It's easy to think games retailers are fighting a losing battle.
With the rise of digital content, stores must be simply trying to stave off the eventual migration of consumers away from shops and to ‘Download now' buttons, right?
Certainly, some stores are bearing the brunt of such big changes.
But not the towering behemoth like GameStop. Just ask Mike Mauler, EVP of the global games giant's international business.
Two weeks ago, the firm announced better-than-expected Q3 sales for the whole business. And despite the total hardware sales decline every retailer is seeing, GameStop specifically seems more enthusiastic than ever to maintain its growth – with real emphasis on international expansion. The firm told finance execs at last month's BMO Capital Markets forum that it is sees more and more non-US opportunities for its stores.
PUT A STOP TO IT
But first, let's get the inevitable question MCV always has to ask out of the way – does that mean UK expansion? GameStop has two stores on the mainland, inherited as part of an Irish retail acquisition. But that's it for now, says Mauler.
We are currently not looking at expanding bricks and mortar in the UK,” says Mauler.
But he adds: Yet with a number of our digital businesses we are already in the UK – Kongregate's customers are in the UK, our online gaming business Jolt has users in the UK, and Irish e-commerce already has British customers.”
The comments echo statements made to us by his colleagues in August. So how will these holistic approaches help GameStop grow internationally? To answer, you need to rewind 12 months.
Mauler stepped up to become international chief, responsible for everything outside of the USA, a year ago after serving ten years in charge of GameStop's supply chain.
From the off his plan was to get GameStop global back to basics.
The big thing was to take a step back and focus on our core strengths – the way we deal with customers, our inventory, and how we deal with publishers. That's been the theme for the year.”
At the same time, GameStop has been in the midst of a transition, actively embracing online gaming, downloads and social media. GameStop's initial plays into this arena were surprise moves for a bricks and mortar powerhouse. It bought the afore-mentioned Jolt and Kongregate. More recently, the retailer has been bridging the online-offline gap with DLC sales in stores and commissioning apps.
THE CLASSIC MODEL
But Mauler still sees plenty of mileage in the core areas of bricks and mortar mail order for Europe.
In terms of shops, GameStop is testing new store concepts – concessions, stores-in-stores and mall shops, plus kiosks, at sites across Europe.
What we're doing with new store concepts are in the test phase – I don't want to let the cat out of the bag where we're doing that, but we are pleased with the results,” explains Mauler.
The aim is to find the right ways to enter non-GameStop markets, or improve its standing in others.
We want to be able to offer customers the buy-sell-trade reward model where we currently are in malls and street stores – but in some countries there aren't that many real estate opportunities. So we're looking to grow in markets where it might have been difficult in the past.”
So, does that mean kiosks in the UK? Mauler doesn't say.
Probably because the bigger focus, which does scream ‘UKopportunity', is e-commerce. GameStop has already launched six online retail sites for its international businesses.
Says Mauler: A year ago we had one e-ccommerce site in France and since then we have added Canada, Australia, Italy, Spain, Germany and Ireland. We will continue to expand that over the next year or so.”
Where else would it expand to?
We don't want to say exactly which countries – but we will expand to countries where we do have stores and potentially some other markets.”
It's a coy statement. Sure, it keeps the corporate press rep listening in on our chat happy, but although Mauler never says it himself, the notion of GameStop.co.uk in that context doesn't seem far fetched. After all, much of GameStop's progressive thinking of late stems from its October 2008 acquisition of French retailer Micromania.
The $700m swoop just on the other side of the Channel gave it the only non-US e-commerce in GameStop's business. But it also gave it a thirst for other ways to grow, too, such as growing its loyalty card programme.
GameStop, like any business, has eyes on being the leader in its category. It's already the games retail daddy in North America – so it's no surprise it wants to achieve the same success in other markets.
Says Mauler: We're seeing growth in most countries. We have No.1 market share in the majority of the countries we are in – and all the key territories where it is measured closely, such as France and Germany. Of course there are markets where we are well established, but there are others where we are newer and are expanding rapidly – Italy or Gemany.”
And the big trend encouraging a niche retailer to expand at a time when Facebook, iPhone, Wii, Kinect and Move is attracting the mass market? Well, it's that exact mainstream audience, of course.
That's why GameStop has started selling DLC in store. It attracts a diverse array of people to buying DLC, and we can help new users actually find content. Look at the iPhone – there are thousands of apps, and most people have only looked at five. Whether it's apps or DLC, we can market the content in-store. And unique to GameStop is that our trained associates can help customers find the content they want, and then at the push of a button buy the content, with a code to redeem it on their receipt. There's a lot less friction to that approach than usual for customers.”
Plus, it's not as if the tide of new casual and social players is eroding the principles of a traditionally core-gamer-focused retail like GameStop.
What's happening with social gaming and casual gaming is that it is bringing more and more people into console gaming,” says Mauler.
A year or two ago everyone thought games like FarmVille were detracting from boxed product, and that less people would play console games. I think it's the opposite – those channels introduce games to people. It started with the music genre, and then grew with Wii and so on. Now we're seeing all these consumers say ‘Hey, games are cool' and then trying the big budget game such as Assassin's Creed or GT5.
Ultimately, the entertainment value consumers get from those smaller games drives them to games like Call of Duty. It's additive to the industry – it's good for publishers, it's good for gamers and it's good for retailers like us.”
It's easy to think games retailers are fighting a losing battle.