GameStop Chews On Its Future

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GameStop is a regular topic in this column. That should be no surprise as it’s the largest video game retailer chain in the world, and GameStop has been instrumental in pushing geek culture into the mainstream. But helping make video games a popular hobby came at a price: other stores, including electronic retailers like Best Buy, mass merchandise stores like Walmart, and, of course, Amazon, want a piece of the action. Many of them even tried to muscle in on GameStop’s bread-and-butter of the used game market, but GameStop continues to dominate in that category.

However, GameStop’s biggest challenge is perhaps not from other retailers but the consumers themselves. With the advent of digital games and marketplaces, gamers no longer need to venture out to pick up the latest releases. They can have it easily available on their consoles and don’t need to worry about disc scratching and such. And obviously, with people buying fewer physical copies, there are fewer physical copies being traded in to sell. This has caused GameStop to struggle as it tries to find other ways to lure in customers, especially amidst bad press, changes, and investments. The chain also has been in the news lately because of its social media-organized stock surges.

Executive Shuffling

But that hasn’t been the only reason for GameStop making a lot of recent headlines. In summer 2020, GameStop shook up its board, including the addition of the former president of Nintendo of America. One shareholder, Ryan Cohen of RC Ventures, has been vocal about GameStop needing massive changes in order, including releasing this letter.

Cohen, the founder of Chewy, has increased his stake in GameStop, and with his influence, GameStop has brought in more Chewy alumni and some from other retailers like Amazon and Zulily to step in as executives. Cohen reportedly pushed out several people since February, with some positions yet to be filled.

Additional executives are going to be leaving soon, including the current CEO, according to Reuters.

As for Cohen, he will be named chairman of GameStop’s board in June.

Besides the front office changes, GameStop announced its plans to become debt-free by paying off its notes. Because the chain announced its fourth-quarter results, which fell below expectations, GameStop can now sell stock at its current price. That’s part of the reason why GameStop stock is rising again.

All of these changes are to help shift GameStop to e-commerce.

The Chewy Connection

So two-thirds of GameStop’s board of directors will be connected to Chewy. Many investors believed Chewy would never succeed, but 10 years after its founding, it has been sold to PetSmart and is now worth about $10 billion. Its initial stock price was valued at $22 a share in 2019, and current price is about $85 a share.

So Chewy is quite a success story. While sometimes it is harder to fix something than to start off fresh, it is good that businesspeople with proven recent experience are coming onboard. Cohen believes gamers will be devoted to the chain the way pet owners are to Chewy. Customer service is going to be a key part of that, which will likely be copied from Amazon just as Cohen did for Chewy.

A revamped website is also a good possibility.

To the Future

Still, there’s a difference in a business for pets versus for people. Especially when that people business faces a huge threat from digital versions and downloads. The shift to focusing on online orders also means store closings. In about two years, GameStop closed about 1,000 stores. Those estimates were for until the end of March, and some stores are already liquidating to shut down by the end of May. Even Cohen knows that GameStop’s success isn’t in the bag simply because Chewy was a success.

However, something had to be done to change GameStop’s trajectory, which is why Cohen has been advocating for these shake-ups. While they may be planning on earning some extra cash thanks to stock sales with its bubble pricing, analysts still predict the stock price will fall.

Personally, with their website, I’d love to see more options, like being able to select what’s available for shipping or what’s available at my nearest store. It’s really annoying having to click on each product individually to find out what’s in stock. There needs to be a filter or some way to see availability at a glance. If I do find something, it’s usually not available locally, or I don’t have enough in my cart to get free shipping.

GameStop website

But with the focus on e-commerce, I hope the stores aren’t neglected. Sure, the pandemic has perhaps changed brick-and-mortar forever, but I don’t think anyone wants GameStop to be online only. I know I’ve cut back on my GameStop visits (which were, admittedly, always rather infrequent) to limit exposure, and I’m sure I’m not the only one since the one I usually go to is closing. There’s still another, larger one in town about a mile away on the same street, so my area won’t be GameStop-less.

Possible suggestion for the stores? Maybe with GameStop’s pursuit of customer service, the chain will keep new games factory sealed instead of opening them up. Or display games that are actually in store. And maybe treat the employees better, like not springing events on them at the last possible second.

But I remember when there used to be three GameStops in town, and it just is a reminder of how much retail has changed in a generation. And whether Cohen has the right ideas for GameStop or not, if the chain can’t better position itself against digital storefronts and larger rivals, the chain itself won’t make it to the next generation.

Have you shopped at GameStop recently? What do you think they need to do to be more profitable?
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