Against Digital Market, Every Gamer’s Favorite Store Stands Strong
Next generation consoles and the rise of digital sales seemed like GameStop’s (NYSE:GME) death knell, but the brick and mortar retailer is not down and out. Instead, its hardware sales have been stronger (81.1 percent growth) because of the PS4 and Xbox One console releases. While hardware sales will eventually tapper off (once everyone owns their console of choice), don’t expect the retailer to suffer from the rise of digital sales. In fact, it will find plenty of business in the coming market.
GameStop is by no means going to way of Borders and Barnes & Noble (NYSE:BKS) just yet. Don’t think of it as “everything is going digital, therefore everything physical will die.” On the contrary, the two are still intertwined and have a complementary relationship. It also helps that GameStop is embracing the digital future and helping provide seamless software purchases and even helping to inform and pitch digital content.
“We don’t talk about defending against digital distribution,” said GameStop president Tony Bartel to GamesBeat in an interview. “We talk about driving digital distribution. We’re on offense when it comes to digital.”
GameStop has been criticized for taking money out of developers’ pockets through its sale of used games, but these developers rely on retailers more than you may realize. Game companies and retailers have quite the symbiotic relationship. GameStop provides ad space in the form of open shelves of game cases where consumers can browse and see what box art catches their eye. While most gamers will go into GameStop with a purpose (or not at all) that’s not its primary customer base.
Storefronts are based in areas where there’s foot traffic, which means parents walking by with their kids or teens and adults meandering by. Posters of fantasy or military heroes decorate the outside and interest is piqued. When you go on your Xbox or PlayStation, there’s usually an intention to purchase a particular game, but a mall or shopping center offers opportunity for impulse buyers.
GameStop employees have the ability to offer recommendations to consumers who don’t read IGN and Joystiq every day. When Watch Dogs was coming out, GameStop employees helped inform customer purchases by pushing Ubisoft’s digital season pass for the game — a flat fee for future DLC. Who sold the most season passes? Brick and mortar stores, and by no slim margin. Physical retailers pushed over 70 percent of those digital passes by pitching customers the Watch Dogs season pass to complement customers’ purchases of the game.
Ease of use
There’s a certain level of simplicity that comes with purchasing from a brick and mortar store. You can inspect the product more thoroughly and ask any questions you may have to an associate. There’s also no need to navigate a digital marketplace or enter in any credit card information — it’s all one seamless transaction.
Even if your intent isn’t to purchase hardware, GameStop offers download codes for DLC (Sony systems only) or to purchase an Xbox Live or PSN gift card. Then, there’s always picking up a box copy of a full game.
Some consumers are also concerned about web security and don’t want to risk their information being compromised, like it was for 77 million PlayStation Network users in 2011 when hackers broke through. Other people (especially teens and some college students) don’t own credit or debit cards, and go to physical retailers to purchase time and points cards with cash or through trade-in offers.
Investing in consumer interests
GameStop also isn’t afraid to invest in its consumers, either — in order to get their attention.
When Naughty Dog released its Sony exclusive The Last of Us for PS3, it stated that there were no plans for a PS4 port. Plans change, of course, and a new remastered version is slated to hit shelves. While many PS3 owners have likely upgraded to PS4, they may want to relive the adventure. GameStop is offering 50 percent off the PS4 Remastered Edition if you trade in your PS3 version. Not a bad deal.
GameStop is even trying to take advantage of misinformed gift card giving. Who hasn’t received a gift card for a store they weren’t particularly keen on? Cardpool offers a way to exchange that gift card for cash at a reduced value, depending on how in-demand your gift card is. GameStop has partnered with Cardpool, so you can trade in that Barnes & Noble gift card and receive more credit for a GameStop gift card than you would had you asked for a check. Partnerships, such as these, help drive sales that may have otherwise sat in another company’s coffers, and driving sales to their online and physical storefronts.
GameStop has also made quite a few long-term investments in websites, like Game Informer and Kongregate. The former offers game reviews, news, and features online and through a digital subscription. The latter is a free browser-based gaming site where people can create flash and html-based games, some which have gone on to become popular mobile ports.
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