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Can pay raises and stock awards change GameStop’s trajectory?
GameStop is planning on giving pay raises and awarding stock to thousands of employees in an effort to retain valued workers and recruit talent to the video gaming chain.
The retailer will award stock to all its U.S. stores leaders and give raises to senior store staff, according to The Wall Street Journal. Store leaders will receive up to $21,000 in the company’s stock, vesting in three annual installments.
The Journal gained access to an internal memo from CEO Matt Furlong announcing GameStop’s plans.
“After spending a year strengthening our assortment, infrastructure and tech capabilities, we’re now focused on achieving profitability, launching proprietary products, leveraging our brand in new ways and investing in our stores,” Mr. Furlong wrote. “While we continue evolving our e-commerce and digital asset offerings, our store fleet will remain critical to GameStop’s value proposition.”
Mr. Furlong, who previously ran Amazon.com’s business in Australia and served as a technical advisor to the head of the North American division, was brought on last year as part of chairman Ryan Cohen’s strategy to transform GameStop. Mr. Cohen, the former co-founder and CEO of Chewy, has driven the push to drive GameStop’s digital transformation since first acquiring about a 10 percent stake in the company in 2020.
GameStop in the past year has added a new customer service center and leased more fulfillment center space. It has also launched a digital asset wallet and will soon debut a marketplace for trending nonfungible tokens (NFTs).
GameStop in June reported that its first-quarter sales increased eight percent with a loss of $157.9 million, compared to a loss of $66.8 million a year earlier. The company ended the quarter with cash or cash equivalents of $1.04 billion, up about $340 million from 2021.
“We set out 12 months ago to accomplish something unprecedented in our industry, transform a decaying brick-and-mortar retailer into a technology-led organization that meets customers’ needs through stores, through e-commerce properties and through emerging digital marketplaces and online communities,” Mr. Furlong told analysts in June.
“In the quarters and years ahead, we’re going to continue embracing change, putting the customer first and focusing on long-term stockholder value,” he said.
Discussion Questions
DISCUSSION QUESTIONS: How likely are stock awards and pay raises for store leaders to spur stronger frontline performance at GameStop? What is your assessment of the progress that GameStop has made in its transformation?
Poll
Loading …BrainTrust
Jeff Weidauer
President, SSR Retail LLC
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
Anything that GameStop offers their employees will be well-received, but just tossing a few stock options and a one-time bonus isn’t going to create meaningful culture change. The promises of a new future for GameStop were hyped and expectations were high. The business outcomes thus far do not match the expectations and the machinations and headlines created when GameStop became a meme stock were distracting. Management has a long way to go before GameStop is a well-oiled machine – if it ever can be.
If the law of supply and demand applies here, then offering perquisites such as higher pay (higher than whom?) and stock awards should improve the quality and the employment duration of store associates and thus everything that follows as a result.
GameStop needed a transformation in a big way. Some of the assortment refinement, store improvement, and operational measures were long overdue. That said, I personally believe boosting compensation to retain staff, motivate action, or inspire change is a long shot.
Compensation does help keep employees. The reason for stock options vesting over a period (in this case three years) is to keep employees from leaving. That said, it takes more than just a good comp package to keep good people. The culture and more has to be right for employees to stay.
Great comment, Shep. GameStop cannot survive long-term without a significant cultural shift and sweeping reinvention. The question remains, is there time enough to right the ship?
The best talent has already left for greener pastures, since GameStop ignored the stores and focused on internal initiatives for many years. The stock would’ve been a great incentive when the meme stock trend took off, but no one was thinking about the stores. As a former GameStop exec and creator of their loyalty program, I’ve been dismayed to watch the systematic dismantling of a powerhouse retail team and the elimination of a key level of leaders. They had all the pieces, but instead chose to focus on shiny objects.
It’s a nice gesture that will help with retention and therefore customer service. However other than being a meme stock, I am not entirely sure that GameStop is on a trajectory to success. A lot of its plans, like NFTs, are based on hype rather than proven commercial ground. Meanwhile, the core gaming category continues to digitalize cutting out the middle-man selling the games. I am sure there is a future around in-store gaming experiences, but that needs a lot more work.
GameStop is operating brick and mortar stores in a digital industry. There is no good reason for its stores to continue, so the company needs to create a compelling destination for gamers. The addition of stock options to retain employees feels like a shot in the dark, and I have to wonder if the three-year vesting will actually keep anyone engaged for that long. What’s missing is a long-term strategy to engage gamers and bring them in.
The stock awards to store leaders and raises to senior store staff are smart moves to help retain store management. However there needs to be additional perks for store associates that are the face of the brand. Without enough qualified and happy store associates, store revenues will suffer. GameStop’s initiative to become a technology-led organization that meets customers’ needs through stores, through e-commerce properties and through emerging digital marketplaces and online communities is another smart strategy. However it won’t happen overnight.
The effect of these moves Is hard to predict without far more in-depth knowledge of details. Certainly their return to revenue growth is encouraging but their losses are not. Becoming “tech led” is not encouraging as they need more reasons for customers to shop in their stores – not merely infrastructure. With this one it is hard to know what to expect.
Stock awards are great — if the stock is performing well. Pay raises always help recruit and retain top talent. But GameStop’s real challenge is that – perhaps ironically – the technologies responsible for its initial success have evolved in ways that threaten its long-term success. Streaming and the metaverse (as in VR, not marketing hype) will move gamers in new directions. So, long-term, GameStop will have to find ways to get ahead of the trends. Not easy, but not impossible.
I would have loved to have been the first to comment on the new initiative by GameStop. Someone at GameStop needs to go back to school and study Maslow’s hierarchy of needs and understand that for most people, money is not a key motivator, but lack of money is a key de-motivator. Pay raises and stock options will be a quick short-term fix but, in the long run will not be lasting.
If GameStop wants to raise the bar and attract great employees and customers, they need to be the place these people want to work and shop.
They need to build on the name. It should say GameStop, let’s have some fun, tie that in with great pay and opportunity, and they will have a winning strategy.
Much like offering restrooms or payday options other than paying you in cash, I’m sure they’re better off offering these than not offering them, but I don’t see them as — wait for it — game changers.