GameStop: Why retail will play a key role in the digital revolution

Whenever a big entertainment retailer goes bust, it prompts the same analysis: They didn’t adapt to the rise of digital”.

Such troubled chains are trying, of course. Since coming back from the brink last year, GAME has begun to transform its business, as did HMV and Blockbuster before bankruptcy. Websites have been revamped. Download sections and streaming services were added. Points and DLC cards are now available in stores.

For proof that such measures can work, you need only look at US retail giant GameStop.

The world’s leading specialist games retailer has actively changed the way it sells games over the years to contend with both online outlets like Amazon and digital stores like Steam.

A combination of its PC Downloads store – now available across various European territories – and its ability to sell downloadable content at the checkout has been instrumental in GameStop’s growth.

While the firm’s total sales fell by four per cent year-on-year for the nine weeks ending December 29th, digital sales – including DLC for major Q4 titles such as Black Ops II, Halo 4 and Assassin’s Creed III – rose by 40 per cent.

This was not a freak occurrence. Digital sales have consistently shown growth throughout the past year, a highlight in any GameStop financial report.


Just before Christmas, GameStop opened a series of temporary GameStop Kids
stores across the US. While Lawlor doesn’t expect a brand new chain to emerge,
he says the retailer was pleased with the results of this experiment.
This format was launched for the holiday selling season only,” Lawlor explains.
It gave us an opportunity to carry a broader assortment of game-related accessories
that we would not normally carry and to use our strong brand recognition
in a growing segment of the toy market.”

Advocates of a digital future will tell you that DLC and downloadable game sales are carrying GameStop’s bricks-and-mortar empire, but in fact it is that hefty retail footprint that has enabled such success.

The ability to buy digital content in stores has opened the market for such items to a larger audience: less tech-savvy gamers, gifters or those who don’t have a credit card or don’t want to store their card details on their PC or console.

We are the only retailer selling digital content in-store utilising our proprietary systems,” GameStop Europe VP Niall Lawlor tells MCV.

60 per cent of customers who buy digital in-store don’t use credit cards. They’re either using cash, gift cards or trade credit. Being able to sell DLC in-store allows us to serve customers who do not want to buy online.

We are able to introduce and promote digital content to consumers in a way that a static portal cannot, and that is one of the main reasons we have leading market share of DLC sales.”

And there’s still room to grow. A recent survey run through Power Up Rewards, GameStop’s loyalty scheme, found that only half of the firm’s customers have purchased DLC and a quarter weren’t even aware of the concept.

Again, this is where a traditional store can help. GameStop’s director of retail digital distribution Brad Schliesser claimed that the majority” of DLC sales resulted from GameStop employees selling the items directly to customers in-store.

GameStop has rolled out these products – plus its loyalty scheme, tablet range and pre-owned mobile business – to stores across key European territories such as Germany and Italy.


Latest Nintendo figures have revealed that Wii U didn’t enjoy the launch it
was expected to. But GameStop’s Niall Lawlor for one is optimistic about
the new console. We had a successful Wii U launch, with more than
320,000 units sold worldwide in the first two months,” says Lawlor.
We were No.1 in terms of market share position. We think the Wii U is an
innovative new platform and are excited about its potential. Nintendo has
a solid line-up of new software titles coming out in 2013.”

Downloads have yet to be made available from the UK website, and GameStop still has no plans” to open High Street stores in the UK, according to Lawlor.

But the exec says the company is keen to expand on these additional revenue streams to offset the decline of boxed sales.

We want to continue to make progress with our strategic initiatives that include international e-commerce, digital sales and mobile product sales as these new product lines were rolled out to all countries,” he says.

Again, it’s all about adapting. Retail has changed faster than anyone could have predicted, and the transition is still happening.

Some companies will inevitably fall by the wayside, but GameStop believes the way it has transformed its business will keep it on track – particularly when the next Xbox and PlayStation arrive.

Lawlor adds: Our ability to implement the best practices we develop is accelerating. Loyalty rollouts, websites, in-store digital and mobile sales are all initiatives introduced in just the last three years and they play a key role in our success in all of our overseas markets.

Our strong focus on managing the basics of our business and the rapid execution of GameStop’s strategic transformation is driving profitability not only during the bottom of the current cycle, but will ensure that GameStop International is the international leader as we enter the next console cycle.”

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