GameStop Or How Digital Transformation Could Have Prevented A Disaster

February 15 5 min read
GameStop Or How Digital Transformation Could Have Prevented A Disaster

By now, you can’t not have heard the story of the GameStop digital transformation, from the gaming retailer who jumped from a $1.15 billion valuation to $22.6 billion and kept us hooked to our devices like the will-they-won’t-they of business love stories. The coverage of this is absolutely everywhere and it speaks of the decentralized, community-oriented power we all have when we unite forces.

I get why this story alone is powerful enough not just to make the news, but to keep interested some of the world’s most influential people, including the world’s richest, Elon Musk. This fairytale where everybody takes sides to stick for the little guy is as unexpected as it is endearing.

But after all the jokes are made and all the memes have passed, what I think should be the bottom line of this magnificent turn of events is not how trees can revolt against the forest, much less the holistic anti-establishment perspective.

No. What truly bugged me throughout the development of this tragically misplaced business CPR is how unnecessary it would have been had the gaming magnate embraced digital transformation.

You’ll say ‘well this is a long way to a short idea’ and in part, I can only agree. However, the core struggle of the retail world is no novelty in this post-pandemic reality we’re still getting accustomed with. On the contrary, it’s something we should expect to see more and more often.

It’s going to sound like Darwin would pat me on the back, but I do believe that not all businesses were created equal. Not all businesses have the same resilience, the same ease of scalability, the same vision for the future and maybe, even more importantly, the modular and flexible processes that are so needed when coping with future-changing events. It’s not negotiable – some businesses are not meant to survive digitalization and while it’s a pity, it’s also perfectly natural.

My thesis, however, is that GameStop’s tragedy could have been avoided through (I want to say a little but I would be lying) lots of planning and through infusing their core business model with a tech layer that would have made it easier to stay competitive.

A fundamental tragedy of human nature is that we’re too in love with our ideas.

It’s pretty easy to make a case that GameStop’s fandom is truly the cornucopia of brand advocacy. The easiest way to check whether a brand has true fans or not is to see whether it represents something to them. And GameStop does. It is a combination of generational love intertwined with the freedom of fantastic escapism. Objectively, it’s pretty hard to beat that. The retailer is not just another store where you went as a kid and purchased Portal only to find that the cake is a lie, it’s the story of our teenage rebellion, of our day dreams and passions and the statement you made when you uttered the word gamer. An unstoppable force in our childhoods, it has now met its immovable object.

For a brand of such extended fandom, GameStop had one sin that the past year was not at all merciful with – it was smug.  Like every other good business that is a generational legacy, it thought that this too shall pass.

But digitalization is here to stay.

Of course, it’s easy to look at things from the sidelines, and I would never trivialize the amount of effort that goes into transferring a physical business into a digital product while keeping its identity alive. The irony is that the thought hasn’t occurred to the decision makers because of how much this brand represents. But as I kept reading about the way it spiraled back to life, I couldn’t help asking myself why not be bolder.

God knows GameStop tried. First, it expanded its business model and then, when the pandemic came, its digital sales grew by 519%. Which is a lot, but just wasn’t enough to compete with closing its 3,500 physical locations, and so the company lost over 30% of its retail.

Changes in market conditions can be tough on businesses like GameStop, especially since online services like Xbox Live, PlayStation Network, Nintendo eShop or Steam have taken up a huge chunk of the market.

A case can be made that efforts in keeping up with the times and transferring most of the business to the digital environment would have been a solid option.

The problem with this is that it would have required a powerful market shift in order to regain momentum.

But it still wasn’t impossible to do. I am in no way trying to come up with solutions after the fact, the bias of having gone through 2020 would give me lots of unfair advantage. But after the skyrocketing shares are said and done, what does strike me as important is the way retail can benefit from IoT, digitalization and a good general technological infusion. The GameStop digital transformation is proof of this.

Whatever the reasons for the GameStop digital transformation downfall, rethinking business models to accommodate intentional placement of digital tools that can optimize workflows and get rid of bottlenecks is a necessary introspection exercise for any business decision maker in the retail industry.

And we’re happy to help. So drop us a line and let’s get you out of these muddy waters.

Disclaimer: This post does not encourage stock gambling on behalf of our organization, and it is just a mere depiction of our vision for the future of retail businesses.