GameStop Closing Operations in Spain
Back during the global economic crisis of 2007, one of the hardest hit countries was Spain. That tidbit of information is normally irrelevant on the blog but when the Spanish games industry has a bit of a shake up, it suddenly becomes relevant.
This week, games retail chain GameStop announced that they would be ceasing operations in the Spanish market and selling off some of its stores to Game.
An internal letter from the Managing Director of GameStop Spain implied that the local operations hadn’t been profitable since the company entered the Spanish market nine years ago. UK-based retailer Game is the other big games retailer in the market holding 35% of the market share in Spain. They must be able to make a go of the Spanish market as the company went public last year and will be adding some now ex-GameStop stores. The remaining GameStop scores not acquired by Game will be closed by the end of the year.
Despite the closure of GameStop Spain, it’s not an indicator of a global problem with the business. GameStop says that resources that would have otherwise been directed at Spanish operations will be used to expand in other parts of Europe. GameStop also recently announced a doubling of its second-quarter profit year-on-year thanks to the launch of the Xbox One and PlayStation Four.
While this is probably the thinnest lesson I’ve taken from a business story, it’s still clear that video games are pretty elastic in demand. That is to say that games are not essential goods and when people need to save money, games are one of the area where they’ll stop spending first. An inelastic good is basically an essential to life. Food, utilities and shelter would fall under that bracket. We may love games but they sure aren’t essentials.