A year ago GME stock was trading at around $16. Today it's hovering below $5. GameStop stock is down 2% today and has taken a shellacking over the last five years.
The age of brick-and-mortar game retailers is coming to a close. It has been on its last leg for years. Game store chains have increasingly closed over the past decade. Even huge chains like GameStop have faced mass branch closures at various times.
GameStop has lost a bunch of its expected holiday sales. This has prompted the closure of even more branches and a decline in the value of their stock. Though the death of brick-and-mortar game stores has been on the horizon for years, 2020 might be the year it really happens.
A year ago GME stock was trading at around $16. Today it’s hovering below $5. GameStop stock is down 2% today and has taken a shellacking over the last five years.
In June, UK-based retailer GAME was bought out. The company blamed a “negative retail outlook.” The new owners must close down more branches to remain profitable. With 40 stores closing, the total number of GAME stores will go from just over 250 to just over 200.
This new wave of closures is in-line with a general decline in physical game sales. In 2016, physical sales accounted for 26% of the market. Now, only 17% of the copies sold are physical versions. If things continue at this rate, physical sales could be as low as 7% by 2021.
GameStop has suffered particularly badly due to their reliance on physical locations. They’ve claimed this downward trend is industry-wide, but the data does not bear that out. Industry analyst Daniel Ahmad pointed out that Sony and Nintendo reported game sales are up year-on-year.
It is very possible that we will see the end of large-scale brick-and-mortar game retailing in our lifetime. It seems at the very least GameStop does realize that the market is heading this way. CEO George Sherman has outlined a three-point plan to save the business.
The first two points refer to streamlining spending and reducing prices on pre-owned games. Point three on this plan is to “develop new revenue streams.” It is this above the rest of the plan which will save the company, if it is going to be saved. GameStop should focus very heavily on digital game selling online. They also need to consider closing more stores and selling their physical stock primarily through their website as well.
No matter what the future holds, it seems likely that brick-and-mortar will continue to decline. If GameStop wishes to survive, they will need to rapidly change their outdated business model.