GameStop Survival Strategy Amid Industry Disruption

GameStop --Let the Games Begin! Presenting to: George Sherman, CEO of GameStop January 2020 Presented by: Nanyang consulting

Agenda Agenda 1 2 3 4 5 6 7 8 Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 2

Problem Statement: GameStop faces obstacles to survival amidst disruption in the gaming industry Disruption - online gaming Brick and Mortar - online Industry Landscape Online gaming communities Decrease in mall sales Consumer Behavior Internal inconsistencies Consistency in company culture Operations and Governance GameStop faces obstacles in future growth prospects amidst a highly evolving industry and consumer landscape Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 3

Recommendations : GameStop can dynamically evolve with the industry and consumers to attain exceptional performance Data analysis and integration Gamification and community hub Customer centricity Store Arenas Omni-channel subscription model Business Model Fast Track program Focus on employee satisfaction Corporate Operations and Culture GameStop can exploit opportunities in the industry, and internally, to stimulate growth and ensure survival amidst challenges Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 4

External analysis: GameStop operates in a highly evolving, competitive industry that faces disruption Threat Opportunity Disruption from physical to online Competition Brick and mortar and online Shift in consumer behavior 9.6% YoY growth in digital gaming content Shift to online gaming communities 27% increase Introduction of 5G (20-30 gbps) CAGR 13.4% in console sales 3.8% YoY growth in retail sales Increasing online shopping 14.3% of total retail sales Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 5

Internal analysis: GameStop has a robust retail model with capabilities that need to be exploited to survive Weakness Strength Lack of investor confidence decreasing stock price Lack of customer segmentation Inadequate use of customer data Decreasing Revenue and Operating Income Revenue growth over $ 9 billion Geographical presence 5830 locations worldwide Differentiation pre-owned segment Robust marketing program Powerup rewards, magazine Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 6

Industry Value Chain analysis: Gaming retailers faces threat of disruption and displacement within the industry Threat of disintermediation Gamespot, BestBuy Game sellers online Game producers Game seller offline Online Retailers Consumer (Gamer) Threat of displacement Orogin, UPplay Offline gaming retailers are threatened by online sellers with deep partnerships with game producers, and customer who prefer online sales Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 7

Industry potential analysis: Gaming industry has potential areas for growth and exploitation Online Sales $$ Youtubers & Channels Console sales $$$ $$ Gaming Offline Sales Events $ $$$ Community potential SSS GameStop must monetize on community potential, events and influence of YouTube channels Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 8

Industry value analysis: GameStop must focus on potential areas to secure competitive advantage High GameStop Traditional retailers (Best buy) Online (Origin) Relativity Low Convenience Customer Understanding Price Product Variety Customer Experience Future potential areas for avoiding disruption customer analysis and experience and convenience of purchase Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 9

Customer Persona Analysis: GameStop must target customers across profiles to ensure that it stays ahead in the game 37 years old, Product manager at P&G Average play-time : 3-4 hours per week Preferred Games: Assasin s Creed Priority : easy wins, strategic game set up, experiment Frederic (Father of 2) 20 years old Average play-time : 30-40 hours per week Preferred game: World of Warcraft Priority : increase performance, competitive nature, interactions, game conventions, good game graphics Jason (PhD in Material Sciences) 25 years old Average play-time : 10-20 hous per week Preferred game: league of legends Priority: Community playing, multi-language games, exchange new discoveries Jenny (Student in Language translation) Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 10

Strategic alternatives have been considered in our analysis Profitability Strategic Fit Feasibility Decision X X X Content Provider X X X Mobile game application Diversify X X X Future growth Online streaming Community hub Current operations Business Model revamp Operations and culture strategy Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 11

Implementation (1/3): Community hub creation What Utilize available data to gain competitive advantage Study consumer behavior Incentivize to join community hubs Why Study of consumer behavior one step ahead of disruption and competition Building customer loyalty GameStop can build customer loyalty by associating with industry emerging trends and creating a stamp in gaming Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 12

Implementation (1/3): Enhancing Customer Centricity 1. Data Integration OmniChannel experience Analyze data create a recommendation system Integrate customer profile with rewards program Recommendation of games online and offline Deep partnerships with EA, Ubisoft sell collectibles Monetize customer data Game producers Data Analytics is imperative in understanding consumer and market needs, and can be used to target sales and increase revenue exponentially Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 13

Implementation (1/3): Enhancing Customer Centricity 2. Community Hub Gamification Rewards point collection based on purchases/ sales Continued points based on game plays/ wins Increases behaviour analysis , accuracy competition to join communities Gamification/ points post participation in communities Monthly rewards Partner with YouTubers (eg: Ninja) gain traction Data Analytics is imperative in understanding consumer and market needs, and can be used to target sales and increase revenue exponentially Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 14

Implementation (1/3): Enhancing Customer Centricity Data analytics Operations and HR IT team Customer Centricity Customer Service Marketing Activity Stream required for the implementation of an enhanced customer centric experience Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 15

Implementation (2/3): Business Model revamp What Revise business model Boost revenue and profitability Build partnerships and collaboration Why Industry dynamics require a shift in business model Need to secure profitability Financial security Attain profitability and higher revenue growth by increasing footfall at brick and mortar stores and revamping current business model Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 16

Implementation (2/3): Business Model revamp 1. Store Arena Identify stores for revamp Gaming Arenas GameStop challenges Play to Win Partnerships with gaming companies - sponsorships Boost branding & sales Increase footfall at stores (malls) by shifting focus from only sales to gaming and conventions Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 17

Implementation (2/3): Business Model revamp 2. Business Model Game Share Sales Online Selling Gaming Arenas Collectible sales Subscription Sales Console Sales Omnichannel subscription model (pre-owned games) Surprise me recommendations Social media selling Participation in Game Cons (e.g. Gamescom in Cologne, Germany) Exclusive launch of games at events Focus on the long-tail - niche market of the industry, and monetize returns via subscription model Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 18

Implementation (2/3): Business Model revamp Data analytics IT team Sales Omnichannel model Customer Service Pricing Activity Stream required for the implementation of a revamped business model store arenas and omni-channel subscription Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 19

Implementation (3/3): Corporate operations & culture strategy What Stabilize and incentivize top management team Nurture new talents and next generation of leaders Build a strong corporate culture Why Significant turnover in key management results in inconsistency of operations Improved compensation system enables employee motivation Coherent corporate culture will reduce turnover rate Consistent company culture will allow employees and consumer to resonate with a common vision, and ensure loyalty Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 20

Implementation (3/3): Corporate operations & culture strategy Culture Operations & HR Send employee surveys to understand their views Offer Employee Stock Options for key employee (top executives, line managers); Promote corporate vision, e.g. To be the leading gaming experience retailer Re-design KPIs to tie with company-wide performance; Work-life balance activities, e.g. Game on Friday Launch Fast track program to cultivate next generation of leaders; Constantly track employee satisfaction rate and loyalty rate Actively participate university events and promote 6-month internships; Recruit talents from gaming conventions, e.g. Gamescom Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 21

Timeline for Implementation plans Strategy and Steps H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 H2 2023 Customer centricity 1. Integrate customer data Build data analytics platform Rollout and sell 2. Improvise rewards points system and community hub creation Youtube partnerships Rollout program Business Model Revamp Store modifications and publicity Game Company partnerships and Rollout Online modifications (subscriptions) Social media selling and rollout Game Con partnering and Exclusive game launches Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 22

Timeline for Implementation plans Strategy and Steps H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 H2 2023 Corporate operations and Culture Corporate vision initiation Design ESOP and KPI Recruitment Culture Activities Rollout Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 23

KPIs: Following KPIs will enable GameStop to secure the success of proposed suggestions Target KPI Customer centric strategy Customer centric strategy 1. 40% 1. Conversion rate from recommendation to sales 2. 75% 2. Customer net promoter indicator Business model revamp strategy Business model revamp strategy 1. More than 20% 1. Increase in physical store visits 2. 300 (progressively achieved) 2. Number of store arenas Corporate operation & culture strategy Corporate operation & culture strategy 1. Less than 5%, especially for top executives 1. Employee turnover rate 2. 90% 2. Employee satisfaction rate Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 24

Contingency plan: Mitigating Controls to address foreseeable risks of the implementation plan Mitigation Risk Customer centric strategy 1. Inaccurate recommendation system 2. Less signups for community hub Business model revamp strategy 1. Unsuccessful opening of store arenas 2. Rejection of omnichannel model 3. Closure of malls Corporate operation & culture strategy 1. Resistance to new vision 2. Insufficient knowledge of new recruits Customer centric strategy 1. Collect more customer data better profiling algorithm 2. Increase marketing for community benefits Business model revamp strategy 1. Re-evaluate arena offering 2. Increase pre-owned shelf space 3. Reevaluation of stores to predict closure Corporate operation & culture strategy 1. Identify vision ambassador and realign KPIs 2. Implement training programs Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 25

Financial analysis: Proposed strategies will enable GameStop to increase revenue by 38% in 5 years! In USD million Customer centric strategy Revenue of online stores Revenue of pre-owned products 2020 2021 2022 2023 2024 Trend 932 373 1,118 448 1,342 582 1,543 699 1,775 803 Business model revamp strategy Revenue of offline sales due to store arenas Revenue of offline sales due to GameCon Annual subscription package 373 19 410 21 472 24 519 26 10 571 29 12 5 7 8 Total incremental revenue 1,702 2,003 2,428 2,797 3,190 Proposed strategies will enable GameStop to achieve stronger financial results, especially revenue. Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 26

Financial analysis: The following cost is associated with suggested strategies. In USD million Customer centric strategy COGS Data integration (payroll & development) Online community hub & gamification Business model revamp strategy COGS Store Arena renovation expense Marketing expense Corporate operation & culture strategy Design of ESOP and KPIs Recruitment & training expense Corporate culture actrivities expense 2020 2021 2022 2023 2024 Trend 848 85 42 1,018 1,251 1,457 1,676 17 8 17 8 17 8 17 8 242 10 267 11 307 12 337 13 371 15 1 1 1 1 1 1 1 2 1 - - - - - 2 1 2 1 2 1 Total incremental cost 1,230 1,325 1,598 1,837 2,091 Net income 472 678 830 960 1,099 Profitability will increase profit significantly, while necessary investment and cost will incur to support the implementation process. Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 27

Conclusion : GameStop can dynamically evolve with the industry and consumers to attain exceptional performance Data analysis and integration Gamification Customer centricity Store Arenas Omni-channel subscription model Business Model Fast Track program Focus on employee satisfaction Corporate Operations and Culture GameStop can exploit opportunities in the industry, and internally to stimulate growth and ensure survival amidst challenges Problems Recommendations Analysis Alternatives Implementation Financials Contingency Conclusion 28

THANK YOU FOR YOUR ATTENTION We now welcome any question you may have. January 2020