The meteoric rise of the online marketplace in the 21st century has contributed to the collapse of many brick-and-mortar retailers. Once people figured out they could buy their books online, they stopped shopping at Borders. When people figured out they could have DVDs sent to their houses in the mail, they stopped renting from Blockbuster. Now as gaming shifts more towards digital downloads, a target has been put on GameStop’s back.
The notable gaming retailer has already felt the sting of the shift to digital in the last few years. During 2019 it was estimated that GameStop had to shut down 321 stores. It was expected that this number would be the same for the following year but the 2020 pandemic caused more closures than predicted with around 450 stores having to shut down. By the beginning of April 2021, GameStop is planning on closing over 1,000 stores. This will be more stores closing in the next couple of months than the last couple of years.
Despite the awful circumstances, GameStop was able to surge 1,500% in the last nine months. It’s hard to wrap your head around because it looks like a contradiction. How did the company report disastrous business findings yet become more profitable coming into the new year? While the surge can somewhat be attributed to the holiday sales and the rolling out of next-gen consoles, the most significant reason for the rise in GameStop stock is the addition of new board members.
Investor Ryan Cohen, founder of Chewy.com, bought a 10% ownership stake in GameStop. Other former Chewy.com executives joined the board with the intention of leading the gaming retailer to embrace e-commerce. This would mean going through with the planned closure of over 1,000 stores by the end of the fiscal year. This bureaucratic switch up caught the attention of other investors and the rest is history.
Even though GameStop was able to make a breakthrough in short-term growth, experts see this sudden surge as a short squeeze bubble destined to pop. The sharp rise has forced traders who anticipated its fall to invest into GameStop in order to prevent greater losses. This method only adds pressure to the rising stock, which could be bad news for anybody believing that GameStop can’t stop, won’t stop.
If GameStop successfully transitions into the realm of e-commerce, it is likely to survive as a brand. In order for that to happen, so many physical stores will have to drop dead and join Toys “R” Us in retail heaven. There will be Best Buys, Targets, and Wal-Marts for you to browse in but GameStop will always be the rightful home for video games. It’s a place which brought happiness to so many people and, more importantly, brought power to the players.