The contrasting strategies of GAME and GameStop

Video games retailers are currently facing up to the biggest ever challenge to their business models as supermarkets up their interest in the sector and the growth of digital distribution threatens their very foundation.

Having recently met with senior executives from both GameStop and GAME, Klosters Trading analyst Lutz Muller has told MCV that both are taking a very different approach to the problem.

Specifically, GameStop sees the current market struggles as all part of the natural cycle. GAME, on the other hand, seems to be preparing for a far more uncertain future.

GameStop seemingly plans to grow its way through tough times. Had it not been for Game Stop’s acquisition of Micromania in France effective November 2008, their sales would for the past 24 months been negative,” Lutz told MCV. As it is, they have been stagnant for all of 2008 and 2009.

They continue to open additional outlets – in 2010 about 300 stores. They are actively looking around for an acquisition to allow them to bridge the slow-down period in manner similar to what they did when they bought Electronics Boutique. Also, there is talk of sharp cost measures to be instituted well before the fourth quarter.

But, unlike the Game Group, GameStop sees the current struggles pretty much as ‘business as usual’ and expects to navigate it more or less the same way they did last time around.”

This approach is, Lutz claims, the polar opposite of that being adopted by GAME, which is in his opinion preparing for a world where games retail can no longer prosper.

The Game Group has effectively thrown in the towel and their long-time CEO and COO both have either departed or are departing. At the same time they are reducing their store count in the UK by 20 per cent and are sharply cutting costs. There are also insistent reports that the company is frantically looking for a buyer and BestBuy and GameStop are the two most often mentioned.”