GameStop after just two years. It’s clear that the success of these concepts is worth exploring, especially seeing as they are a source of immediate growth to be tapped. But the fact remains that there are already too many places to buy smartphones and Apple products, including online, and as Radioshack can attest to, it’s tough to stand out from the crowd no matter your previous supply chain strength.
A focus on phones and other electronics could be a great side business, but the real question surrounding GameStop is what is going to happen to its core business of selling videogames. Avoiding this is a merely a distraction, as companies rarely undertake complete business model overhauls successfully, especially considering the level of competition in the field. If anything, these stores should be used to fund initiatives to help save the shrinking sales of their video game outlets
What GameStop Wants to Avoid
GameStop has centred its company around culture, so it should double down on that
Up until now, GameStop has had a great record of being more than just a game store. Past purchases of a major periodical (Game Informer), a hub for online games (Kongregate), and a geek-centric pure play retailer (thinkgeek.com), position the company as a player within the broader gamer culture. Further entrenching its stores within this flourishing culture seems like a risk worth taking for a company with an existential crisis.
In its current iteration, GameStop is widely known as a place where customers can not only trade-in games and play a few demos, but talk to employees about the latest in gaming news. This is the spirit that GameStop needs to nurture. A great way to do this would be to start turning stores into lifestyle centres for young men (a common need in suburban areas). Game demos have been a long standing strategy to get people in the stores, but setting up full-fledged gaming stations, with a choice of complete games to play can encourage people not just to try and buy, but to play and stay. Staying longer gives them the ability to sample more games and increases the opportunity for sales associates to sell them on something in the store.
Allowing the customer to relax in-store also serves GameStop’s subbrands. Full access to the latest Game Informer magazine encourages subscriptions and online traffic at home. Mere exposure to the coolest collectibles that thinkgeek.com has not only gives the stores character, but could encourage shoppers to give their homes those very same characters. Dedicated space and support for this sort of store would also give people the ability to try out gaming accessories before purchases, a segment which is growing and currently makes up a greater share of revenues than mobile phones and consumer electronics. This set-up could be particularly potent if virtual reality headsets become the next big thing in gaming because their high cost would be easier to sell with better in-store assurance of their quality.
Being a leader means not following the crowd
Unlike Radioshack, GameStop is in the enviable position of being the unquestioned leader of all video game stores. The last thing this retailer needs to do is squander that position chasing after last year’s growth categories. Instead, GameStop needs to look to the future but rely on its roots. As has often been the case across store-based retailing, this means focusing on customer experience, and giving those customers a good reason to come into the store. GameStop already does this to some extent, but its future will rely on doing so even more if it hopes to overcome the challenges that digital distribution are about to bring.