Can Microsoft Save GameStop From Going Bankrupt?
In recent years, the explosion of online retailing has not been kind to brick-and-mortar companies. During 2020, several traditional storefronts, such as GNC and JCPenney, have declared bankruptcy, and many others are on the cusp of financial ruin. The iconic video game store GameStop is among those on the verge of economic ruin; however, another industry titan is attempting to rescue the sinking firm. Microsoft recently announced a robust multiyear partnership with GameStop, which raises the question: can GameStop avoid going bankrupt? Let’s dive in.
In short, GameStop is on the brink of financial ruin. Sales have declined over the past five years, and the company reported significant losses in 2018 and 2019. The loss of revenue coupled with rising costs has forced GameStop to close over 300 stores in 2020. Finally, the company’s stock price has eroded from $47 per share in 2015 to $2.80 in early 2020.
Despite a valiant attempt to shed debt and implement a just-in-time inventory system, GameStop remains a troubled corporation. As consumers shift purchasing preferences to digital storefronts, GameStop’s benchmark of same-store sales has decreased by nearly 20 percent. If the company is unable to generate additional sources of revenue, GameStop could go bankrupt in 2021.
In Rides the White Knight
In GameStop’s most dire hour of need, Microsoft revealed a strategic and multiyear partnership with the video game retailer. On the surface, the union appears superficial and nonsensical; however, the details are intriguing. Although a large segment of the video game industry is shifting to digital storefronts, many players still prefer the brick-and-mortar experience. In an effort to cater to this crowd, Microsoft unleashed a series of upgrades to GameStop’s physical infrastructure:
- GameStop’s information technology will entirely shift to Microsoft software applications. Although the details are vague, GameStop will use Dynamics 365 to “empower associates with integrated experiences across business operations, which includes finance, inventory, eCommerce, retail, and point-of-sale.”
- GameStop employees are no longer facilitators of financial transactions. Instead, GameStop workers will utilize Microsoft Surface tablets as point-of-sale devices. This transition provides workers with increased consumer interaction.
- Microsoft will add connectivity for all GameStop employees through the medium of Microsoft Teams. The collaboration tool allows workers to freely share insights and ask questions of one another.
- Finally, GameStop will expand its portfolio of Microsoft products by offering subscriptions of Xbox All Access at no upfront cost to customers.
GameStop’s current Chief Financial Officer, Jim Bell, summarized the partnership:
We believe Microsoft’s integrated retail technology platform will enable the continued development of our frictionless omni-channel digital environment, providing customers with an exceptional cross-channel experience for all things video gaming.Jim Bell, GameStop CFO
Reading Between the Lines
What does the deal between Microsoft and GameStop mean for the video game industry? Although the details remain vague, data sharing is the core component of the partnership. Time will tell if GameStop can avoid bankruptcy, but fans can expect the following changes in the future:
- Shared Player Data: Microsoft and GameStop benefit from data sharing. Because GameStop is transitioning to Microsoft infrastructure, employees will likely have access to player-specific information, such as trophy achievements, subscriptions, etc… Players can expect GameStop employees to request gamertags and other personal information when visiting stores.
- Better Physical Inventory Management: Despite the industry’s transition to digital storefronts, a large percentage of the video game community prefers physical games. The Microsoft Teams collaboration tool will allow GameStop employees to communicate in real-time with other GameStop locations. If one location runs out of inventory, GameStop can provide fans with timely alternatives. This strategy should increase same-store sales.
- Microsoft Bundles: Finally, Microsoft benefits most from the relationship by cross-selling its bundle of software products. While Microsoft has authorized GameStop to sell subscriptions of Xbox All Access, players should anticipate GameStop employees selling subscriptions of Office 365 and other Microsoft products. GameStop continues to tout the Microsoft partnership as an opportunity for increased revenue streams, and the video game retailer will likely earn a percentage from the sale of each Microsoft product.
But we want to know what you think. Are you excited about Microsoft’s partnership with GameStop? When was the last time that you bought a game from the store? Do you think that Microsoft will save GameStop from going bankrupt? Let us know in the comments below and the social media links on the right. Also, be sure to check out our other news items on Pokemon, Modern Warfare, Capcom, Blizzard and more.
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