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Is Gamestop Going Out Of Business? Is the Company’s Plan Working?

Is Gamestop Going Out of Business? Some years back, gamers all over the country would gather outside of GameStop stores to be at the front of the line for a new video game release. Today, it’s not the same.

Why is GameStop Stock Going Down?

Speculative names, such as meme stocks, have fallen out of favor with investors. Retail investors who hold meme stocks appear to be disillusioned as well.

Because of a lack of buying interest from institutional investors, these stocks required continued buying support from retail traders.

To make matters worse, the Fed’s tightening has effectively ended the easy money party that was one of the primary drivers of the meme stock rally.

Why is GameStop Stock Going Out Of Business

Because several high-quality growth names are now available at appealing valuations, investors have shifted away from meme stocks like GameStop.

Finally, at its peak, GameStop’s valuation was unjustifiable. Markets got carried away with Ryan Cohen’s business transformation.

The shortened earnings call for the last several quarters, during which the company did not take any analyst questions, hasn’t helped matters either in terms of information flow.

GameStop has Closed Several Stores

GameStop Has Closed Several Stores

GameStop is developing a de-densification strategy. As part of that initiative, the company closed 449 stores permanently between October 2020 and October 2021.

GameStop has been expanding its e-commerce business, and most of its sales are now conducted online. They have transferred customers from closed stores to nearby stores or online for shopping.

Aside from permanent store closures, GameStop has been forced to temporarily close its stores in some parts of the world because of lockdown regulations.

Is GameStop Going Out Of Business? (10 Things To Know)

There has been news about Gameshop going out of business, but are they true? Read through to know.

1. Rise Of Digital Gaming

These days, video game purchasers prefer to purchase games digitally. Digital gaming is a convenient gaming method that involves purchasing games online rather than purchasing physical game discs or cartridges.

Online games are available for every video game console and computer. Many games are also available as apps for tablets and smartphones.

In 2019, the digital game industry generated $152 billion worldwide, with console game sales accounting for approximately 32% of total sales.

Digital vs. Physical Discs

Not only does buying games digitally save you a trip to the store, but it also eliminates the risk of losing or scratching the disc.

Digital games cannot be returned. If you damage or lose the storage device, you will lose the game (along with all of your other games).

You also need to make sure that you have enough space in your gaming system or hard drive to store all of your games.

Game Streaming Services

Game Streaming Services

You can not only download the most recent games, but many services are now offering game streaming services, similar to video streaming platforms like Hulu and Netflix.

For a small monthly fee, members gain access to all the games on the streaming service. For example, PlayStation Now costs $60 per year and includes 800 games.

Why purchase individual games when you can subscribe to a streaming service? The streaming service may not include the most recent games.

2. New Sales Strategies

The purchase and resale of used games provided a significant portion of GameStop’s revenue. GameStop buys used games from customers at drastically reduced prices, depending on the game’s popularity and availability.

Customers who use store credit rather than cash can get more money for their used games. GameStop resells the used game to other customers after purchasing it for a fraction of the price.

For a long time, GameStop’s business model has proven to be successful. This system, however, is reliant on the purchase and resale of physical games.

Additional Info on New Sales Strategies

The purchase and resale of used games provided a significant portion of GameStop’s revenue. GameStop buys used games from customers at drastically reduced prices, depending on the game’s popularity and availability.

Customers who use store credit rather than cash can get more money for their used games. GameStop resells the used game to other customers after purchasing it for a fraction of the price.

3. GameStop Stock is Fluctuating

With the dramatic changes in the gaming industry, many people looked to GameStop’s stock price to learn more about how well the company is doing.

However, the recent stock prices may leave anyone even more perplexed than they were before looking at them, as GameStop’s prices have fluctuated.

Following some significant losses, GameStop dramatically returned to the market early this year, with shares reaching $347.51 in January before quickly dropping to around $245 for the rest of the year.

Added Info on GameStop Stock Fluctuating

While this appeared to be good news for the company, many experts believe that the figures do not tell the entire story and maybe been overvalued.

Because of the volatility, the trading platform Robinhood restricted the purchase of GameStop stock, prompting some customers to file a Securities Arbitration claim.

However, an SEC investigation concluded that everything appeared to be legal. The stock is currently trading at $241.34, showing that it could maintain its evaluation for over eight months.

4. GameStop has a Digital Store

Experts believe the rise shows short-term success and may not show long-term sustainability.

Because of the volatility, the trading platform Robinhood restricted the purchase of GameStop stock, prompting some customers to file a Securities Arbitration claim.

However, an SEC investigation concluded that everything appeared to be legal. The stock is currently trading at $241.34, showing that it could maintain its evaluation for over eight months.

5. Benefits of Shopping Through GameStop

In order to remain relevant, GameStop must provide special services that you can’t get when you shop through Nintendo or PlayStation directly.

‣ Exclusive Deals

Sometimes, especially with new releases, GameStop must adhere to a gaming company’s pricing. In some cases, however, GameStop can set its own pricing.

There are “Buy One Get One Free” sales available. You can also occasionally find lower prices than at other retailers

When you look through the pre-owned games, which many gaming companies don’t sell, the deals really stand out.

‣ Knowledgeable Staff

Not everyone understands video games and the average GameStop customer.

You might game as a hobby or purchase a gift for a friend or family member, but you are unaware of the most recent releases.

An experienced and knowledgeable GameStop employee can answer your questions and even make recommendations.

‣ Preference for Physical Games

Preference For Physical Games

Some people are hesitant to purchase games online for a variety of reasons. If you’re buying a new game, you might prefer a physical version so you can try it out and possibly return it if you don’t like it.

To reduce the likelihood of piracy, they sold most digital games “as is” with no return option. Gamers on a tight budget may prefer the sale options and lower prices of preowned games.

‣ Gamer Community

The digital age allows us to speak to people online. However, there’s nothing quite the same as face-to-face human interaction. GameStop creates a community for gamers.

When these gamers, who may not always feel included in other stores, enter GameStop, they enter a safe haven with other gamers.

To encourage people to continue buying from them, GameStop might host local events and form a gamer’s club.

‣ PowerUp Rewards

If you frequently shop at GameStop, you may benefit from a GameStop PowerUp Rewards Membership. Access to all digital issues of GameInformer magazine costs $14.99 per month.

The membership costs $19.99 per month if you prefer physical copies of recent issues. Besides the magazine subscription, you will receive the following benefits:

  • $5 monthly reward
  • Extra trade credit
  • $10 for signing up
  • Early access to select games

6. GameStop Stores are Closing

GameStop announced plans to close 1,000 stores by March 2021 at the end of 2020.

The closures were justified by GameStop’s CFO, Jim Bell, who stated that the move “will allow us to more efficiently and profitably service our customers.

The overhead costs associated with maintaining the stores appear to be insufficient to justify keeping them open in many locations.

While many people interpret the store closures as a sign that GameStop is doomed to become the next Blockbuster, they may actually show something more positive.

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More Information

Closing stores shows GameStop is not giving up. GameStop appears to be restructuring itself to recoup its massive losses.

GameStop reported a staggering loss of $485 million in 2018 and $83 million in 2019. They last turned a profit in 2017. See the GameStop store locator page to see if there is still a GameStop near you.

7. GameStop Made Poor Investments

GameStop Made Poor Investments

We all bet on the wrong horse from time to time, which makes it even more important to diversify investments so that if one fails, you still have the others.

Unfortunately, GameStop appears to have put a lot of money on the wrong horse.

‣ Spring Mobile

GameStop purchased 90 Spring Mobile locations to stay relevant and branch into a somewhat similar industry, with plans to take over the cellphone game.

They did not, however, anticipate how competitive the market would be. Most people already own cell phones.

When they need to upgrade, they’ll most likely go to their cellphone provider rather than GameStop. People are keeping their cell phones for longer periods of time.

The ambitious plan ended up being a financial disaster. GameStop recently sold Spring Mobile to Prime Communications in order to free up resources for video games.

‣ ThinkGeek

ThinkGeek was a retail brand dedicated to geek culture. They mostly sold toys and nerdy items like computer parts.

Unfortunately, ThinkGeek did not gain enough traction to remain viable. In 2019, they shut the website where they sold their products down.

Some limited products are still available on GameStop’s website and in their stores, but the selection is limited.

‣ Vice President Stole Millions

Sometimes a company makes a poor investment in a person rather than a company. A poor investment for GameStop was a man named Frank Olivera, who rose through the ranks to become vice president.

A scheme involving Olivera billing GameStop as a fictitious vendor called Cloud Communications and then keeping the payments unraveled in 2012. (on top of his already substantial salary).

In the end, Olivera could get $2 million. He’d be apprehended and sentenced to four years in prison.

8. Losses Affect Salaries

As GameStop struggles, everyone, including executives and board members, must make sacrifices. Due to recent losses, GameStop can no longer afford to pay the high salaries it once did.

Individual directors will actually see a 28% pay cut from the previous year. Unfortunately, the pay cut and store closure can cause panic and low morale among the 17,000 part-time and 1,200 full-time employees.

9. Lack 0f Funding

You probably heard the phrase that you need to spend money to make money. Unfortunately, GameStop hasn’t had a surplus of cash flow to invest in its business practices.

‣ Marketing

Customers enter stores because of advertising. How else would we know when the McRib will be available again at McDonald’s?

Because of limited funding, GameStop released little marketing material, such as commercials. They only launched three new advertising campaigns in the previous year, spending less than $100 million.

A company’s marketing budget will only be effective if it implements an effective marketing strategy that includes commercials, print ads, and digital marketing techniques.

‣ Technology

GameStop was technologically behind a video game company. Many customers, for example, complained about the online store’s glitches and difficulty making payments.

While they accept PayPal, they do not accept popular emerging payment methods such as Apple Pay or cryptocurrency.

They intend to invest in upgraded systems in order to upgrade the company.

10. GameStop isn’t the Only Company Affected

The decline in in-store shopping has affected more than just GameStop. Other well-known brands have been affected, which may surprise you.

Why GameStop Could Go Out of Business in the Digital Age

Why GameStop Could Go Out Of Business In The Digital Age

Many gamers’ lives have revolved around GameStop. The bright red and white sign served as a symbol of their gaming needs.

However, GameStop has been on the rise, with various ex-employees coming forward to discuss their experiences. Here is some reason GameStop could go out of business in the digital world.

1. Lacking Content

GameStop has always had a lack of content in its stores, and the years have only gotten worse. Sony removed all digital content from GameStop stores in 2019.

That was a tremendous blow that aided the transition to digital. Customers were flocking to the stores to get downloads because of promotional offers or PowerUp Rewards points.

Without those perks, it was preferable to stay at home and avoid wasting gas. Other digital items, such as PC games, were previously difficult to get, and some games offered bonuses such as discounts if pre-ordered through a digital store.

It’s no surprise that digital gaming is on the rise, but do customers realize how far it’s come? Back in 2009, when GameStop was profitable and digital gaming did not have the market share, it does now.

Fast forward to 2018, and the market has drastically changed. Only two years ago, physical games accounted for 17% of the market.

Meanwhile, digital games accounted for 83 percent. This trend is only going to speed up as internet speeds improve.

3. Gamestop’s Market is Shrinking

GameStop closed 321 stores in 2019 alone, with more planned by the end of 2020. The company’s sales have revealed that it is no longer as profitable as it once was, and this is showing.

With fewer people having access to a nearby store, switching to an online platform has become easier.

GameStop is also attempting to rebrand some of its stores, with some focusing on collectibles rather than games. This could be detrimental if some gamers cannot locate a store that sells games in their area.

4. A Growing Digital Marketplace

Digital gaming is becoming more accessible and affordable than in the past. Part of this is due to Microsoft’s Game Pass.

This system allows gamers to pay a monthly fee to play any game that has been added to the Game Pass, and it is expanding to include new games.

Future titles such as Halo Infinite will be available on Game Pass from the start.

5. Streaming Services

Streaming Services

Games, like movies, are available for streaming. PlayStation Now, for example, allows gamers to stream or download some of their favorite titles.

This is a market that GameStop does not currently have access to. PlayStation Now costs $60 USD per year, or $5 per month, and allows you to play both older and newer games.

Microsoft has announced Project Xcloud cloud, which will be available later this year for free to anyone with a Game Pass Ultimate subscription.

6. World Events

The world’s current situation has not been kind to GameStop. COVID-19 has forced many businesses to close and lay off workers.

According to reports, GameStop’s e-commerce sales have increased over the years. This would be fantastic, except that reports show they had a net loss of more than $160 million.

Because of lockdowns, the company had to temporarily close almost all of its stores. They only provided curbside pickup.

7. A New Business Model

GameStop requires a new business model that is more focused on digital gaming. Sometimes, test stores that focus on being more of a gaming cafe style of the store have been opened.

However, the business model is flawed. GameStop is heavily reliant on trade-ins. They make about 46% profit on each used game they sell.

There are they purchase fewer trades because of fewer physical games. This business model appears doomed to fail in the digital age.

8. GameStop’s Crazy Stock Prices

A group of daytraders recently banded together to boost GameStop’s stock price to levels not seen in a long time.

The stock price skyrocketed to over $400 overnight. Many media outlets covered the increase, but just because the stock is up doesn’t mean the company will survive.

If the store’s brick and mortar do not change to reflect the higher stock value, the stock price fluctuation could actually harm it.

FAQs About Is Gamestop Going Out of Business

1. Is GameStop Closing Stores in 2021?

 Overall, GameStop expects to close around 1000 retail stores by the end of March 2021, which will benefit the company’s outgoings but will also result in the layoff of hundreds of workers during one of the worst economic periods in recent history.


2. Will GameStop Go Out of Business?

GameStop announced plans to close 1,000 stores by March 2021 at the end of 2020. The closures were justified by GameStop’s CFO, Jim Bell.


3. Will GameStop go Out Of Business Because of Amazon?

No, GameStop will not go out of business because of Amazon. It will go out of business because it’s a business model is flawed.


4. Why Did the Mass Buying of GameStop Last Week Fail?

The reason the stock values fell is that eventually people who were riding the bubble up, sold off, get their money.


5. What Does GameStop do with Used Games Used Don’t Sell?

They backstock them in bricks of five until another store needs it or a holiday sale depletes it.


6. What Does GameStop Do With Old Games?

They are for sale. Gamestop and most other video game retailers make the most money from used games. The markup on new games isn’t much, probably around 10%, at least when I was managing a game store 15 years ago.


Added FAQs 

7. Does GameStop’s Price Match Amazon?

No, Gamestop does not match Amazon prices. However, Amazon prices fluctuate, because average people, like you and me, sell those items and have price control.


8. Why Does GameStop Give Such Little Money For Trade-Ins?

It comes down to profit margin. GameStop makes 10% off the sale of a new game, so a $60 game would be a profit of $6.


9. Does GameStop Throw Away Old Games?

With Gamestop dealing in trade-ins as an enormous part of their business, those trade-ins are handled one of three ways: They’re sold as-is, they’re refurbished, or they’re tossed in the trash.


10. Does GameStop Have a Future?

The gaming retailer claims to be evolving into a more general technology company. GameStop has revealed its long-term goals, and they don’t all revolve around selling video games.


GameStop maintains a significant presence in the video game industry. However, with the shift to digital gaming, many people are wondering how long the organization will survive.

This ambitious and open-minded change philosophy suggests that, with the right idea, they can find their place in the modern retail market and thrive for generations.

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