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How collectibles can ease GameStop’s headache

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Digital distribution has taken the world by storm. Every piece of media from music to movies can be purchased directly from online stores.

Digital distribution grew so quickly that even a company like Blockbuster couldn’t adapt fast enough to compete. In the video game industry, the story is the same.

Small video games stores are in deep trouble along with companies like GameStop. However, there is a market that GameStop has their hands on and it could completely change their luck through video game collectibles, like figurines, shirts, toy replica and things of that nature.

To understand why, we must dive into their annual revenue. According to Google Finance, GameStop Corporation has been on a steady decline. From April of 2016, GameStop market shares had dropped by 50 percent by February 2018.

This decline is not surprising considering how much of their revenue rely on physical video game software. According to GameStop’s financial reports in 2016, 29 percent of GameStop’s revenue was “new video game software” and 26.2 percent are “pre-owned and value video game products.” That equals to 55.2 percent of their revenue coming from physical video game software.

The problem was that digital video games are becoming cheap enough that it has become a more convenient alternative than going to stores. Not only that, GameStop has to compete with Amazon when it comes to selling games online as well. Pre-owned sales also declined by 8.1 percent, according to GameStop’s 2017 holiday reports.

On that same year, GameStop was forced to close 150 stores due to new hardware and software sales, according to USA Today.

Another emerging problem is the rise of video game subscription services, which is another form of video game distribution. Think Netflix but substitute movies with video games.

The most recent and revolutionary example of this type of service is the Xbox Game Pass. This subscription allows Xbox owners to download and play over 100 games. What separates this service from others is that it includes highly anticipated Xbox exclusive titles in its game library the day those games are released. This is extremely appealing for gamers that can’t afford to purchase newly released video games.

So, how can a company that is structured around sales of physical products compete against all of these factors? The answer might just be in the collectibles market. When analyzing GameStop’s fiscal year in 2016, their collectibles gross profit raised by 47.2 percent compared to 2015. According to the latest quarterly report by the company, collectibles sales had seen the largest increase at 17.5 million in gross profit in the third quarter of 2017. That is 49.7 percent increase since the first quarter alone. The only other increase was the sale of new video games which increased by 37.1 percent while the rest had seen decreases.

Even though collectibles only amount to 5.7 percent of GameStop’s revenue in 2016, a large profit margin should not be ignored by any company.

Unlike Blockbuster, GameStop has the time to adapt and the video game market has the flexibility to offer more than just software. Not to mention that they own the company, ThinkGeek which specializes in purveying video game and pop culture collectibles. The main problem about ThinkGeek is that it isn’t a recognizable brand, so it might not be a bad idea to completely integrate ThinkGeek inventory into GameStop stores.

The good thing about GameStop is that they are taking steps to adapt. Closing unprofitable stores was a great first step. Another thing that people would notice in your local GameStop is that a good portion of the store has shelves for just collectibles.

Some outlets even have glass cases for high end collectibles that are too precious to leave in the open. These are necessary steps to adapt in this market and I’m glad that GameStop is taking them.

Hopefully in the near future, GameStop will start stacking more collectibles in their shelves with varying quality and selections and expanding their online stores carry more collectibles. In other words, don’t be surprised to see more Batman figurines in a GameStop outlet rather than pre-owned video games for cheap.

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How collectibles can ease GameStop’s headache