Has the retail onslaught that the likes of eBay and Amazon have brought forth over the last decade or so taught anything to the likes of big box retailers? What about the fact that I can more easily, not to mention more conveniently purchase and download a new PS3 or PS4 game without even having to leave my fancy, fake-leather couch? Market disruptions are nothing new, and new ideas and new technology has always forced agile businesses into pivots, whether they liked it or not. Some companies however, still don’t seem to accept the reality of the market that is moving around them, and by some companies I mean GameStop. Just recently – yesterday in fact – Paul Raines, GameStop’s Chief Executive Officer, announced “that the company plans that to open 300 to 400 retail locations which will have a focus outside of games”. (SeekingAlpha, 28 March) Yeah, I’m scratching my head too – more brick and mortar overhead, and lots of it, but not to sell games. Rather, these new store shelves will house smart phones and wearable technology products. Still confused? So am I.
GameStop and Strategery
Although I do love to poke fun, I would like to point out that this is not a doom and gloom situation for the used video game retail leader, however, their long term strategy – or lack thereof – is what has become quite concerning. We all are well aware of the expanding world of digital downloads, and what eCommerce has done to the brick and mortar world – I’ve already made that point, and it’s nothing new. What also is not new – and this is the concerning part in my opinion – is that Mr. Raines and his c-team haven’t pivoted with the rest of the market. If you haven’t heard the news yet, a little store called Wal-Mart has officially jumped into the used video game marketplace, which is sure to take a nice cut – if not the entire piece – out of GameStop’s market share. While GameStop should be focusing on the digital end of the business, and pivoting away from the brick and mortar side, they are doing the exact opposite. It just doesn’t make sense to me, and analysts are starting to take notice as well. Robert Wagner, a research analyst at SeekingAlpha.com, just published a telling piece on this very subject with a very relevant title: “Is GameStop the Next BlockBuster Video?” If getting associated with Blockbuster’s failed business model of stubbornly ignoring their changing market isn’t enough of a wake-up call, I’m not sure what else could do it.
As I mentioned above, this isn’t a doom and gloom situation per say, but concern is growing. While there is some applause due to GameStop for diversifying their organization with these new – and successful, as I might add – technology stores which brought in “$62.8 million of revenue in the fourth quarter”, the thought of new brick and mortar storefronts for anything within their video game and technology-driven product mix just seems scary for the long-haul. (SeekingAlpha, 27 March)
What are your thoughts on this latest decision to expand the retail technology presence? If you haven’t read the Q4 2013 earnings results from GameStop’s CEO, you can find it right here, courtesy of the fine folks over at SeekingAlpha. You will have to register at the site for free, but it is well worth it.
Leave your thoughts on GME below, and stay tuned for more – with GameStop, you can bet there will be more on this!