R.I.P. Gamestop: The Death of Brick and Mortar Retail and Physical Videogames

Ah, Gamestop, the place where scores of people used to camp out to wait in line for the newest Halo installment, and where I made my family spend small fortunes on PS2 and PC video games.

The advent of Amazon.com has almost single-handedly obliterated brick and mortar stores, even the 800-lb gorilla (RIP Harambe) of the whole sector, Wal-Mart, is wildly trying to now compete and maintain their market share through acquiring online businesses and assimilating it into their own system. Shopping mall profits are rapidly drying up, and most clothing companies that were the trend 10 years ago are now essentially worthless.

But, in regards to physical video game stores like Gamestop, there are simply so many more factors slowly strangling the retailer into oblivion. Online ecosystems like Amazon and Valve’s Steam provide digital avenues for gamers to purchase new titles, view sales, and interact with friends all from the comfort of their own room. In stark contrast to Gamestop, Steam offers all kinds of seasonal sales that encourage customers to purchase a ton of content, realizing that gamers will easily justify buying bundles of titles at discounted rates. This kind of pricing model is completely absent at Gamestop, where their inventory slowly decays in price relative to their release date, but lack any sort of other promotional opportunities. Gone are the times when gamers would meet up at stores, hang around with regulars, now these stores are in-and-out exchanges, if they get any serious traffic at all.

In the late 1990’s and early 2000’s, most PC games had to be installed over 3-6 discs to get all of the content onboard, these mammoth installations required disk drives, something that most modern laptops nowadays lack. While Gamestop has their famous trade-in opportunities, which for those who don’t know, was actually brilliant from a business strategy perspective. Essentially, Gamestop allows people to “turn-in” games they’ve finished or don’t want anymore for some amount of store credit usually at about 1-10% of the game’s retail value, they would then sell a used game they bought back at $15 at $40, making serious returns. But, this strategy only works for as long as gamers decide to buy physical discs, this upcoming generation of gamers have grown up buying apps off the app-store, and therefore are very comfortable “missing out” on buying physical copies of games.

In the beginning, video game stores became the new arcades for hardcore gamers, then Steam allowed them to stay home. Then, Call of Duty fans, and the proliferation of mainstream console gamers kept the lights on, but now, with massive digital ecosystems, and 24/7 convenience, who can truly justify driving out to a store and spending $60 on a fragile disc?

The market knows this adjusted their expectations accordingly, and last quarter Gamestop still missed expected sales revenue by over $90M.

Gamestop is dead, long live Gamestop!

 

-Tom

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