Reinventing GameStop: Navigating the Digital Revolution

GameStop faces challenges in adapting to the digital shift in the gaming industry. With high supplier and buyer power, intense rivalry, and digital substitutes, the company's profit margins have been shrinking. Alternatives such as going fully digital, corporate restructuring, or harmonizing physical with digital presence are considered. Going digital could reduce operating costs but risks losing sales through physical stores and facing heavy e-commerce competition.

• GameStop
• digital revolution
• gaming industry
• profit margins
• e-commerce

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1. Reinventing GameStop Game On or Game Over? CASE 5 SCHOOL: NMIMS Presented by: George Sherman Presented to: Sarah and Team

2. Problem Statement Reinventing GameStop to keep up with the digital revolution

3. Market Forces Analysis Bargaining Power of Suppliers Bargaining Power of Buyers High: Store shelf collection highly dependent on collaboration with game development companies High: Buyers have many online as well as traditional to choose from Rivalry between existing competitors Presence of core gaming retailers and traditional retailers like Walmart, etc. Threat of Substitutes Threat of new entrants There are digital substitutes available: online buying, downloading and playing Barriers to entry are high because it is a large and fiercely contested market Analysis Alternatives Recommendation Implementation Financials

4. Overview of GameStop STRENGTHS WEAKNESSES Re-sale of second hand games Digital video game publications Reward program: Power-up rewards High operating costs which ultimately affects the profit OPPORTUNITIES THREATS Streaming platform for games Digital game selling Digital substitutes Traditional retail competitors People shifting from physical game disks to downloadable programs and streaming games Analysis Alternatives Recommendation Implementation Financials

5. Shrinking profit margins 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2016 2017 2018 -5.00% -10.00% -15.00% Gross Profit Operating Income Net Income Analysis Alternatives Recommendation Implementation Financials

6. Alternatives Going digital and phasing out physical stores entirely Corporate Restructuring (sell, merge/acquire) Harmonizing physical and digital Analysis Alternatives Recommendation Implementation Financials

7. Going digital and phasing out physical stores entirely PROS CONS Exponential reduction in operating costs due to elimination of physical stores Opportunity loss in terms of sales through physical stores Limited Revenue streams Extreme competition in e- commerce space Lack of any added value proposition by Game Stop Analysis Alternatives Recommendation Implementation Financials

8. Corporate Restructuring (sell, merge/acquire) PROS CONS Entering profitable new businesses to salvage weak financials Exit strategy for a dying business Dilution of control in case of a merger Further strain on financials in case of an acquisition Highly undervalued assets due to previous failed sale Poor brand image on Wall Street Analysis Alternatives Recommendation Implementation Financials

9. Harmonizing physical and digital CONS PROS Possible loss of revenue with the reduction in number of stores Facilitates enhanced user experience Bundles the ease of digital with the personalization of physical stores Reduced need for physical stores Analysis Alternatives Recommendation Implementation Financials

10. Evaluation of Alternatives Going digital and phasing out physical stores entirely Corporate Restructuring Harmonizing physical and digital Operating Cost Revenue Value Proposition Analysis Alternatives Recommendation Implementation Financials

11. Recommendation Shifting the focus from the sale of new video game hardware and software to gaming accessories, pre-owned game re-sale, collectibles, digital offerings and in-store gaming The GameStop library The Game Stop Parlour The Annual GameStop Olympics In-store trials Analysis Alternatives Recommendation Implementation Financials

12. Game stop revenue by segment (2018) 100 90 80 70 60 50 40 30 20 10 0 New hardware New software Pre owned video game Accessories Digital Collectibles Other % of net sales gross profit %

13. The Implementation Strategy Phasing out 30% physical stores over 5 years Strong advertising to communicate the Online sale of video games Leasing out 670 former RadioShack and AT&T owned stores Analysis Alternatives Recommendation Implementation Financials

14. Implementation Strategy Focusing on: Resale of second hand games Video Game rentals Facilitating enhanced user experiences through in store trials and a video game parlour Catering to loyal customer base by hosting Comic-Con like Video Game Exposition and eSports Festival Annually Creating a vast database of customer behaviour to analyze and predict future trends Analysis Alternatives Recommendation Implementation Financials

15. Timeline Analysis Alternatives Recommendation Implementation Financials

16. Assumptions Gaming Library: $15 per month with security deposit of $50 Experience Parlor: 3$ per hour. Subscriber base growing at 10% YoY Analysis Alternatives Recommendation Implementation Financials

17. Financials Analysis Alternatives Recommendation Implementation Financials

18. Analysis Alternatives Recommendation Implementation Financials

19. Sales/Square ft 1200 995.83 978.58 950.15 1000 920.14 909.67 800 657 600 400 200 0 2018 2019 2020* 2021* 2022* 2023* Analysis Alternatives Recommendation Implementation Financials

20. Risk Mitigation Risk Mitigation Likelihood Impact Digitization of video games Gradually exiting the new game sales High Low Dropping consumer footfall Enhanced in-store user experiences Medium High