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Can GameStop's New Social Concept Stores Help It Bounce Back?

GameStop (NYSE: GME) is testing new store concepts in hopes of finding a model that can help it stave off its decline as the market shifts away from physical video game sales. In addition to concept stores built around retro-gaming and pop-culture hooks, the retailer is experimenting with turning some locations into social hubs -- creating places where gamers can use dedicated in-store gaming computers and consoles to participate in tournaments, contests, and other promotions.

Some of GameStop's social concept stores are seeing strong engagement, according to a report from GamesIndustry.biz. The trade publication also quoted Zach Shor, GameStop's head of innovation, as saying that the retailer is testing ways to reduce clutter in its concept stores, implementing a less-is-more approach to floor-and-shelf space similar to what's seen at Apple Stores.

Image source: Getty Images.

A turnaround for GameStop looks like a long shot

Video games are more popular than ever, but GameStop shares are down roughly 90% over the last five years -- and the company eliminated its dividend last June. The gaming market has been shifting to digital distribution, and it's having a crippling impact on the specialty retailer. GameStop previously thrived in part thanks to used-game sales and trade-in programs that kept shoppers engaged and generated great margins, but revenue and profits are slipping as gamers increasingly opt to download titles instead of purchase physical copies.

Featuring video game tournaments and social events at its stores is an interesting approach that could boost traffic and brand affinity, but it faces some substantial obstacles and would likely be difficult to implement at scale. Many of GameStop's retail locations aren't big enough to properly host social events, and a significant pivot to its new concepts could mean high expenses at a time when the company is trying to cut costs.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.


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