GameStop stores play big role in digital sales

04/28/2014 10:51 AM

04/28/2014 10:53 AM

We learned a surprising fact about GameStop Corp. last week. The video game chain sells most of its digital content — video games or add-ons that can be downloaded online — not through its website, but inside thousands of stores.

That runs counter to the digital revolution that’s reshaping the retail scene, where shoppers are “showrooming” brick-and-mortar stores and then buying at home online where they can save a few bucks. But it says a lot about how the Grapevine-based retail powerhouse hopes to survive in an age when the shift to digital media has wiped out other retailers such as Blockbuster Video and Tower Records.

During an investor presentation last week, GameStop said it generated $724 million in digital receipts in 2013, reflecting downloadable content, and expects that to grow by 12 to 15 percent this year.

The really amazing part, said Rob Lloyd, GameStop’s chief financial officer, is that 95 percent of those sales occurred inside the company’s 6,400-plus stores. In many cases, he said, customers can’t find digital add-ons for games online or can’t figure out how to buy them, he said. So they come to the stores for help.

The trend highlights the continuing strength of GameStop’s brick-and-mortar stores, which are a neighborhood hangout for young gamers. The company spends heavily on training each year for its in-store “game advisers” so they can explain to customers what’s available. And the company’s highly profitable system of buying and selling used games, devices and equipment gives it an advantage on competitors.

“People are in our stores because they don’t understand what they want to buy,” GameStop CEO Paul Raines said in an interview with the Star-Telegram. “We’re an interesting company, and I bet the only one that’s selling hundreds of millions in digital content through a store.”

Brick-and-mortar remains central to GameStop’s strategy of gaining market share, he said. While GameStop plans to trim its video game store base by 2-3 percent each year, it plans rapid expansion for two small electronics chains it acquired last year — Simply Mac, which sells Apple products, and AT&T-branded Spring Mobile stores.

“We’re bringing the Internet into our stores,” Raines said.

— Steve Kaskovich

Life Partners sues optionExpress

At this rare moment in time, Life Partners and its longtime adversary, the Securities and Exchange Commission, find themselves on the same side.

Both are having problems with a subsidiary of Charles Schwab called optionExpress Inc.

Life Partners, a publicly traded broker of life insurance death benefits, announced last week that it’s suing the Schwab unit for allegedly creating and selling shares in Life Partners’ corporate parent, LPHI, which the controversial Waco firm never authorized. The practice is known as naked shorting.

The suit is based on findings spelled out the week before by the SEC in administrative proceedings that found optionExpress helped facilitate illicit short sales, according to a Life Partners news release.

Life Partners is usually at odds with the watchdog agency. Last year, in its second attempt, the SEC saw the bulk of its fraud case against the death benefits trader defeated in an Austin court. On Wednesday, Life Partners happily announced that the SEC’s attempt to have the court reconsider its ruling was rejected.

The latest action, it noted, didn’t affect the jury’s earlier findings against Life Partners relating to compliance issues — the slim victories secured by the SEC’s Fort Worth office.

Meanwhile, a Schwab spokesman said Life Partners’ suit is “completely unfounded and without merit,” and that optionsXpress intends to “vigorously defend against the lawsuit and expects to win.”

“OptionsXpress customers did not engage in the naked short-selling of Life Partners’ stock,” Greg Gable said in an email to us. While Life Partners alleges its stock price was hurt, “an SEC expert who already looked at the trading in this matter has testified that the type of trading done by the optionsXpress customer had no adverse impact on share price.”

Schwab did not own optionsXpress at the time of the trading and was not named in the complaint.

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