Physical stores still play a role, particularly for GameStop’s significant used game business, however they have been slow to embrace online gaming. GameStop is reliant on game publishers to release new compelling games, and increasingly these are being delivered online. GameStop needs to go much further to embrace online selling and digital game downloads.

Physical stores will not disappear but the manner of shopping and purchasing has and will continue to change. In-store there is likely to be a demand for retro games, new games, and in-store demonstrations. Stores need to offer in-store purchasing, delivery, and curbside pickup. In addition streaming services are increasingly important. GameStop will need to do all of these or become irrelevant.

There are certainly a lot of parallels to be drawn to Blockbuster Video back between 2000 and 2008. GameStop had enjoyed tremendous success with its physical stores given that online bandwidth had not yet allowed most console gamers to switch to pure online play. However as internet speeds continue to increase into homes, games are increasingly switching to downloadable formats. Because GameStop itself is not a game content producer, they need to find creative ways to demonstrate their value to their customers and suppliers. I agree with their shareholder who is pushing for a much stronger and dedicated push into online. The stores as they exist today will be a relic within a few years (or less); however, continued experimenting with different gaming niches and concepts may be able to net value out of a greatly reduced number of locations.

Online gaming is fast approaching the $200 billion mark. Physical consoles do not require a physical store to purchase, although there are advantages to test driving a new device in a store setting.

However the increasing share of mobile gaming, and Google’s announcement of cloud gaming service Stadia, undermine the demand for physical stores. Used consoles are easily discovered and sold online through several selling platforms. Bottom line, the shift to online is permanent, the physical footprint of games is smaller, and all growth and dominant future revenue will be online.

My son is a gamer and a good part of his childhood was a weekly visit to stores like GameStop. Nowadays he only goes to the store if he wants a new console or accessories and doesn’t want to wait for online delivery. I like that the new stores will be geared towards allowing shoppers to try out new games and interact with other gamers in person, face to face.

History shows us two things. First, it’s no surprise GameStop is struggling — a big part of the physical inventory that was successful for them has become digital inventory. Second, while it’s not clear where they can find financial health, digital sales are NOT the answer to their challenge.

Their board needs to move beyond the archaic idea of the digerati that they should “just move online.” GameStop has benefited tremendously from brick and mortar and there is no evidence they could survive without it.

What should they do? Find to make brick and mortar work within the world of digital game distribution. Not easy. But that’s their only option for success.

Simply put, they aren’t important at all, at least in terms of selling content. Gaming has moved on to streaming, and streaming has no “returns.” Like everything else, there will eventually be a nostalgia collectors’ market for physical games, but it won’t scale. The only thing physical stores will be able to do is sell cutting edge hardware … if they can access it … and create collective in-person gaming communities, although gamers already have communities online, so it’s hard to imagine how the person-to-person “hook” would work. So, yes, I think the only way GameStop survives is it focuses on purely digital product.