GameStop Visionary Consulting: Strategies for Future Success
GameStop is advised by T.U.K Vision Consulting to restructure operations, broaden products, and adapt to market changes in the gaming industry. Key issues include competition and changing consumer behavior, with a focus on creating value and capturing market share. The agenda covers analysis, alternatives, and financial considerations to enhance performance and customer experience.
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GameStop turning the tables T U K V i s i o n C o n s u l t i n g TUK Vision Consulting Create Visions for Future Success. Anne | Caroline | Jim | Marcel Technische Universitaet Kaiserslautern
Our Vision your Mission Be the one brand which unites gamers and let them reexperience childhood memories!
Our key recommendation is to T U K V i s i o n C o n s u l t i n g eliminate 15% of retail stores restructure and transform the remaining ones and broaden your product portfolio by new products and an unique subscription model. 10/7/2024 3
Key issues T U K V i s i o n C o n s u l t i n g 1 Changing environment 2 Declines in sales & revenues 3 High competition 4 Shift in consumer behaviour 10/7/2024 4
Todays agenda T U K V i s i o n C o n s u l t i n g 1. Analysis 2. Alternatives & Evaluation 3. Implementation 4. Financials 5. Risks & Mitigation 10/7/2024 5
01 Analysis
How GameStop creates value T U K V i s i o n C o n s u l t i n g Selling: game hardware (new) Key Activities game software (new, pre-owned) accessories Customer Relationship Provide people with gaming products to Customer Segments ages Gamers at all Key Partner Value proposition enable them to have their perfect gaming experience Retail stores Key Resources Channels Website Games (new, pre- owned Hardware Accessoires Revenue Streams Cost Structure 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 7
GameStop creates value on the gaming market T U K V i s i o n C o n s u l t i n g Gaming Market Large and fiercely contested market with strong competition offline as well as online $18 bn 9.6 YOY Online Origin Uplay Steam Gamefly Amazon Offline Best Buy Target Walmart (Kmart) Estimated market size Growth rate The gaming market is growing market that is characterized by a high intensity 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 8
by selling games and related products in retail stores T U K V i s i o n C o n s u l t i n g Gross Profit Margin in % % of net Sales New video game hardware 8.5 21.3 21.5 New video game hardware 29.6 Pre-owned & value video game products 43.4 22,5 5,830 locations worldwide 3,846 locations in the U.S. 1,984 across other countries Video game accessories 32.7 11.5 Digital 2.3 88.5 33.0 8.5 Collectibles Located in high-traffic shopping centers Others 30.5 4.3 Pre-owned video games make the second highest gross profit margin and are also important for the overall sales 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 9
But there is a changing environment T U K V i s i o n C o n s u l t i n g Shift from offline to online ! The next generation of consoles still accommodate physical game disks 14.3 % 15 % 25 % Retail sales online ($517 bn) CAGR in the US Of traditional malls are expected to close in the next 5 years Even through the market is changing the traditional way of gaming is not yet dead 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 10
Wrap-Up T U K V i s i o n C o n s u l t i n g Growing of the game industry Console sales fastest growing segment Loyal customer group Well-known brand S O Changing customer behavior Expected closing of malls Currently declining sales Low store traffic W T 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 11
02 Alternatives & Evaluation
Several alternatives to gain success in the future T U K V i s i o n C o n s u l t i n g 1 Subscription model to rent games 2 New offers through Cloud-gaming 3 New revenue streams by more merchandising 4 Selling own-produced games 5 Expansion to the Asian market 6 Closing of stores 7 Hosting of events & tournaments 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 13
Decision criterias for success to assess the alternatives T U K V i s i o n C o n s u l t i n g Get a high revenue (be as successful as 2008 with $64 billion USD) Revenue Growth Believe in your strengths and brand awareness Differen- tiation from competitors Be successful and the greatest competitor in the market Future Growth Fit with your business Providing value to your customers model Strategic Fit Customer Fit 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 14
4 Alternatives are evaluated to be profitable and successful in the future T U K V i s i o n C o n s u l t i n g Drive Profitability Future Growth Customer Fit Strategic Fit Differentiation from competitors Weighting 30 % 15 % 25 % 15 % 15 % Subscription model to rent games New offers through Cloud-gaming New revenue streams by more merchandising Selling own-produced games Expansion to the Asian market Closing of stores Hosting of events & tournaments Low High Medium 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 15
Coming back to our key recommendation T U K V i s i o n C o n s u l t i n g eliminate 15% of retail stores restructure and transform the remaining ones and broaden your product portfolio by new products and an unique subscription model. 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 16
03 Implementation
Lets go back in time T U K V i s i o n C o n s u l t i n g 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 18
The transformation process consist out of 3 crucial implementation steps. T U K V i s i o n C o n s u l t i n g Restructure Adapt Provide 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 19
You should start providing a comfortable atmosphere in the GameStop stores. T U K V i s i o n C o n s u l t i n g Analyze stores Dedicated top level team 5 executives, HQ: Texas Fast decision is essential Rank stores by value, revenue, customer base and eliminate the worst 15% Design 5 restructure taskforce: 8 people architects, designers, gamers Implement new layout Set-up gaming ecosystems directly in store (PC, Xbox, PS, Nintendo) Gamers unite! Program to attract gamers to the stores Host specific events (e-sport tournaments, movie nights, binge watching) Recreate the feeling of gaming together 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 20
Add new revenue streams by focusing on adapting the product portfolio. T U K V i s i o n C o n s u l t i n g Gaming chairs (need4seat) Merchandising (wootbox) Cobrand hardware (AMD) Give customers the opportunity to recreate the GameStop feeling at home Marketing through: Power Up, Game Informer and events 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 21
Add an unique subscription model to your business model. T U K V i s i o n C o n s u l t i n g Implement a subscription model for pre-owned games and consoles Premium diamond membership Diamond membership Gold membership Silver membership Prior gaming Hardware Console Game Magazine Hardware Console Game Magazine Console Game Magazine Game Magazine Steady revenue streams and possibility for cross-selling Increased customer engagement and loyalty 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 22
Follow this roadmap to transform GameStop to succeed in the future! T U K V i s i o n C o n s u l t i n g Actions 2020 2021 2022 2023 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 H1 H2 H1 H2 Short term Analyze stores Customer co-creation Hire restructuring team Hire marketing team Mid term Renovate stores Adapt product portfolio Implement subscription model IT-infrastructure (Amazon S3) Marketing campaign Launch and develop 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 23
Our Vision your Mission Be the one brand which unites gamers and let them reexperience childhood memories!
Implementation costs T U K V i s i o n C o n s u l t i n g 2020 2021 2022 2023 2024 Assumption: Close 15 % of stores Close 15% stores (plus) 19.13 19.13 19.13 19.13 19.13 Buildings and rental in mio Stores $ 638.20 Marketing online offline 5380 20 15 5 6 10 10 2 2 4 3 rent per store a year $ 118,500.00 close 15 % in 5 years 807 Restructuring stores Plattform R&D Market analysis AI 250 10 4 3 3 250 15 4 3 2 250 20 4 5 2 250 20 4 5 2 250 20 4 5 5 savings $ 95,629,500.00 savings per year $ 19,125,900.00 Co-branding 7 7 7 7 7 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 26
Investment of Implementation T U K V i s i o n C o n s u l t i n g Assumption: 2020 2021 2022 2023 2024 Close 15 % of stores Close 15% stores (plus) 19.13 19.13 19.13 19.13 19.13 Buildings and rental in mio Stores $ 638.20 Marketing online offline 5380 20 15 5 6 10 10 2 2 4 3 rent per store a year $ 118,500.00 Restructuring stores Plattform R&D Market analysis AI Co-branding 250 10 4 3 3 7 250 15 4 3 2 7 250 20 4 5 2 7 250 20 4 5 2 7 250 20 4 5 5 7 close 15 % in 5 years 807 savings $ 95,629,500.00 savings per year $ 19,125,900.00 Fund with internal fund and selling assets Investment of 1.396 bn USD 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 27
Key Performance Indicator T U K V i s i o n C o n s u l t i n g KPIs Current Target (2024) 0 27 Mio. Subscribers 8.285 bn. 11.02 bn. Revenue 23942/year 0/year Hosted events (6.59) 11.1 EPS (loss) 79 % 92 % Customer satisfaction 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 28
05 Risks & Mitigation
Risks & Mitigation T U K V i s i o n C o n s u l t i n g I. New message affects current customer base negatively Strong message, build bridge between where you are and you heading up to major I Probability II II. Further competitors entering market Use your knowledge and insides of the industry to raise up advantages minor III high low Impact III. Competitor s imitation Increase loyalty program and switching costs 10/7/2024 A n a l y s i s A l t e r n a t i v e s & E v a l u a t i o n I m p l e m e n t a t i o n F i n a n c i a l s R i s k s & M i t i g a t i o n 30
Thanks for your attention T U K We are looking forward to further V i s i o n C o n s u l t i n g discuss the topic! TUK Vision Consulting Create Visions for Future Success. Anne | Caroline | Jim | Marcel Technische Universitaet Kaiserslautern
