Source: iStock | Jonathan Weiss
Is There Any Winning at GameStop?
GameStop CEO Matt Furlong is out and Ryan Cohen, the retailer’s chairman, has been appointed executive chairman, effective immediately.
No reason was given for Mr. Furlong’s termination after nearly two years on the job. He was recruited from Amazon.com, where he ran the company’s Australian business. He previously served as Amazon’s technical advisor to the head of the North American division.
Mr. Furlong’s departure comes as the video game retailer just posted a decline in revenues and profits for its first quarter. GameStop canceled its quarterly earnings call with analysts. The retailer’s net sales were $1.237 billion for the quarter, down from $1.378 billion in 2022. The company recorded a net loss of $50.5 million, an improvement over GameStop’s loss of $157.9 million in the first quarter last year.
It’s unclear from the numbers why Mr. Furlong was fired. GameStop just one quarter earlier posted its first quarterly profit in over two years.
GameStop has been on a cost-cutting mission since Mr. Cohen, Chewy founder and erstwhile activist investor, was named chairman in 2021. Mr. Cohen, who first engaged with GameStop after taking a 10 percent stake in the company in 2020, once derided the company for operating a twentieth-century business model in the twenty-first century.
“If GameStop takes practical steps to cut its excessive real estate costs and hire the right talent, it will have the resources to begin building a powerful e-commerce platform that provides competitive pricing, broad gaming selection, fast shipping and a truly high-touch experience that excites and delights customers,” Mr. Cohen wrote to GameStop’s board in 2020. “This is the type of world-class infrastructure that was constructed at Chewy, which is worth multiples of GameStop’s current market capitalization.”
GameStop’s hiring of Mr. Furlong was part of the retailer’s remaking of its executive team by July 2021 with the company adding a new chief operating officer, chief financial officer, chief growth officer and chief technology officer from digital-led organizations including Amazon, Chewy and QVC. Several hires have since left the company.
Reuters reports that people close to Mr. Cohen say he is “very hands-on with GameStop’s operations and is a demanding boss.” Mr. Cohen, as his 2020 letter to GameStop’s board made clear, tried to turn the video game retailer into a version of Chewy before discovering that the chain’s stores were vital to its success.
Discussion Questions
DISCUSSION QUESTIONS: How much of the responsibility falls on Ryan Cohen for the progress and setbacks at GameStop going back to 2020? What type of CEO does GameStop need at this point?
Poll
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David Weinand
Chief Customer Officer, Incisiv
Neil Saunders
Managing Director, GlobalData
Meme stock or not, the fundamentals behind Game Stop have not changed. The challenges GameStop faces have not changed. And it may very well be like Ron Johnson and JCPenney, where the challenges now are so great that they may be insurmountable. I’m not sure that the most brilliant CEO of all time could come in here and remake GameStop in a hybrid, omnichannel, digital transformation world. There just can’t be that much runway left for them at this point…
We did a lot of work with Gamestop over the last five years. The challenge was that teams were not held long enough to truly have an impact on the business. When the door is revolving on a 6-12 month basis, that means the next person will have a different strategy and different approach. That’s not effective.
The reality is that as internet bandwith went up, the need for physical locations proportionately went down. Gamestop was the equivalent of Netflix “red envelopes” (remember those) in an internet world. Hard to fix.
GameStop knows its main business is challenged so it has increasingly grasped at various straws to justify its existence. This includes dabbling in the NFT market and previously signing a deal with now bankrupt FTX to offer gift cards that would allow purchasers to buy crypto currency. None of these side-hustles have good long-term prospects: most are built on the very shaky foundation of hype and do not provide the solid ground that GameStop is grasping for. The company needs to get its feet back on the ground and its head out of the clouds and look for real solutions to the problems it faces.
I had my first experience with GameStop last week. I was buying a gift card for one of my grandsons online. I am sometimes challenged with online use. My GameStop experience was beyond challenge. I had to call support twice to get the purchase correct. Apparently, they have yet “to begin building a powerful e-commerce platform.”
I imagine that saving GameStop has become a personal challenge for Mr. Cohen. I also suspect he is grabbing at anything he can to turn around the unturnable.
This should be a quick and painless process. There are lot of infrastructure issues it appears they need to fix (e-commerce should be a HUGE one) but it looks like they are throwing everything against the wall and see what sticks.
I was a very loyal customers for years, but once I had my unit, controllers, etc. , I really don’t have a need to go into a store. Reminds me now of the old Blockbuster Video stores.
Ryan Cohen laid out a clear strategy for GameStop in 2020: Optimize its brick and mortar retail footprint, hire the right talent and build out a world-class e-commerce platform. His success at Chewy should be GameStop’s playbook, though modified to leverage the value of the store network. GameStop needs a CEO who can effectively execute on Cohen’s vision.
This business model has clearly not worked in several years, but they stubbornly refuse to change course. In this age of virtual stores, shop-in-shops and in-game purchasing, it’s time to get out of the real estate business and reshape the company to match customer needs. The sad part is that there could be significant demand for their product, especially in the resale category, but they just don’t know how to sell it to today’s customers.
Game Stop has the delicate balance act between physical and digital e-commerce, with a higher importance ranking of physical stores than traditional multichannel retailers. In addition, their target market is very tech-savvy and is not willing to contend with a multichannel experience with lots of friction. Finally, to compound matters, the business is highly “hits” driven, and success comes from publishers as well as retailers. Add in an ever changing platform environment and you can see where the challenges come from.
The business requires long-term investment in digital transformation and a nimble business mindset. Feels like pulling the plug on the CEO so quickly may be a bit preemptive…