Can GameStop Sustain Its Growth?

GameStop plans to open 400 stores this year on top of the 6,450 it already operates worldwide. That is up from 388 last year, and in 2008, it rolled out 674 locations.

Landlords likely love a rapidly expanding retailer, especially during these times. But is there any concern that it could eventually face a fate similar to Blockbuster?

We’ve heard arguments on either side. There is some concern out there that GameStop could get into trouble if gaming starts to make a shift primarily to an online platform. If this becomes the norm, gaming companies could cut out retailers altogether.

This commentator makes a strong argument against GameStop losing ground to Gamefly, its Netflix-like competitor, saying that a mail-in service for games isn’t as relevant as it is for movies because gamers like to hold on to the software for a while and play it numerous times.

Meanwhile, GameStop doesn’t appear to be in any financial trouble. The retailer took in fiscal-year earnings of $377.3 million, its second-best performance ever, though they were down 5.3% from the prior year, and same-store sales fell 7.9%.

Does anyone see any risk in this ever-expanding retailer, or are the doubts out there premature?

ALSO: Wall Street Puts Boot Into DSW

4 Responses to “Can GameStop Sustain Its Growth?”

  1. 1 Doug March 22, 2010 at 8:37 am

    A compelling concept that has become a main stay with teens to 20 somethings with little to no competitors. Too bad that Moive Gallery couldn’t see it with Game Crazy, the only national competition to Game Stop.

    With THQ and others suffering as game use drops, it is a questionable strategy to grow their locations so dramatcially, but remember that their business model is built on trade in and with millions of consoles out there, it is cheap entertainment. The only thing they are missing is the game rental business, as everything needs to be purchased.

    Eventually, their web presence will need to move toward the netflicks model, and then they really have something. It is my prediction within 5 years, they will add movies and tv shows to their line up as gaming is going to change like video.

  2. 2 dealmaker March 23, 2010 at 9:08 am

    Gamestop’s sales are already sliding…To Walmart (where their Ex CEO now resides) and to Online Formats where technology will improve the software, content, and transmissability of updates etc. They are virtually no different than Blockbuster or all the Music / Media stores of yore (now called FYE)…Gamestop is asleep at the wheel if they don’t begin to change the format by taking more space and adding an interactive component to the stores…Hype is great, but the numbers don’t lie. Malls provide a platform for an ideal interactive format…and they just haven’t gotten it yet. When one company controls nearly all the brick and mortar market and starts asking for lower rents? They’ve stopped growing and need new talent & blood.

    • 3 Doug March 24, 2010 at 3:11 pm

      dealmaker, you make some good points but please explain your thoughts more around interactive format. Do you mean turning their stores into arcades? Define “interactive”. I’ve heard and seen this term thrown around from Disney Stores which hasn’t helped them to restaurant venues to grocery stores.

  3. 4 James March 24, 2010 at 3:31 pm

    Technological improvements deliver what sticks and bricks cannot. If you can do it from your couch why would you visit a store? The customer profile is quixotic and must always have the latest and greatest. I would say, not the best profile for long term committment.

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