GameStop holds the top score in video game retailing. The largest retailer of new and used games, hardware, entertainment software, and accessories boasts more than 4,010 GameStop, EB Games, and Micromania branded stores in the US and 2,000-plus stores in Europe, Australia, and Canada. Its stores and e-commerce websites stock more than 5,000 video game related items, with more than half of its sales coming from new video game hardware and software. GameStop also sells downloadable add-on content from publishers, operates 1,565 smartphone retail locations (under the AT&T, Cricket Wireless, Simply Mac, and Spring Mobile banners), and publishes video game magazine Game Informer.
The company operates five business segments, of which four are based on store and e-commerce sales in their respective geographic markets: US, which counts sales for its 4,013 stores (as at the end of fiscal 2016, ended January 31) in the US and its territories, www.gamestop.com, Game Informer Magazine, and its web and mobile gaming platform Kongregate; Europe (1,299 stores); Australia (444); and Canada (325). Its Technology Brands segment (6% of sales) includes its Spring Mobile business, which sells post-paid AT&T services and wireless products through 890 AT&T branded stores and pre-paid AT&T services and related accessories through its 70 Cricket-branded stores; its Simply Mac business, which is an Apple reseller that sells Apple electronic products through 76 stores. Beyond its stores, GameStop operates more than a dozen e-commerce sites.
By product, GameStop generated 31% of its total sales from new video game software in FY2016, while 25% of sales came from pre-owned and value video game products and software. The rest of its sales came from new video game hardware sales (21% of sales), video game accessories (8%), mobile and consumer electronics (7%), digital download services (2%), and other sources.
GameStop's stores are supported by several distribution centers strategically located to serve its global network of stores. Distribution centers in Texas and Kentucky serve the US segment, further supported by third-party distribution centers for new release titles. GameStop distributes merchandise to its Canadian stores from distribution centers in Ontario. It has a distribution center near Brisbane, Australia, that supports its Australian operations and a small distribution facility in New Zealand for stores in New Zealand. GameStop's European segment gets its merchandise from half a dozen regionally-located distribution centers.
GameStop has a presence in 14 countries worldwide, including 10 European countries, North America, and the Asia Pacific region. More than 56% of its stores are based in the US, where 69% of its sales came from in FY2016. It also maintains a healthy footprint in Europe (which accounted for 14% of sales). The remainder of its sales come from its stores in Australia (6% of sales) and Canada (5% of sales).
Sales and Marketing
The company considers itself a destination location for gamers. It develops relationships with video game enthusiasts through its PowerUp Rewards loyalty program by allowing US consumers to trade in used video games for store credits on future purchases in its stores, on its US website, and on Kongregate.com. Its PowerUp Rewards program provides members with the opportunity to earn unique video game related rewards not available through any other retailer. Vendors also participate in this program to increase the sales of their individual products. It also has loyalty programs in France, Italy, Germany, Australia, and Spain. Altogether, its various loyalty programs total more than 46 million members.
In 2014, the company's GameStop Technology Institute unit established a partnership with AT&T to improve the speed and reliability of its in-store promotional materials and enhance customers' experiences.
Altogether, GameStop spent $66.6 million in advertising in FY2016 (up from $64.1 million and $57.8 million in fiscal years 2015 and 2014, respectively), and focused on newspapers, television, and other media. As part of its brand-building efforts and targeted growth strategies, the games retailer has been expanding its advertising and promotional activities in certain targeted markets at key times of the year. Additionally, GameStop expanded the use of television and radio advertising in certain markets to promote brand awareness and store openings. It's also working to leverage its loyalty programs to boost its membership base and is adding loyalty programs in international markets to build its brand.
GameStop's sales and profits have rebounded since FY2013, as it's remedied slumping video game retail sales by building its relatively newer Technology Brand businesses, which sell smartphones and related accessories, with hundreds of new store openings (mainly under the AT&T banner).
In fiscal 2016 the company’s net revenue increased by 1% to $9.36 billion due to higher revenue from mobile and consumer electronics and video game accessories.
The revenue from mobile and consumer electronics increased by 26%, mainly due to the opening of new stores within the technology brands and the newly acquired ThinkGeek business.
Video game accessories' sales increased by 8% due to the sales of accessories for use with the next generation consoles.
In fiscal 2016, the company’s net income increased by 2% to $402.8 million due to higher net revenue, partially offset by increased selling, general and administrative expenses, related to the growth of the technology brands segment.
GameStop's operating cash inflow increased by 37% to $656.80 million.
GameStop hopes to keep its title as the world's leading seller of new and used video game products by targeting hardcore gamers, as well as those niche customers who purchase games as gifts during the holidays. However, with its video game retail sales shrinking globally in recent years, the retailer has been closing more game stores in favor of acquiring more smartphone retail outlets to grow its relatively new Technology Brands business. Indeed, since it started the division in 2013, the company has closed around 400 gaming stores (net, as of the end of FY2015) while growing its Technology Brand store base to 484 outlets under the AT&T, Cricket Wireless, Simply Mac, Aio Wireless, and Spring Mobile banners. The company intended to open 140 new stores in fiscal 2016, including 90 Video Game Brands stores (including 84 collectibles stores) and 50 Technology Brands stores. It also planned to close 200 Video Game Brands stores worldwide.
Also in light of slumping retail sales, GameStop has been trying to grow its business through video games that are delivered to users in digital form and from the expansion of other forms of gaming. Products that relate to the digital category, including Xbox Live, PlayStation, and Nintendo network points cards, as well as prepaid digital and online timecards and digitally downloadable software. To this end, the company continues to investment in e-commerce, digital delivery systems, mobile applications, online video game aggregation, and in-store and website functionality. It also plans to invest in these processes and channels to grow its digital sales base and boost its market leadership position in the electronic game industry and in the digital aggregation and distribution category.
GameStop's used video game products have lured more frugal customers who want to stay in the game even with tighter budgets in the years following the last recession. That bodes well for GameStop, as used game products carry higher-profit margins, and represents the company's most profitable product segment. However, GameStop has faced new competition from Wal-Mart Stores, which in 2014 announced that it will begin allowing customers to trade in used video games for store credit at most of its stores. Best Buy and Target also buy used video games from customers.
Mergers and Acquisitions
In 2016 the company acquired three national AT&T authorized retailers (Cellular World Corp., Midwest Cellular, and Red Skye Wireless), adding 507 stores to its Technology Brands business.
In July 2015, GameStop made good on its stated plan to move into collectibles when it outbid teen apparel retailer Hot Topic to acquire Geeknet, parent of ThinkGeek, a purveyor of geek and gamer-targeted gifts, apparel, and collectibles like a Hans Solo refrigerator, Star Trek aprons, and Dr. Who cookie cutters.
During 2014, the company spent $93.3 million on acquiring AT&T resellers and authorized Apple retailers to continue growing its Technology Brands business.