Changing the Game By: Gabriel PotterMBA, AIFA® 2019.04.08

My wife and I were poking around a mini-mall this weekend, killing time before an adjacent store opened.  As a lifelong gamer, my curiosity was piqued and we decided to stroll into a GameStop store.  I used to frequent this store-chain, but it had been several years since I’d walked into a GameStop for two reasons.  First, I’ve primarily switched to playing games on my homemade, custom PC and GameStop focuses on providing discs for consoles like the Xbox or PlayStation.  GameStop’s reason for focusing on consoles makes sense:  they can make higher profit margins with reselling used-game trade-ins versus new game sales and, for a variety of reasons, it is vastly simpler to process single-disc, standardized format console games for trade-ins than PC software.  Second, the PC has had a long history with internet connectivity, so online-focused storefronts penetrated the PC gaming market years before consoles; again, GameStop makes greater profits by acting as a storefront for reselling used-games than just being another outlet for new titles.

That was the world of retail outlets as I understood it, but times have changed.  Video game software – like music, movies, and other information goods – translates perfectly to digital distribution.  Reselling software has been complicated by some console makers, online storefronts are common for all newer consoles and this partially negates the necessity for a physical storefront.

As a result, the GameStop of today is greatly different from the store of a decade ago.  Sure, you still buy video game releases on disc and there was a still a section for reselling used-titles.  Today, the chain has had to refocus on physical items to defend consumer interest in its business model:  collectible figurines, trading cards, board-games, themed Monopoly boxes, and substantial T-shirt racks.  It’s as if the store has been hybridized with Hot Topic or Spencer’s Gifts.  Please understand, that is not a criticism of the store.  Other informational goods retailers (Borders, F.Y.E., Walden Books, Block-Buster Video) weren’t eager to change the approach and they’re gone now.  GameStop’s refocus is a logical, natural response to how consumers and key manufacturers have changed the game.  

 

 

 

 

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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