GameStop Finds Digital Success

In recent years, specialty retailer GameStop Corp. has been among the fastest-growing global chains, opening 388 new stores in 2009, more than 350 in 2010 and 285 new locations last year. For its current fiscal year, GameStop is ramping down organic growth, anticipating the opening of some 150 stores, in deference to building on its dominant presence in the multichannel PC digital download market.

The company’s total sales increased modestly in fiscal 2011, topping $9.5 billion, but its digital revenues grew an impressive 57% to $453 million. GameStop is projecting a strong showing in 2012 that will be led by the continued expansion of digital offerings, as well as growth in its pre-owned business and emerging mobile categories. Steve Nix, division VP and general manager of digital distribution at GameStop Corp., talked with Chain Store Age contributing editor Connie Gentry about the transformation and how the retailer is successfully leveraging “virtual” sales inside its brick-and-mortar stores.

Tell us about the industry’s evolution to multichannel PC digital distribution.

Sales of PC physical games started to decline in 2001. We initially thought customers were less interested in PC games, but as we began to factor in PC download sales, we learned that from 2001 to 2010, the category actually grew by about 15%; it just shifted to online sales. 

What has GameStop done to position itself in this growing market?

In the last year we focused aggressively on the PC download business and bringing customers into stores for digital downloads. We acquired Impulse, Inc., which we implemented to power PC downloads at GameStop.com, and we also acquired streaming game specialist Spawn Labs.

Additionally, we sell downloads through our GameStop PC App, and in 2010 the company purchased flash-based game portal Kongregate. Probably the most interesting thing that distinguishes GameStop is that now customers can walk into any of our over 4,400 [U.S.] stores and purchase PC downloads in the store.

But why would a consumer go into a store to download a video game?

I’m so glad you asked. A lot of our customers either don’t have credit cards or prefer not to use credit cards. In fact, 70% of customers buying digital content in our stores do not use credit cards. They purchase with cash, GameStop gift cards or credit from product they traded in to our stores.

But the other big reason is customer service — it can be very difficult for customers to find a product that they might be interested in online. Our associates are amazingly passionate gamers, and their expertise can be a big help to customers. For instance, we sell console DLC (downloadable content). When a game comes out like Call of Duty or Assassin’s Creed, there may be downloadable content in addition to the physical disc. We started selling the codes for DLC in our stores and it took off. Call of Duty Elite was a subscription purchase that entitled subscribers to several new pieces of exclusive DLC. GameStop was the market leader for selling that content across all channels thanks to the digital focus in our stores.

How do store operations and associates acclimate to the digital distribution model?

Digital programs are not only new for our customers, they are new for our associates as well. Our store operations team communicates to associates at multiple levels, including weekly emails describing new initiatives that include updates on digital. Also, we have employee-training programs that focus on PC downloads, including certification programs for our managers on particular platforms.

Do social media and mobile marketing fit into the digital distribution strategy?

Absolutely. We have over 4 million followers on our Facebook page and over 140,000 Twitter followers, so we definitely use those channels to drive both in-store and online sales. We send weekly emails to millions of consumers, particularly with special offers for the members of our PowerUp loyalty program. 

Do you have the same selection of digital downloads in-store and online?

Occasionally we will have a digital sale that is available in-store only. For the first few months, we had about 50 games available for download in our stores; but in April we launched a full library of over 1,500 PC games for in-store downloads.

All manner of content has gone digital. What is the key to GameStop’s success in embracing the digital model without sacrificing its store presence?

As I mentioned, there are advantages to coming into the stores versus downloading from a website. First, you get expert game advice from our associates. Second, the ability to use trade credits can significantly reduce your out-of-pocket cost. Finally, you don’t have to risk using a credit card online, which is a security concern for many people, and in-store purchases earn PowerUp Rewards points.

Is the international market for digital downloads comparable to that of the U.S.?

Definitely in Asia and Korea we see real growth in online models and in the “free to play” games. There is a fairly similar uptick in digital in North America and Europe, particularly in the Nordic regions.

What’s your favorite game?

Such a hard question! I’ve been a big fan of the Call of Duty series for years, but my favorite game of all time is Half-Life, which was the “Citizen Kane” of the gaming industry because it brought a new level of story into the genre that changed the way people thought about what video games could convey.

When you aren’t doing digital, what do you do for fun?

I love to play with my daughters, and I enjoy amateur car racing. In fact, there’s a 24-hour race coming up in May.