GameStop Might Go, But Game Is Here To Play

Troubled US gaming retailer GameStop revealed recently that it made 120 employees redundant as part of a restructuring initiative, representing over 14% of the company. The news comes after the company announced a $673 million 2018 loss back in April, the largest in its history and a certain surprise after a healthy $34.7 million profit the previous year. Does this signal the beginning of the end for physical gaming storefronts? What does it spell for retailers like GAME in the UK?

Physical retailers must change. A rising competition from not only online but digital storefronts has signalled the need for this change for some time. Virtual storefronts, while typically more expensive than their physical counterparts, offer convenience. Gamers do not have to leave their seat to buy and start playing the latest titles. 

GameStop revenue from selling new software fell from 40% to 30%

To combat this, the first solution was to try the “If you can’t beat ‘em, join ‘em” mentality. You have undoubtedly seen the rows upon rows of plastic digital download cards on the shelves. In the case of PC gaming, given the seemingly total dominance of Steam, these cards make up the entire range selection. However these cards, whilst catering to a credit or debit card-less audience, provide only the negatives of both systems. They are not convenient to buy, nor cheap given they almost never go on sale.

The failings of this tactic are likely highlighted by the fact that from 2012 to 2018, the percentage of GameStop revenue from selling new software fell from 40% to 30%. However, the company’s total revenue remained roughly constant. This is due to the reselling of pre-owned games and also a rising revenue share attributed to sales of merchandise and peripherals. 

This success explains the creeping increase in Funko figures and Fortnite T-shirts at your local GAME. These gaming goodies did not necessarily encourage more people to visit the stores but, much like sweets at a checkout, encouraged shoppers to spend a little extra on their visits. It may also be why these parts of the store are at the back, right by the checkouts and their queues. 

A final, and more recent tactic GameStop has employed is layoffs. However the issue with this latest batch is that they did not affect stores at all. All of those made redundant were either at the company’s headquarters in Grapevine, Texas, or other smaller corporate offices, including nearly half of the editorial staff at its subsidiary magazine GameInformer. This is simply a retail business doing middle-management costcutting and attempting to recoup some rather significant losses by reducing its expenditure on less core services, like a magazine. 

For UK retailers there are extra hurdles to jump over, such as the continued rise in business rates (effectively the council tax paid by businesses, charged based on a store’s area). All businesses pay it, just gaming is more vulnerable to online competition than, for example, groceries. 

To tackle all of these adversaries GAME has been marketing well, maintaining a constant flow of deals in the run-up to the next generation of consoles. Though there are signs of a different tactic, a move towards experience-based retail.

We have been operating under the headline of ‘building the most valuable community of gamers’

Back in 2012, then-new CEO Martyn Gibbs made clear that this was his intention- to make stores a place to play as well as buy. In 2016, the firm launched its Belong outlets, larger stores with dedicated ranges of high-spec PCs, consoles and VR equipment that can be used for reasonable prices. Growth has been steady, now at 22 arenas from an initial 7, but such a large change in focus is likely to take time. The larger arenas give the opportunity to host parties and group sessions, as well as allowing for the development of an intermediate esports scene, with competition open to all willing to register for a GAME loyalty card. 

This represents the most important aspect of the move for GAME, as Gibbs told gameindustry.biz  “For four years we have been operating under the headline of ‘building the most valuable community of gamers’”. These arenas and their accompanying tribes (the name given to the teams formed by each store) are able to build a far more loyal base of customers than a glorified kiosk selling figurines and online credit. Physical game storefronts may be dying, but physical gaming? Far from it.