GameStop holds the top score in video game retailing. Operating under the GameStop, EB Games, and Micromania banners, it's the largest retailer of new and used games, hardware, entertainment software, and accessories. It boasts nearly 6,700 stores in the US, Europe, Australia, and Canada. By carrying about 4,500 items, including more than 3,000 used video game titles, a majority of GameStop's revenue is generated by sales of new and used video games and their software. The company also sells downloadable add-on content from publishers. GameStop operates several e-commerce websites, offers GameStop TV in many of its locations, and publishes Game Informer, a video game magazine with some 7.2 million subscribers.
Despite the gloomy selling forecast for retailers during the past few years, GameStop has logged its greatest revenue increases during the recession and beyond. It's seeing the largest gains among used video game products as the company lures more frugal customers who want to stay in the game even with tighter budgets. For used items, revenue rose from 23% of 2009 revenue to 28% in 2012. More consumers are turning to existing video game products, rather than new, due to their availability and cost-effectiveness. That bodes well for GameStop, because used game products (with their higher gross margins) is the company's most profitable segment. To maintain its foothold in new and used gaming, GameStop continues to target hardcore gamers as well as those niche customers who purchase games as gifts during the holidays.
Those gamers who jockey for the latest and greatest video game software still chose to shop at GameStop, which brought in another 42% of its 2012 revenue from new video game software. GameStop saw slight sales declines, however, among its lower-margin new video game hardware product segment (21% in 2009 to 17% in 2012). The company points to lower consumer demand and price cuts on hardware consoles for the sales slips. The sales decline on new hardware wasn't detrimental to GameStop, though, as the products generate a high single-digit profit margin for the games chain.
GameStop operates its stores in the US, Europe, Australia, and Canada.
GameStop has continued to expand its operations in the US and overseas, but most of its recent sales growth has come from outside the US. In Europe the company has logged revenue increases that have offset sales declines in the US related to decreased demand. Boosting its store count overseas has allowed GameStop to maintain its overall store growth strategy. While expansion from 2011 to 2012 slowed to a mere net 13 stores, the company has reached its current store count through several years of aggressive growth. In 2010 alone GameStop added more than 220 stores to its operations across the board (107 in the US, 88 in Europe, 17 in Australia, and eight in Canada). Albeit, this is modest growth for GameStop, which opened 674 new stores in 2008, 586 stores during 2007, and 421 stores in 2006. (To the uninitiated, GameStop was a much smaller game in town just seven years ago. The company's purchase of rival Electronics Boutique in 2005 doubled GameStop's size.)
Mergers & Acquisitions
GameStop is also looking to the Web's game space for growth. In 2011 the company acquired Spawn Labs, which develops peer-to-peer game streaming technology, so that gamers can access their video games and play with others (via an Internet-connected device) even when they are away from home. Spawn Labs sells its streaming applications to game developers. The business is being integrated into GameStop's research and development unit, as Spawn Labs' expertise in virtualization is key to strengthening the retailer's online gaming offerings. Also in 2011 GameStop acquired the Impulse subsidiary of software company Stardock Systems, whose online distribution platform enables gamers to purchase and download games to their computers. Impulse offers more than 1,100 games, a number that is sure to grow with Spawn Labs on board. Prior to these deals, GameStop secured a digital platform in 2010 when it acquired Kongregate, a gaming site launched in 2007 for social gaming that attracts some 10 million users a month. As part of the purchase, Kongregate operates as a wholly owned subsidiary of GameStop and maintains its headquarters in San Francisco.
Sales & Marketing
The company considers itself a destination location for gamers. It develops relationships with video game enthusiasts through its PowerUp Rewards loyalty program (launched in 2010) by allowing consumers to trade in used video games for store credits on future purchases. – less