Can brick and mortar gaming stores survive the digital onslaught?

Posted by David Konow

With the economy still in bad shape, it’s depressing to see so many companies and local businesses going under.

Yet you would think game stores would be somewhat resistant because the market is currently on fire. Yes, gaming experienced a down year overall, but it had an incredible November with Halo 4 and Call of Duty Black Ops 2.

 
Nevertheless, about 200 GameStop stores are slated to close by next year. GameStop is the biggest retail game store in the world, and according to various reports, the chain has taken a serious hit from mobile gaming. As Inquistor explains, with many people playing games on their phones, there’s less people shelling out $60 for a console game. 
 
Meanwhile, Gamestop CEO J. Paul Raines said that the company was showing "strong resilience in the face of challenging category headwinds, and the new categories of digital and mobile are creating new profit pools that we are exploiting aggressively." Indeed, third quarter earnings for GameStop actually "exceeded expectations."
 
GameStop has put on a very brave face publically in the face of changing tides in gaming, not to mention this is going to be a big shopping season for games. So why close the stores? Well, 3% of GameStop stores (which isn't bad for retail) are currenty losing money, and those stores will be closed next year. 
 
In one of our recent reports on GameStop for TG, we also noted that the  company has been trying to launch their own old school digital gaming service. 

As GameStop executive Rob Lloyd told Reuters earlier this year,"We’ve continued to find new ways to drive revenues and margins in our stores and that’s enabled us to hold on to some earnings in these difficult times. We’re still a little bit cautious in that it’s a difficult environment in which to forecast because the industry has been down. And we’ve got uncertainty surrounding what the supply of the (Nintendo) Wii U is going to be." 

 
We also reported that GameStop suffered a 32% drop in revenue this year, but again, a big rush in sales just came in with Halo, Call of Duty and the new Wii. Next year certainly looks very promising for gaming, but can it all stop more GameStop stores from closing? We’ll find out soon enough…