May 11, 2016
Because it has over 4,000 physical retail stores but more than 60% of video game sales are projected to move online by 2020, GameStop is in the midst of major disruption. The steps it has taken to maintain growth and margin are nontraditional and compelling. In fact, we featured many of these tactics in last year’s Future of Shopping report. Among GameStop’s key approaches to driving growth now are:
- Diversification. GameStop has launched two new store formats in recent years. The first new format is mobile device stores in partnership with AT&T. In fact, outside of AT&T’s own company stores, GameStop is the 2nd biggest owner of AT&T stores, selling not only smartphones but tablets, home security systems and internet connectivity. GameStop also acquired the cult brand ThinkGeek last year. GameStop has plans to open 50 new ThinkGeek stores in the coming year and that gives GameStop an opportunity to take share in entirely new categories like apparel and soft goods.
- Loyalty marketing. GameStop has developed one of the most innovative and successful loyalty programs in the retail industry. Currently, it has over 49MM members in its PowerUp Rewards program and 9MM of them even pay for enhanced rewards. Collectively this group drives 75% of the company’s GameStop store revenue. One of the benefits those paying customers receive is a video game magazine called Game Informer which now, because of its affiliation with GameStop’s rewards program, has one of the biggest circulations of any magazine in America, even greater than magazine industry stalwarts like People and Sports Illustrated.
- Omnichannel fulfillment. GameStop recently rolled out a company-wide ship-from-store effort. GameStop has a unique trade-in program and as a result, a significant percent of store-only inventory. GameStop has recently brought most of that inventory online, growing items available online from about 10k to 20k. The new availability of these items and ship-from-store capability is enabling the company to sell-through previously “trapped” inventory at higher margins and get packages to customers faster, sometimes as quickly as next day.
These efforts have already rewarded GameStop financially. While GameStop’s new businesses drive approximately 13% of the company’s revenue, they now generate 25% of the company’s profit. And all of this is in place even before virtual reality devices are released in a big way, which we expect GameStop to benefit from perhaps more than any other retailer. For more details, see Forrester’s recently published a case study on GameStop.