Economy

GameStop closures: Is this the end of brick-and-mortar video game shops?

The video game retailer will close at least 150 of its stores in 2017, as blockbuster titles are now available in big-box stores, on Amazon, and downloadable through consoles. 

This Aug. 28, 2013, file photo shows signage at GameStop Vegas 2013, in Las Vegas.
Al Powers/Invision via AP
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Gamers no longer have to look far or travel wide for the latest video games. But the availability of blockbuster titles at WalMart, on Amazon, or downloadable directly from consoles or other devices continues to undercut one of the most recognizable names in the industry.

After it reported fourth quarter sales declines in almost all of its segments on Thursday, GameStop announced it will close in 2017 at least 150 of its 7,500 retail stores worldwide. The Texas-based video game seller will instead open more of its other successful stores, which includes cellphone retailers such as Spring Mobile, and its Collectibles business, which includes the clothing and novelties retailer ThinkGeek.

GameStop’s closing of between 2 and 3 percent of its storefronts is the latest example of brick-and-mortar stores' suffering from online competition. To meet the lightning-fast expectations of Millennials and Generation Z (those born between 1996 and 2010), some big-box stores are reinventing themselves, turning their superstores into distribution centers where customers can retrieve online orders rather than wait for them to arrive in the mail. But GameStop faces a challenge unique to its industry: the ability to download games directly from a Playstation 4, Xbox One, smartphone, or tablet.     

"Not only are they getting hammered by the online retailers and big box that have an inherent cost advantage through no retail real estate footprint or a much larger footprint that they can leverage with other products, but the movement to mobile-based games is creeping up mightily," Larry Perkins, chief executive and founder of SierraConstellation Partners, told USA TODAY.

The sum effect was a drop in sales across almost all of GameStop’s segments. The company reported on Thursday that its hardware sales declined 29.1 percent during the fourth quarter, and new software sales fell by 19.3 percent during the same period, according to a press release. The retailer blamed weak sales of certain blockbuster video games released during the critical holiday period, as well as “aggressive console promotions by other retailers” on Thanksgiving Day and Black Friday.

"We encountered stiff headwinds as we completed the third year of the console cycle," said GameStop chief executive Paul Raines, according to USA TODAY.

But the headlines over the weekend were nothing new for the mainstay in the video game industry.  The retailer and others like it have suffered blows from both online competitors and consoles and other devices that have made games available directly online. For decades, video games were available on physical media like discs and cartridges, wrote Michael McGrail, chief operating officer at the financial consultant Tiger Group.  

Now, he wrote in 2013, “gamers download and stream content on the fly rather than head out to malls to buy games sealed in shrink-wrapped plastic.”

“Retail observers already cite a parallel trend — the downloading of digital books and movies — to help explain the demise of brick-and-mortar chains such as Blockbuster and Borders [Group],” he continues. “While it would certainly be premature to declare ‘game over’ for video game retailers, it is nonetheless true that recent trends for these stores have not been encouraging.”

Xbox and Playstation, for instance, now have digital stores on their consoles — the Xbox Marketplace and the Playstation Store — which allow gamers to purchase and download titles directly from them, sidestepping GameStop.

GameStop has seen success with its Technology Brand and Collectibles stores. In its report on Thursday, it said its Technology Brands business posted a 44 percent increase in sales during the fourth quarter, and its Collectibles business rose 28 percent. It plans to open 65 Technology Brand stores and 35 Collectibles stores.

But GameStop’s apparent struggles resemble those of big-box stores and other traditional retailers. J.C. Penney, for example, announced in February that it plans to shutter up to 140 of its department stores after a poor holiday season, joining names such as Macy’s, Sears, and Kohl’s, The Christian Science Monitor previously reported.

But other retailers are attempting to reinvent themselves in the face of a shifting consumer landscape. Earlier this year, WalMart announced its plan to invest more in its e-commerce operations in an effort to fend off competition from Amazon. The big-box store installed mobile payment systems for checkouts and established new online pickup and grocery services, the Monitor previously reported. WalMart paired these changes with a round of investments in e-commerce companies such as Jet.com, and a planned expansion of warehouses for online sales, in what market analysts describe as a model geared toward "the consumer of the future,” namely Millenials and Generation Z.

"These generations are constantly connected and inhabit an online environment where events happen in real time without them having to wait, and where social media enables them to dictate terms," London analysis firm Ovum wrote in a report this year. "However, by 2026, instant gratification … will have evolved into expectations of a seamless shopping experience across an increasing range of connected devices, in which immediacy and convenience are paramount."

Target announced this month plans to implement a similar model, offering a separate store entrance that includes self-checkout aisles and a counter for in-store pickups of online orders.

But video-game enthusiasts have said in the past that storefronts like GameStop could offer gamers something browsing the newest titles online or in a console app can’t.

"In my store we have three 50-inch plasma screens, we have all the consoles set up so people can try the games, and we hold competitions," Mark Harrison, owner of 24-7 Games in Maidenhead, Britain, told The Guardian in 2012. "It's all worked out really well.”