GameStop is Not a Failed Business, it’s a Failed Idea

To those in retail, GameStop’s decline might be seen as a slight shock — it’s a monopoly chain with more than 5,000 stores that has been dominating the gaming industry for more than three decades. For professionals in gaming, the company’s demise was inevitable and not surprising in the least bit. GameStop is comparable to what Circuit City once was. It could have been a promising new-age business that successfully won back its lost customers by transitioning to e-commerce, but instead the idea of GameStop’s brick-and-mortar dominance prevented it from adapting to the realities of the ever-changing worlds of video games and retail.

So why is GameStop sinking? There are multiple factors that led to its struggles, but three primary issues, bundled together, have been written on the wall for a long time. First is the customer experience. GameStop staff are required to upsell everything, promoting memberships, magazine subscriptions and more. Being treated as a cash cow instead of a loyal customer never bodes well for a retailer's long-term growth.

A second factor in GameStop’s current predicament is the business model hasn’t worked for a long time. GameStop’s real money maker, and what the company has relied on for well over a decade, is the secondhand games market. The company actually makes little to no money on the sale of new games, but makes money hand over fist in the secondhand market due to not having to pay royalties on sales. While this model worked great in the era of boxed products, the rise of digital distribution — which has lowered the cost of games and effectively killed the secondhand market — has rendered GameStop’s business model toothless. Additionally, GameStop is oversaturated in a single city radius. In New York City alone, there are four GameStops within six blocks of each other. This leads to stores taking business away from one another.

Lastly, GameStop failed to advance with the rest of the brick-and-mortar industry (and the gaming industry itself). The company’s online store has an abysmal interface, doesn't include free shipping on orders less than than $50, tries to push in-store pickup options too frequently, and has no clear advantage over competitors like Amazon.com. As a games-specific store, GameStop has done nothing to adapt to the rise of digital distribution. How does a retail store compete when games can be bought and downloaded all from home? In reality, GameStop was reactionary to the massive shifts in the industry and too slow to react to consumer needs. GameStop should have partnered with major digital distribution companies, and even potentially invested early on in its own digital storefront. Instead of taking those steps, GameStop tried to panic pivot into selling merchandise, a lackluster attempt to increase sales without addressing the core issues of the company.

GameStop was once seen as a haven for gamers, offering them a place to test the newest games and attend midnight parties for game launches. However, GameStop's business was plagued by the idea of brick-and-mortar dominance and failure to acknowledge the e-commerce train the rest of the industry was transitioning to. With a new generation of video game consoles slated for next year, GameStop will survive 2020. The question remains, how much longer does it have after that as more platforms, developers and game publishers opt for digital distribution only?

Michael Brown is CEO and co-founder of Vicarious PR, a multi-award-winning video game PR and marketing agency.