GameStop: Adapting to Evolving Trends in the Gaming Industry
GameStop faces challenges due to declining net income and revenues, influenced by digital trends and changing customer preferences. The company's strategy must focus on digital transformation, profitability, customer satisfaction, and competition to remain competitive in the gaming market amidst growing online gaming and shifting consumer habits.
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GameStop- Changing The Game Rules AHINOAM MAUDA ZOHAR GERSHONI NOAM KLEFIELD IGOR RONIN BGU consulting team-January 2020
Problem Definition What should be GameStop s strategy in order to react to the changing reality in gaming field?
Net Income 2016-2018 Net income 2016-2018 600 400 200 0 2016 2017 2018 -200 -400 -600 -800 Net income Big decrease in net income
Revenue 2011-2019 Revenue 2011-2019 10 9.5 9 8.5 8 7.5 7 2011 2012 2013 2014 2015 2016 2017 2018 2019 Series 1
Key issues Digital mega trend profitability Customer preference competition
Key issues urgency importance
Key issues urgency profitabili ty impotency
Key issues urgency profitabili ty Digita l impotency
Key issue urgency profitabili ty Digita l impotency compe tition
Key issues urgency profitabili ty Customer preferen ce Digital impotency compe tition
Analysis BGU consulting team-January 2020
Company Overview 5380 GameStop stores 14 countries- Most of them in USA (3846) 16,000 Full time employees 23,000-45,000 part time employees
Gaming Industry Console sales fast growing segment in 2020 with a CAGR of 13.4% Global market value of 47.9$ billion USD Tens of thousands of competitive gamers More than 1.5$ billion USD in prize money in 2018 454 million viewers Shifting from physical games discs to downloaded and online games
Competition Traditional retailers: Best Buy Target Walmart Kmart These traditional retailers stock the same titles and digital products as GameStop, with GameStop s only real product advantage found in the collectibles market
Competition Online competitors -Downloads sites owned and operated by game publishers Origin Uplay Steam Gamefly Amazon Rental service for physical games for traditional consoles Sells physical game titles and Twitch streaming platform GameStop faces a fierce competition both in the traditional retailers and digital sites. GameStop will to have to make a crucial decision to stay highly competitive in the market
Gaming market trends Decline in mall-oriented foot traffic Online shopping Retail landscape Accounts for 14.3% of total retail sales Valued at $517 billion USD in the US alone Growing at 15% CAGR Mall visits are declining steadily year on year due to changing social trends and shopping habits Prediction estimates that 25% of American malls will close in the next 5 years Overall retail figures remain strong with US retail forecast- rise of 3.8% YoY to $3.8 trillion USD in 2019 These strong overall numbers mask the two trends of shift to online retail and a general decline in mall oriented foot traffic Considering these trends and the fact that 92% of GameStop s retail outlets are located in traditional retail malls, GameStop need to take a quick and efficient decision in order to stay relevent
Alternatives 1 2 3 Go on- line retail only Go Go Streaming Natural
Alternative 1- Go streaming Move to online streaming model pros Address with the changing market Hard competition from online retailers Engaged customer base General decline in mall-oriented foot traffic cons
Alternative 2- Go Natural- Stay as you are Game Stop need to continue with their known and familiar product pros Retail forecasted to rise 3.8% Ignore global changing in the market Known product General decline in mall-oriented foot traffic Still produced significant revenues High competition cons
Alternative 3- Go on-line retail only Close all your physical shops and focus on develop online retail only pros knowledge in the field Fierce competition from traditional and online retailer Address to the changing market cons
Decision matrix Profitability Competition Digital Customer preference TOTAL weight 0.4 0.2 0.2 0.2 1 Go streaming 5 3 5 4 Stay as you are 3 3 2 3 Go on-line retail only 3 2 3 3
Decision matrix Profitability Competition Digital Customer preference TOTAL weight 0.4 0.2 0.2 0.2 1 Go streaming 5 3 5 4 3.6 Stay as you are 3 3 2 3 2.8 Go on-line retail only 3 2 3 3 2.8
Recommendation We recommend you to focus on streaming platform in order to address the future trends in the immediate term. In addition, start learning the field of gamers training and launch this product as the next step.
profitability Customer preference competition Implementation Plan Digital mega trend Go Streaming Narrowing physical stores Narrowing Manpower Gamming Academy
profitability Go Streaming: develop streaming platform develop streaming platform Customer preference competition Digital mega trend Game system with diversity games Monthly membership user Can use anytime & anywhere Can use on website & app
profitability Go Streaming: develop streaming platform Steps to implement Steps to implement Customer preference competition Digital mega trend Platform development 0-1Year In 1 year Launching the platform
profitability Customer preference competition Narrowing Physical Stores Digital mega trend Investigate your less profitably store Pre-step Close 10%- 538 store Year 1 Close 12%- 635 store Year 2 Close 15%- 698 store Year 3 Close 20%- 791 store Year 4 Close 8%- 253 store Year 4 In 5 years stay with 50% of your physical store (2915)
profitability Narrowing man power Year 1 Year 1 Customer preference competition Digital mega trend Cut down 10% operation workers Develop human resources: Training 200 programmers Hiring 5 developers and programmers
profitability Customer preference competition Gamming Academy Digital mega trend Develop new online platform Training gamers online Create gamers community Achieve customers loyalty
profitability Gamming Academy Steps to implement Steps to implement Customer preference competition Digital mega trend Platform development 0-2Year In 2 year Launching the platform
profitability Customer preference competition Sales & Marketing Digital mega trend Pricing Model streaming platform: Special offer for PowerUp members: Monthly membership user: 30$ 2 First month for free First month for free 1+1 get 50% off on 1 month
profitability Customer preference competition Sales & Marketing Digital mega trend Social media campaign Launching streaming platform: events in your 10 main stores Gamming Academy
Time line Year 1 Year 2 Year 3 develop streaming platform Launching the platform Narrowing Physical Stores +2 Develop Gamming Academy Launching the platform Sales & Marketing Social media campaign
Risk mitigation plan risk probability mitigation Difficulty due the competition high -New marketing strategy -New arrival discounts Crate GameStop gamer community The gaming academy won t attract enough new audience Medium -Research on the most popular games and create special training courses for it -Create your own yearly event of gaming competition and market our training The members won t adopt the streaming platform Low -Market education using your magazine
Capex- 000s $USD Year 1 2 3 4 5 Platform development 1000 200 100 100 100 R&D Total 600 300 200 50 50 1600 500 300 150 150
Opex 000s $USD year Narrowing physical stores-50 per store Narrowing manpower- cut down 4000 people Hiring 5 developers and programers- salary 1000 per year 1 2 3 4 5 26900 8000 31750 34900 39550 12650 5000 5000 5000 5000 5000 Courses and salary improvement-200 employees- course cost- 2000,salary improvement-3000 per year Marketing and sales expenses Social media campaign Launching events-10 stores Total 10000 6000 150000 200000 250000 270000 50 20 6000 6000 6000 150 1000 51050 192800 245920 300550 293650
Incomes and Prediction 1 2 3 4 5 OPEX CAPEX INCOME REVENUE 1600 51050 192800 245920 300550 293650 0 720000 792000 871200 958320 -49450 527700 546380 570800 664820 500 300 150 150
profitability Customer preference competition Implementation Plan Digital mega trend Go Streaming Narrowing physical stores Narrowing Manpower Gamming Academy
