Video Games, Movies, Comics, & Pop Culture

Many are watching GameStop’s decline with anticipation of its demise, eager to see it go out of business once and for all. I personally don’t agree with that position and find it short sighted to do so. Most seem to want GameStop to collapse due to their own discontentment with the company’s policies and treatment of both customers and employees.

While this topic itself may see a lot disagreeing with me, rather than wanting to see GameStop burn to the ground, I’d prefer to see the company turn things around and be better. Better for the employees, better for customers, and better for the industry. The company’s new CEO, George Sherman, has reportedly set out a 3 point plan for the company’s turn around. Personally, I think there’s a lot more to do than just three steps, though some of my opinions might fall under Sherman’s three points of “GameStop Reboot”:

• Address SG&A [Selling, General, and Administrative Expenses] that’s been allowed to deleverage
• Execute on opportunities to optimize current business
• Develop new revenues for future

A lot of this is well and good, and some of my suggestions will fall into these areas, but there are a lot of aspects missing that GameStop needs to work on.

Problem #1: Perception

GameStop’s biggest problem is their perception among gamers. In the past, one could argue that core gamers aren’t crucial compared to the casual gamers and family members that go to GameStop to pick up games as gifts or browse for something new. That is no longer the case. If GameStop wants to be the “local church” of gaming with E3 being the “Vatican”, they need to appeal to core gamers. They need YouTubers and social media talking about what they picked up at GameStop or what they did one afternoon at GameStop.

To accomplish that, GameStop has to do some soul searching because their current image is that of a soulless corporation that doesn’t care about their customers, their employees, or their product.

Proposed Solutions

Executive Level Company Image
Executive level management should take steps to gain back some goodwill with the gaming community, seek feedback, and gather input on what their core customer base is looking for. I would look for opportunities to have CEO Sherman himself be a guest and take face to face criticism from YouTubers and podcasts. During these appearances, there shouldn’t be a hard push to explain or defend policies so much as taking opportunities to take the public lashings and listen to feedback directly. Keep in mind Sherman is new to the position. He’s the top of the chain, so he’s the right guy to get first hand input from the community. Another opportunity for this would be to hold a Reddit “TMA” – Tell Me Anything rather than Ask Me Anything where users can simply vent to the top dog of GameStop.

After gathering feedback, executive management would need to genuinely evaluate the information and determine what actions can be taken to address the issues brought up. Compile a plan and present it in a Letter to the Gaming Community, published on GameStop’s website and in GameInformer (assuming it’s still being published).

Gamer (Consumer) Advocate
I would also create a new position within the executive team akin to what Howard Phillips was for Nintendo. This position would not be interested in the company’s assets and profits, stock performance, or shareholder concerns. This position’s entire purpose would be to advocate for gamers to the executive staff and help guide decisions on what games to pursue for in-store promotions.

This position would also be responsible for analyzing every promotional program at GameStop and competition to evaluate potential for abuse. Believe me, we gamers figure out how to abuse systems and go to multiple sources for our own benefit. To succeed, GameStop needs to have incentive to be a primary source for purchases and trades.

Policies in Action
All executive management should undergo “undercover boss” type training as an assistant manager in store every so often to understand how corporate policy translates to in-store application on a day to day basis.

2. Value Employees
Desperate times call for desperate measures and the first step that won’t make logical retail sense would be to abandon standard retail thinking. Drop the quotas for selling GameStop Pro cards, drop the pressure for reservations, drop the numeric requirements to push these things.

Instead, incentivize these things. Employees should have a bonus structure for selling Pro Memberships, not quota requirements. Don’t push reservations at all. They’re seen with a growing negativity and many describe it as dealing with a “used car salesman.” The only exceptions are Collector’s Editions that typically sell out – but make them cancellable/refundable/returnable with ease (when unopened) as others do.

Consolidate Stores
I know this seems counter intuitive when talking about doing right by employees, but it’s a necessary reality for GameStop’s position. They need to close more stores and consolidate into localized, larger, locations.

Staff these stores with employees from the closed stores who were Managers, Assistant Managers, and Team Leads and pay them all at the team lead or assistant manager level rather than decreasing their pay. Treat your store employees similar to office jobs with more hours and better vacation, offset by lower overall headcount across the company. Employees who feel valued are more productive.

This consolidation factors into a later detail in the “Store as an Experience.”

3. Value Customers

Pre Orders
Core gamers have developed a more negative view of pre-orders. They are seen as a cash grab for a product that may not be worth it. Employees shouldn’t be required to push pre-orders and the pre-orders themselves need to be revised in how they work.

There should be no down payment required for pre-ordering a game. Best Buy doesn’t require a down payment. Amazon doesn’t require a down payment. Gamestop.com does not require the $5 down payment. The stores should not be required to take one either. An exception could be made for Collector’s Editions, but the above sources don’t require one on those either. If a down payment is taken, a full refund should be available in store credit or by method of payment for cancellation at any time or for unopened pre-orders that are returned within a set time frame.

Truly, however, the pre-order process itself should be redesigned. The Kingdom Hearts III PS4 is an excellent example. Pre-orders should be announced with a set window as far in advance as the manufacturer can offer. Partners such as GameStop should then take pre orders within that window – say 90 days of pre-orders – and then report their numbers back to the manufacturer. The total quantity across all retail partners should then determine the manufacturer’s production run. This isn’t entirely on GameStop, obviously, but they and other retailers should be pushing for a redesign of the process with the manufacturers.

Trade Value
GameStop is perceived as having horrible trade value. Some of this is unwarranted, some of it is. Either way, GameStop should make an effort to improve customer perception of their trade values with more transparency on how those values are determined.

Customers should get better trade value for complete games – disc, manual, and case with art for disc games or box, manual, and cartridge for older games. Likewise, disc only or empty cases and manuals should be accepted for lower value and returned to the corporate warehouse to be paired with other loose parts for a complete game.

Improve value wherever possible. Small towns and entrepreneurs at conventions often offer 50% of sell value for trade in. However, many will only take select games. GameStop’s volume should at least allow them to offer more than they currently do outside of promotional deals. Arguably, a solid trade policy should make trade in promotions unnecessary.

Price Value
Current online selling trends should more quickly be reflected in GameStop’s prices. The database GameStop uses needs to become more agile to respond to shifting trends.

Condition should affect the price of games. Managers, and even some employees, should be authorized to adjust prices in their stores, offering discounts based on condition. This is big for retro games and would give an advantage over some retro-focused chain competition.

Price aggressively on retro games. Most collectors and even many core gamers, are now very aware they can check game price values on eBay with sites like Pricecharting and GameValueNow. GameStop should be targeting to undercut these averages by 10% off the shelf. From the buyer’s standpoint, this puts their price on even footing to eBay after sales tax and for GameStop is equal to what a seller would actually net through eBay.

Opened games should be treated as used, even if it was a display copy that never left the store. For every shipment of games, one copy should automatically be written down as a used copy and kept for in-store demos and allowing customers to try a game out and sold as the final copy at used price.

Offer more transparency on pricing and be more sensible about it. A game on clearance should not be $5 or $10 off the original full value price. Likewise, a used game should at least be $10 off even the week of release. Similarly, used prices should never be higher than new prices and if they are, the reason should be clearly understood, such as a publisher mandated reduction on new copies for a limited time.

4. Product Value
This is an area that GameStop is absolutely abhorrent and should not only take great strides to fix, but should also issue a statement and public apology for its undervaluing of its own product.

Retro games have been sorely undervalued by the company historically. Boxes and manuals should never be thrown away, but there are many former employees who report they regularly are for retro games, especially hand held games. This should change immediately. Some retro games have boxes and manuals that are worth more than the game itself and GameStop has thrown away profits in this regard.

An example I’ve seen was the NES game Metal Storm. During a B2G1 free sale, a customer purchased Metal Storm for around $100 and was elated to get it with the manual included. The manual averages $65 on Pricecharting at the time of this writing based on eBay sold auction averages. The box averages $100 by itself.

The website needs to be updated, along with the database, to reflect an improved value of the product. Stock should be identified into categories:

• Disc/cartridge only
• Disc with case/cart with box
• Complete – Disc/cart with manual and box or case with artwork
• Pricing adjustments should be made based on condition (damage to label/art/box/manual) and noted on the website’s listing.

Problem #2: Competition

Nintendo, Microsoft, and Sony are no longer simply suppliers, but are now direct competitors and GameStop has to pivot their thinking and perform a very careful dance. They cannot directly attack the big three, but they have to view them as competition that must be outperformed in order to draw customers back to the store for physical games as opposed to downloading from digital store fronts. In addition to these three, you’ve got standard retailers that have always been competition as well as the online behemoth of Amazon.

Value of Physical
GameStop’s lifeblood is physical games and the digital stores are competition. The market may continue to shrink and become more niche, but consolidated stores should offset that. As such, GameStop has to get better at emphasizing the value of physical media.

• Physical games, even standard copies, will continue to be more likely to become collector’s items, such as has happened with Job Simulator on Playstation VR.
• Physical discs allow more data to be installed to a console faster for those in areas with slower Internet.
• Physical discs retain some value of being able to be sold or traded in while digital offers no such benefit (at least for now).

Retro Games
Retro games have an entire collectors market on their own, defying digital versions of old games despite being readily available. Retro gaming will likely maintain a market until approximately 5 years after a console generation goes fully digital as people will feel some nostalgia for the games they grew up with and the trend for retro collecting today will likely continue through console generations that had physical copies.

Physical Retro Games are sought after in local stores, retro focused chain stores, and pull in thousands of attendees at Retro Game Conventions. YouTube channels focus on retro games and content creators become small time YouTube celebrities by celebrating gaming history with these titles. Retro Gaming and physical media is a strong area for GameStop to shift focus as digital becomes bigger with new releases.

“New” Retro Games
In addition to this market of existing games, GameTrust offers GameStop an avenue of currently unexplored potential for “new” retro games. If GameStop can obtain a license for small print runs of games on NES, SNES, and Sega Genesis that were never released in the US, there may be a market for those. Thorough evaluation would be required to evaluate licensing costs, a localization department to translate the games, and the cost of manufacturing chips and cartridges to play on original hardware. However, it’s possible with GameStop’s size and the right spread of acquirements this could create a small, but profitable, market to get into.

Final Fantasy II, III, and V, for example, were never released in the US on their original systems. There are, however, fan translations that have been flashed onto carts and are sold at conventions. A legal, licensed, and official copy with Square Enix, especially with professional box, maps, and manuals, would likely have a market. If print-on-demand were possible, rather than large print runs, there may be more opportunities with lower risk here. Reproductions, basically bootleg versions, regularly sell for up to $60 for just a cartridge at conventions. Cartridges can be 3D printed, basic chip boards can be purchased online for around $4 whereas GameStop would likely be able to find a source for less in bulk and the same goes for chips themselves.

Limited Print Games
Companies such as Limited Run Games and Strictly Limited Games have sprung up in recent years and there are more out there now offering limited print runs of digital only games for PS4, PS Vita, and Nintendo Switch. It’s a major error that GameStop wasn’t the first to this market with GameTrust.

These limited print runs regularly sell out of 5000 copies within minutes. Utilizing the earlier proposed pre-order window resulting in determining a production run’s quantity removes much of the frustration and resentment gamers have towards these companies and the resulting eBay scalping that comes with them. GameStop could pursue their own division of partnering with smaller publishers to create physical runs on digital only releases or partner with existing companies similar to how Limited Run Games has done some limited partnerships with Best Buy.

Problem #3: Traffic to stores

Traffic to stores has decreased, largely attributable to the rise of digital gaming and online shopping. It’s easy to simply click a few buttons and download or order a game. GameStop has to look for ways to make it worthwhile to put in the effort to go to the local store.

Store Services
Hire staff that are capable of doing in-store refurbish and repairs on consoles, allowing customers to pay a down payment for the time to perform the analysis and diagnose the required repair. Once diagnosed, contact the customer with the quoted cost and let them decide to go ahead with the repair or pick up their console. If they choose to proceed, the down payment should go towards the cost of repair and they only owe the balance.

Invest is a high quality disc resurfacing machine and offer disc resurfacing for a reasonable price. 75 cents per disc would beat most other stores that offer the same.

Stores should be more focused on what they’re meant to be – Video Game Stores. Decrease emphasis on ThinkGeek products that aren’t related to video games. For example, Mario, God of War, Zelda t-shirts are a good fit for GameStop stores, as well as Overwatch statues or Sonic the Hedgehog figures. However, Chip & Dale Rescue Rangers are not a good fit (unless Capcom announces Rescue Rangers Remastered), nor are anime statues. Board games may be a reasonable avenue to expand to, however.

If ThinkGeek and GameStop must remain more entertwined, the proposed larger store footprint should be divided up so customers know where to go for video games, where to go for anime related merchandise, and where to go for general geek related merchandise.

All of this builds towards a retail store as an experience, but GameStop should go a step further in making the stores an experience that cannot be replicated with online purchases.

A few ideas:

• Every game in the store should be playable in a demo area much like kiosks used to be available in FuncoLand stores to try out games.
• Have a classic arcade cabinet in the store. If a customer beats the previous high score, they get a discount on one item
• Employees should be encouraged to speak their mind about games, but trained to do so without creating a negative experience. If a game is bad, it’s in the company’s best interest to inform customers. If a game simply isn’t the type of game a particular employee enjoys, they should be able to voice that while recommending another employee to speak to about that type of game.
• Ideally a store would have a team with a variety of genre preferences – the MMO expert, the FPS expert, etc.
• Stores in rural areas with slower residential Internet should set up LAN areas where Internet can be rented by the hour and allow customers to play online games

The final point I would make about the experience is in regards to competition. GameStop should absolutely evaluate the area for small local shops that offer retro games. If the area has a number of them, do not push retro games in that area’s stores. Retro games are a finite resource and they do get harder and harder to find with time. Don’t compete with local stores and don’t be seen as driving them out of business. In fact, let employees in those areas encourage customers to check out local small businesses. Meanwhile, bring GameStop’s retro game focus to areas with no other alternatives. It’s another decision that seems counter-intuitive to stock investor thinking, but in the long run, it will be better for all parties in the retro market.

PowerUp Rewards
I would suggest some changes to the PowerUp Rewards membership as well. The purpose of the card, from GameStop’s perspective, is to encourage customers to shop at GameStop while the customer’s perspective is to get the best deal.

In May it was announced that the Pro Membership would be changing from a 10% discount on used games to a $5 off coupon once a month, which has to be used in that month along with an increase to $20/year cost. The first thing I would recommend is GameStop freeze all memberships from expiring and announce a new complete rework of the program.

First, with the earlier suggested equipment in place, offer 5 free disc refurbishes a month. That’s ~$5 value per month on its own and costs the company next to nothing.

Evaluate Best Buy’s rewards points system. PowerUp already earns points per dollar spent. Allow those to accumulate for a $5 gift card ever x number of points (Best Buy’s is every 250 points). Customers can bank their points to keep saving up or use them as they are acquired. This ultimately means a customer can spend and bank points for years until they have enough to buy a brand new console on release day completely with points.  Letting customers earn points on used games to build up gift certs to use on new games ultimately means higher profits for GameStop and “free” new releases for customers.

I would also suggest categorizing games for a progressive membership discount. This would let members get larger discounts on some games and potentially help the company clear out older inventory that doesn’t sell. For the right price, many gamers are willing to pick up a random game to give it a try and this could help move slow selling games without going fully to clearance.

Conclusion

While none of these things are a magic answer to GameStop’s problems, some require analysis that can only be done from within the company, and some may prove cost prohibitive to implement, I do think a lot of these would contribute towards turning the company around.

I know a lot of people just want to see GameStop go under, but I truly believe they would simply turn their distaste for GameStop towards other retail locations, including local stores that have no choice but to utilize some of the policies GameStop uses. Many consumers don’t understand the business side of these companies and the realities of their expenses and costs that have to be taken on to keep the stores operating.

However, I do also believe that if GameStop truly put in the effort from the top down to improve itself, make itself the modern store gamers fondly (if sometimes inaccurately) remember FuncoLand to be, and genuinely work to be a better company for its employees, customers, and the industry itself, they would be embraced once again…..eventually.

The question is whether or not they, and the stockholders, are willing to invest the time and effort and if they can reach that point of being accepted by the gaming community again before it’s too late.