It becomes a challenge for a retailer to remain viable when the product its sells no longer requires customers to leave their home to buy it.
That’s a phenomenon that has hurt countless industries. Bookstores, for example, struggled when digital books became an option for readers.
Music stores essentially disappearing, becoming more about novelty than selling products once streaming music made the concept of owning records more or less obsolete.
Now, the video game space has undergone a similar transformation. You can now download most games straight to your console, which makes gaming stores an unnecessary relic.
“The Entertainment Retailers Association (ERA) reports that a staggering 89.5% of video game purchases were digital downloads in a recent period, leaving a mere 10.5% as physical sales. While 90% sounds like a dominant figure, it’s crucial to contextualize this data. The seemingly high percentage is significantly influenced by the mobile gaming market,” according to Achivx.
That makes GameStop a failing proposition unless it finds a product to sell other than video games, a category which has historically been its major sales driver.
Gamestop itself laid out the problem in its 2024 10-K filed with the SEC.
“The current consoles from Sony, Nintendo and Microsoft have facilitated download technology. Downloading of video game content to the current generation video game systems continues to grow and take an increasing percentage of new video game sales. If consumers’ preference for downloading video game content in lieu of physical software continues to increase, our business and financial performance may be adversely impacted,” the company shared.
To make matters worse, some hardware does not even owners to use physical games.
“In addition, both Sony and Microsoft currently offer consoles that only allow for the purchase of digital games and content and do not work with physical software. Sales of those types of consoles eliminate the ability of customers to purchase physical software, which may also adversely affect our sales of both new and pre-owned physical software,” GameStop added.
GameStop founder Gary Kusin called for the chain to get smaller back in a 2024 interview with Fox Business.
“CEO Ryan Cohen has “got to reduce the footprint of stores,” he shared.
The founder made it clear that efforts to pivot to other businesses have failed.
They “tried a bunch of things and none of them have worked,” he said. “Nothing works in a 10,000-store footprint, unless it’s a historically enormous sector.”
