It seems that GameStop will soon go the way of Blockbuster: no one needs physical copies of their entertainment anymore. Digital purchases and downloads are simply more convenient and more efficient. GameStop has a slight advantage in the fact that they sell things you do need physical copies of, like controllers and consoles themselves. But there’s no denying that video games were the main source of income for GameStop, and they just aren’t making that money like they used to.
The retailer revealed earlier this week that they plan to close down somewhere from 180 to 200 poorly performing stores by the end of the fiscal year. For reference, they closed down 195 stores during the last fiscal year. GameStop has not provided a list of which stores in particular will be closed. But while the closing of this many stores does seem severe, it’s worth noting that GameStop has more than 5,000 stores around the globe.
Moreover, GameStop now expects the drop in same store sales to total somewhere in the teens, as opposed to the 5%-10% drop they had predicted before. Over the latest quarter, GameStop has lost over $415 million, so it’s clear that a change in needed if they are going to stay above the water. That change may include the closure of less profitable brick and mortar stores, or as the following quote implies, at least toning down their density to more profitable levels.
GameStop Chief Financial Officer James Bell said, “We have a clear opportunity to improve our overall profitability by de-densifying our chain.”
GameStop also plans to start a web service where one can buy things online and pick them up in-store, similar to the schemes Walmart or Target are running. However, this does still mean having to drive out to the store, so whether or not that will be enough to offset the rising popularity of web-based purchases is debatable.
Either way, it is clear that GameStop understands the shift it needs to make to the digital realm. Unfortunately, they are a little late to the party, with platforms like Steam and the Epic Games Store already well established and far ahead of the game. There are still some unique things that GameStop can offer that some of these other services don’t, but whether or not that will be enough to save them from the Blockbuster fate remains to be seen.