GameStop Closing 150 Stores in 2017: The Beginning of The End?

GameStop Closing Stores

You may or may not know this about me (depending on how much you read my posts here), but I used to be a manager at GameStop before I became a full-time writer and gaming journalist. I've got plenty of opinions and stories, but today we're focusing on something more present.

GameStop is set to close at least 150 stores in 2017, according to an earnings report from the company. Is this gaming giant starting to stumble? Join me as we discuss the repercussions of this news.

GameStop Closing Stores in 2017: The Details

According to a statement from GameStop in Fortune Magazine, this is part of a plan from three years ago to close non-productive stores. They also plan to open 35 new stores in their other sectors of business.

These stores include things like Spring Mobile AT&T, and Cricket Wireless locations. This shift in focus, while supposedly planned, comes right after a rough holiday 2016, where video game sales slumped.

The earning release reported new software being down 19.3% in the fourth quarter, and new hardware down 29.1%. This was all despite the launch of PS4 Pro, the Slim, and PlayStation VR.

GameStop's claim was that "aggressive console promotions" were to blame for their losses. They also pointed the finger at "weak sales of certain AAA titles."

GameStop Closing Stores

Is it just me, or does this all sound like a whole lot of excuses? They had power to meet their competition with equally "aggressive" promotions, but they chose not to. Heck, when I worked there, the idea of price matching might as well have been heresy.

That brings me to the first point in my commentary today.

Not Just Another GameStop Rant: 5 Reasons Why GameStop is on it's Way Out

There was a time when GameStop was a really cool place to shop and work. I would say this peaked about ten years ago when I was first starting out as a Game Advisor.

We had a sales-oriented culture, but we also knew how to have fun and always focused on customer service. Yes, performance metrics like reservations, used sales, and memberships were always looming, but they never took the place of a great customer experience.

That started to shift as time went on, leadership changed, and performance became the most important thing of all. Having been out of the game for a few years, I think it's time we looked at GameStop from both sides of the coin, and really see why this news isn't surprising.

GameStop Closing Stores

1. Rigid and Unrelenting Structure

GameStop has always championed an employee training concept called "The Circle of Life." We heard about it behind the scenes, but it was never something you talked to the customers about.

It was this perfect little structure that dictated how customers should, ideally, shop with us. Think of it like a sales funnel, but more cyclical. The idea was that someone reserves a game, they play it, then they trade it in.

When they trade it in, they use their membership to get a small boost, and then they take that credit and use it to purchased used games and, you guessed it, place more reservations on new titles. This completed the circle.

It's a nice sales model, but the simple fact of the matter, is that not everyone fits into it. It doesn't have the flexibility it needs to account for people who only want new games, or for people who never reserve titles because they want to wait on reviews.

It's a business model that tries to cram people into it, as opposed to adapting to the needs of the customer. This is why GameStop, despite their attempts to evolve, has stayed almost entirely the same since I started working there a decade ago.

They introduced digital and DLC options, and they've added so many other elements to the business, but none of that addresses the core issue: their business model is outdated and has been from the beginning.

2. Fingers in Too Many Pies

This brings me to my next point. GameStop has slowly, but surely, been moving away from video game sales. When I worked there, we started selling used iPhones, iPads, iPods, and all other things Apple. We started selling collectible figurines, cell phone plans, Beats by Dre headphones, you name it.

It felt like GameStop was trying to diversify, but they had no idea where to go. If it was electronic and hip, they added it to the shelves. It felt chaotic and it seemed like every new week product another product that was just a little bit further away from video games.

Today, you can find all kinds of stuff at a GameStop store. Sure, you'll find video games, but you would be forgiven if it felt like GameStop was trying to be a hundred things at once.

A jack of all trades, and a master of none. That's really what it feels like when you walk into a GameStop store. Now that they are closing traditional stores and opening other specifically tailored to these other aspects of the business, it seems like their pursuit has come full circle.

They don't know what they are anymore. Are they a video game retailer, or a cell phone provider? Do they sell collectibles and video game memorabilia? Are they a modern game seller, or do they focus on retro titles? I don't even think they know the answer to that question anymore.

It seems like they're struggling to stay relevant and competitive by offering more, and more, and more. That's not the problem, though. The problem, is their business model, their culture, and their unwillingness to get competitive with their promotions and benefits.

3. A Culture of Fear

In today's GameStop world, the company is so desperate to shove customers into their model, that employees are terrified they will lose their jobs if they don't hit quotas in each of these elements of the business.

Employees were being pressured by leadership to tell customers they only had used copies of games or consoles, even if they had new ones in stock..

Why? Because they had quotas to fill. At the end of each month, they had to show a certain percentage of used sales compared to new ones. They have to show a certain number of membership sign-ups, and if they didn't they got a warning and a thinly veiled threat against their jobs.

This is nothing new, I started to see it when I was working there. Employees who performed poorly would get their hours cut, while people who did good work were rewarded with preferential treatment.

I need to be fair, though. This is the exception to the rule. Not all district managers are like this, so it's not a company-wide issue, but it is something that happens, and I've seen it first hand.

For the situations where this does happen, I imagine it's a culture of fear that trickles down from the top. The leadership is afraid, because their numbers are slipping. Therefore, the district managers are afraid, and this bleeds into the managers and employees.

There is indeed a circle happening here, but it has nothing to do with life. It's fear, brought on by the more pressing issues the company seems to be ignoring.

4. Power to the Players?

There are some awesome people who work for GameStop. Truly, some of the best people I met were fellow employees. Let's assume you shop at a store packed to the brim with great people who somehow manage to hit their numbers without lying or misrepresenting their stock to the customer.

In this scenario, are we finally seeing GameStop's promise of "power to the players" in action? Unfortunately, no, the power is not in your hands.

Let's quickly compare the benefits of GameStop's membership, versus the competition:

  • GameStop PowerUp Rewards: $14.99/year, rewards points, 10% off pre-owned, 10% extra on trades, subscription to Game Informer (digital only)
  • Best Buy Gamer's Club Unlocked: $29.99/2 years, 20% off new physical games, 2X reward points, 10% off pre-owned titles, free release day shipping on pre-orders (regardless if you're a member)
  • Amazon Prime: $99/year or $10/month, free 2-day shipping on all products, free 1-day shipping in special cases, 20% off all new games up to two weeks after launch, access to streaming movies and TV shows

When you lay it all out, GameStop offers the least value for their membership. Even if they offered some kind of discount on new games, they would be more competitive, but here's the problem:

That would violate their precious Circle of Life.

They're not providing any inherent value to the players that you can't find elsewhere in better form. Even trade-in prices are significantly higher with Best Buy and Amazon. They're not giving people a reason to shop with them over anyone else.

5. Digital vs Physical

Perhaps the only thing GameStop still has going for them, is the general opinion that gamers prefer physical titles over digital ones. I know I go back and forth on this one.

When we asked you, dear readers, we found that you prefer physical games with a case and instruction book.

I gotta say, I agree. That being said, you can still get your physical games from other places for less cost than GameStop. Sometimes, they'll have the edge here, though, when they secure exclusive rights to a title, or they're the only ones carrying a niche game you want.

This is one of the few things keeping GameStop afloat, in my opinion. Of course, this is all purely my opinion. What do you think? Should GameStop change their ways, give up video games entirely, or just bow out?

Let me know what you think in the comments!

Article by - Bradley Ramsey
Insert date - 4/1/17

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