The Gamestop stock rally driven by Redditers Wallstreetbets helped the retail chain store selling video games CDs and consoles, sell &1.7 billion shares to investors. The whole idea was to save the retail chain fallen on hard times. But little of that money has reached the stores and its workers yet.
Chewy co-founder Ryan Cohen and GameStop’s largest shareholder joined its board in January and became chairman last month. He is all set to change the fortunes of GameStop. Cohen has been calling for a company shake-up since late last year, pushing for a shift to digital sales. He bought a 12.9% stake in the company in 2020 through his investment firm RC Ventures. He has brought about some major changes in the company with some new C-suite hires and some fires.
Earlier, GameStop announced that Cohen would chair a “strategic planning and capital allocation committee” to figure out the company’s future.
GameStop to use investment money for store revival
Three people with first-hand knowledge of his strategy said he plans to breathe life into the stores by investing in what customers want and improving how employees can serve them.
To better understand the situation, Cohen has been turning up in stores around the United States unannounced, or “ghost-shopping”.
The task is uphill. The pandemic has wreaked havoc with the already rundown stores—most closed for business in the early months of the coronavirus spread. The close-downs and late payments further constrained workers who were already drawing a minimum wage. Said one worker Pandiscio-Ferrero,” We got our hours cut to the point where it was only the manager and assistant manager working by themselves for about three weeks.”
DJ Hill, the manager of a GameStop store in a strip mall close to Pittsburgh, Pennsylvania, resigned in June after 18 years with the company. He was not happy with the direction the company was taking.
Cohen wants to turn GameStop into a gaming and entertainment retailer or the “Chewy of gaming”, with lower prices and faster delivery times on online orders than its rivals.
But GameStop is not an online store, unlike Chewy, the online pet commerce venture that he sold to PetSmart for $3.35 billion in 2017. Most of the gaming store revenue is generated in stores. Over the last 15 months, it has closed 811 stores, leaving it with about 3,000 U.S. stores and 1,600 stores abroad.
The 35-year-old has been met with dusty rundown stores with empty racks on his surprise rounds of the stores across the country. The employees, he said, were disinterested in selling. The “only differentiator” for GameStop was customer service and that needed to improve, Cohen has told executives and staff.
He has earmarked some of the investment funds for redesigning the stores and training staff, sources said.
Cohen plans to focus on customer experience and create specialized sections that would cater to hardcore video gamers and even youngsters with mothers with some gaming sections aimed at them. This would be in addition to GameStop’s traditional merchandise.
GameStop also plans to extend opening hours to serve gamers who tend to be night owls. The prices will be brought down to compete with Amazon and Walmart.
But not many are convinced that these plans will work. The retail industry is already experiencing hard times due to the Covid, and online transition to shopping.
Mark Cohen, the former CEO of Sears Canada and no relative of Ryan Cohen, said it would be hard for GameStop to reverse the trend of most video games being bought or downloaded online.
“It is an irrevocable move to technology-based acquisition of products. These folks (at GameStop) are not likely to be successful in the mid to longer term,” he said.
Wall Street analysts are skeptical as they believe the so-called meme stock rally has massively over-valued GameStop. Its market capitalization has surged to nearly $15 billion from a little over $1 billion at the beginning of January.
Also, GameStop has not reached the sales, supply and delivery efficiency of its online competitors. Cohen has started the process of hiring warehouses to ease the distribution process. In the last few weeks, it has signed up leases for a 530,000-square-foot facility in Reno, Nevada, and a 700,000-square-foot facility in York, Pennsylvania.
There are plans to bring back its customer service in-house. It was outsourced to the Philippines and Mexico. It is close to signing a lease on a 30,000-square-foot call center space in southern Florida.
A former Chewy executive, Kelli Durkin, has been roped in to overhaul the handling of customer queries with new recruitments and intensive training.
These changes are deemed necessary to turn around the failing retail chain that has a lot of nostalgia value for the gaming fanatics. But gaming has moved almost totally online, and for Cohen to attract new customers with fierce competition from online giants is an uphill task. And he may just lose the old believers too in the process.
