Is GameStop Going The Way Of Blockbuster With Its New ‘Toy-Store’?

Is GameStop Going The Way Of Blockbuster With Its New ‘Toy-Store’?
By Blubberboy92 (talk · contribs) (Retraced from original logo.) [Public domain], via Wikimedia Commons

When the direction a company moves takes them wholly away from their core business, there is a reason. That business has peaked and/or is in serious decline. Repairing iPads/iPods has nothing to do with selling DVD games. Now this??

Is GameStop Going The Way Of Blockbuster With Its New 'Toy-Store'?

GRAPEVINE, Texas–(BUSINESS WIRE)–Oct. 26, 2012– Holiday shoppers need to look no further for the perfect video game licensed present this season. GameStop Corp. (NYSE: GME), the world’s largest multichannel video game retailer, today unveiled a new store concept aimed at offering a unique and innovative shopping experience for the kid in all of us. Starting today, the company will begin the roll out of approximately 80 GameStop Kids holiday store locations in select malls throughout the U.S.

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GameStop announce the national launch of approximately 80 stores, starting at the Grapevine Mills Mall in TX.

From Angry Birds to Hello Kitty, GameStop Kids stores will feature an assortment of this season’s most sought after video games and accessories, video game licensed products, popular toy brands, and collectibles like:

  • Skylanders: GameStop exclusive Golden Dragonfire Cannon Battlepack, additional characters, throws, backpacks, carriers, and displays
  • Angry Birds: Angry Birds plush with sound effects, splat balls, mash’ems launcher pack, backpack clips, mugs, and coming soon: Angry Birds Star Wars plush
  • LEGO: Lord of the Rings, Stars Wars, and Harry Potter build sets, along with Marvel character build sets
  • Star Wars: Two-foot plush talking Chewbacca, key chains, phone cases, banks, and more
  • Minecraft: Minecreeper head, LEGO Minecraft Microworld, and foam pick axe

“We are always striving to make the shopping experience better for holiday gift givers,” said Bob Puzon, GameStop’s vice president of merchandising. “GameStop Kids takes that one step further by having the hottest brands and products that people of all ages can love – from Star Wars and LEGO, to modern favorites like Skylanders Giants.”

GameStop CEO, Paul Raines, announced last night at the annual Latino Leaders Maestro awards ceremony in Dallas, Texas that the first GameStop Kids location opens today at the Grapevine Mills Mall in Grapevine, Texas, with all other locations opening in the coming days and weeks

Seriously? Now, I’ve been into our local GameStop Corp. (NYSE:GME) more than once. Let me tell you, it is designed for kids. It is a video store for goodness sake, I’m not its demographic, my kids are. So, GameStop Corp. (NYSE:GME) Kids isn’t doing anything new on the Gaming front, it is just an effort to sell “licensed products and collectibles”. For those not aware, those are fancy words for “TOYS”. For what it is worth, go into any toy store, they also sell video games.

This is yet more proof their core business is doing a fast fade. Were it not, the emphasis here would be on video games, not toys.

With word out this week that Electronic Arts Inc. (NASDAQ:EA) was ecstatic over the new $AAPL iPad mini and was designing over 300 games specifically for it, one can see why GameStop Corp. (NYSE:GME) is racing away from the physical game model. But is trying to become a second-hand reseller of tablets/phones and now a mini Toys R ‘Us wise? Never forget ~50% of their profits still come from the “trade-in” activity of the used DVD business. Nothing they have done to this point has reduced that reliance. Spending the $$ to open 80 new locations for this is insane. Why not just jam the toys into existing stores? People do not go to a GameStop Corp. (NYSE:GME) for the aesthetics of the store, they simple go to get what they want and get out. Adding some toys in a location won’t deter those who are going (we know fewer and fewer people are going, so it’s not like people are making the stores crowded).

For those wondering if this strategy has been tried before, it has. Blockbuster in ’08-’10 started selling action figures, clothing, and posters of popular kids movies in an attempt to lure more business in the stores. They also added candy, popcorn, and cotton candy to complete the “movie experience”. We know how that ended…..

So I guess if we see GameStop Corp. (NYSE:GME) start selling MNST energy drinks so “you can game for 48 straight hours like a pro” we will then know they are officially following the Blockbuster model to extinction….

Updated on

Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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