GameStop’s $500m merchandise dream

When GameStop revealed its latest financial results, the firm told its investors it had a new dream.

It wants to turn its fledgling merchandise operation (expected to be worth up to $200m this year) into a $500m business by 2018.

Some of its investors were perplexed by this target. There was no question that merchandise is a fast-growing segment of the games market, but how did it hope to almost triple its business in just three years?

Well, within days of that statement, any lingering questions were answered when GameStop offered $140m (92m) to acquire US geek merchandise behemoth ThinkGeek (owned by GeekNet).

Merchandise is a great market for us,” president and EVP of GameStop International Mike Mauler tells MCV.

We started experimenting with merchandise a while ago – we sold Call of Duty games and had some mugs and t-shirts to sell as tie-ins. But the consumer enthusiasm and demand around the products was just tremendous. By August, we’ll have an expanded range of products in every store worldwide.

We will continue to work with the publishers to expand our franchise marketing efforts around video gaming and new releases.”

"Consumer enthusiasm and
demand around our merchandise
products have been just tremendous."

Mike Mauler, GameStop

GameStop is not limiting itself to just games, of course. The firm is targeting all forms of geek culture, including products based around the upcoming Star Wars movie.

Originally, we were just selling game-related products, focused on the big franchises like Call of Duty, Assassin’s Creed and Pokmon,” Mauler says.

We’ve expanded that range to include movie releases and TV shows. Now it’s everything from Game of Thrones to Star Wars. The biggest launch of this year will probably be Star Wars, and you’ll see tonnes of merchandise based on that with the launch of the film at the end of the year. What our consumers have told us is that it’s not just about games in this category, they like to experience films, TV shows and so on in lots of different ways, and come to our stores and buy those products.”

The ThinkGeek deal may be the headline grabber in GameStop’s merchandise plans, but it’s actually the latest in a series of projects at the firm. In Australia, Mauler and his team opened a string of physical shops called Zing Pop Culture, which stock exactly these sort of ‘geek’ items. And that outlet is now set to expand globally – it could even reach the UK.

We ended the quarter with six Zing stores,” Mauler says. We are continuing to pilot more stores in that region, and also want to test that concept in a few other markets. I wouldn’t rule out any region at this time. But at the moment we are focusing on regions where we already have a physical presence.”

"Some analysts have noted GameStop’s
strong international capabilities would
help GeekNet expand its licensing
capabilities outside of the US."

Mike Mauler, GameStop

Overall, GameStop’s presence in the UK remains limited. The firm closed the only two shops it had in the country in 2011, and now places all of its emphasis on its UK website. And there remains no plans to do more than that.

As you know our UK business is strictly omnichannel,” says Mauler. So consumers go through our site to buy and trade-in games and from a brick and mortar perspective, you have GAME there in the UK. We don’t have any plans beyond that, except to continue to expand our omnichannel business.”

As the games market goes increasingly digital, the chances of GameStop entering the UK fully diminish by the day. But the firm is always eyeing up its next move. And with ThinkGeek primarily a US-based website, there’s a big opportunity for Mauler to take that brand – and its expertise – into new markets.

Some analysts have noted that GameStop’s strong international capabilities would help Geeknet to expand its licensing capabilities outside the US,” admits Mauler.

GameStop’s merchandise bid comes at a crucial time for games retail. A number of high profile delays to big blockbusters means there are genuine concerns over a lack of physical content for High Street retailers to sell.

But Mauler, ever the optimist, is not concerned.

There have been some games delayed, such as The Division, Uncharted and Zelda, until next year. But at the same time there are lots of awesome games coming out,” he concludes.

We’re really positive about the coming year. The industry is really healthy and are looking forward to E3. We’re looking forward to lots of stuff coming out.

DIGITAL IS NOT THE ENEMY

GameStop’s recent push into merchandise is part of the firm’s effort to counter-act the decline in physical games.

But the business is doing particularly well in the digital space, too, argues GameStop’s international boss Mike Mauler.

We love digital – we are going to have in excess of $1bn in digital sales this year,” he says. Our goal is to offer consumers the products however they want it, whether they want a physical game, used or new, or a digital download, our goal is to be able to offer that to consumers through our omnichannels anyway they want to consume it.

The retail behemoth owns its own digital channels, too, including browser games portal Kongregate, which Mauler says is starting to prove itself outside of the US.

It is doing well internationally,” he explains. I can’t tell you the number of users that are international, but I know it’s in the double digits. It’s something around 40 per cent are consumers from outside of the United States.”

‘DON’T ABANDON THE XBOX 360′

GameStop international EVP and president Mike Mauler says that the industry has been too quick to abandon the PlayStation 3 and Xbox 360.

They have tremendous install bases, and – except for a few major titles like FIFA and Call of Duty – everything is about the new machines,” he says. There are still a lot of consumers out there that still have the older generation platforms.”

He continues: Our used business is growing this year as there are fewer new titles for the old gen. If you have a PS3 or 360, you are prone to buying a lot of used games that you haven’t played before.”