GameStop to Close 120 Stores, Switch Focus to Mobile and Apple Products
Gaming is a growing industry with a record launch of next-generation consoles with the PlayStation 4 and Xbox One outpacing their predecessors’ sales. Don’t tell that to GameStop, though. The biggest gaming retailer in America is planning to close some GameStop stores and expand Apple and AT&T retail chains.
The announcement was made at last week’s GameStop 2014 Investor Day. CEO Paul Raines referred to the change in focus as GameStop 3.0. The idea is to redirect some of the company’s focus away from physical game retail and into tech sales.
The plan is to close between 120 and 130 GameStop retail locations over the next year. They currently have 6,457 stores worldwide which means about 2% of their worldwide.
Their AT&T authorized retailer, Spring Mobile, will expand with 200 to 250 new locations added to the 164 current locations. GameStop’s Cricket Wireless store will add between 100 to 150 locations to their current 31. Simply Mac, GameStop’s Apple product resale and repair stores, will up to double the number of stores with up to 25 being opened this year.
I’d like to think that I would be expected to slag off GameStop for closing stores when gaming is still a growing industry. However, I actually think that this is a smart move.
If I’m looking for an area of growth in gaming, it’s not in brick-and-mortar stores. Sure, a lot of gamers, especially the casual gamers, go to stores for physical copies of games and to scour the shelves for deals or cool used games. Lately, we’ve seen a move to digital stores and digital game purchasing. With the rise of Steam, EA and Ubisoft trying to get in on that action with Origin and Uplay, and Sony putting an emphasis on their digital offerings on the PlayStation 4, digital sale is really the high growth area of the retail gaming industry.
With digital being the way forward, getting out of brick and mortar is a smart thing for GameStop to do. It makes sense to save money now rather than lose money down the road when costs at a physical store outstrip revenue. In Canada, the book store chain Indigo says that you get better deals online than in-store because physical locations have higher overhead (rent, staffing, utilities, etc.) than just the one warehouse. A similar Indigo.ca/Amazon central distribution centre setup is probably a smarter long-term business plan than expanding the brick and mortar business when that’s clearly not the smart way forward.
So I know that I sounded a bit doom and gloom off the top but I think GameStop is actually making the right call when you look at the big picture. Right now, and maybe for the next few years, it’s not the best idea. If I was looking for a company that had its long-term plan sorted, I would definitely say that GameStop is starting to fit the criteria.