GameStop, the corporation many speculated to be the next Blockbuster, has recently turned average everyday investors into millionaires. Like Blockbuster, GameStop’s business model has been struggling to compete with online markets; that is, until their stock surged in January 2021. However, the question remains as to how sustainable this surge is for GameStop’s future.
The company rose from an average stock value of $8 in 2020, to over $350 in a single day late January 2021. Brockport currently has two GameStop stores, and six total in the greater Rochester area alone. Understanding the reason for this significant peak in stock value, and how it correlates to the actual value of the business as whole is no doubt important to the future of the retail job market in these communities.
The Reddit group known as Wall Street Bets spear-headed the plan to purchase GME stock shares in order damage investment firms like Melvin Capital who attempted to short this stick earlier in the year.
Legal proceedings are currently in process to determine if the Wall Street Bets forum is at fault for market manipulation, as this effort to inflate the stocks’ value appears coordinated. Martin Dallas, a regular user within the Wall Street Bets community, agrees with this sentiment.
“Guys on there did it for a lot of reasons,” said Dallas. “I grew up buying my games from GameStop, so I wanted to help them out. But also, it really screwed over a bunch of rich guys, and I think that’s why most of the guys on Reddit did it too. If that’s manipulating the market, then I say fair game. They do it all they time to us, so we did it to them.”
But while many of the forum posters attempted to save GameStop from going out of business, it seems that they may only be delaying the inevitable. GameStop has closed approximately 1,462 of their brick and mortar storefronts since the beginning of 2019, and while their yearly earnings report shows substantial sales, experts suggest that their business model is not sustainable in the E-commerce ecosystem. Chair of the RIT business administrations department John Striebich suggests that a complete shift in business model is necessary if GameStop wants to survive in the current market.
“Let’s look at their primary money makers, and their primary competition. Now, I don’t play video games, but the majority of their sales come from used games. GameStop makes a fraction of their money by selling new unopened games. They’re in the resale market. If you buy a game for $40 new, GameStop only takes away let’s say $15 of that. But if you buy that same game used for $20, GameStop gets the whole $20” Striebich says. “For a while, that was a great deal. People would be willing to come down and buy their games in person for such a discount. But in the age of COVID and online gaming, folks aren’t so keen to leave their living room when they can just stream the game from home.”
Professor Striebich went on to explain his reasoning as to why the company cannot be saved by the recent influx in stock value.
“No, it’s not sustainable, right now at least. That stock money is really not substantial in the grand scheme of it. You can inflate a tire all you want, but if it’s got a bunch of little holes in it, you’re just wasting air.”
Employees at GameStop are facing a similar struggle, knowing the company is planning to close stores, but not being sure if they’ll have a job within a years’ time. GameStop currently employs roughly 60,000 individuals nationwide. The more stores continue to shut down, the worse the entry-level job markets becomes in communities like Rochester NY.
“I was really worried when COVID hit,” Said Whitley. “I mean I wanted to keep working, but the CEO literally tried to say we’re an essential business, which is BS. They wanted me to be out here on the front line selling video games during a pandemic, sending us emails saying that we’re all a team and how valued we are. Now it’s like, I don’t know if I’ll have a job in a few months. I know a lot of people who work at stores in Rochester and they’re good people. If we go under, like, what are they gonna do? It’s just GameStop obviously, but like, people are drowning and the system doesn’t seem to like throwing life rafts.”
At this time GameStop has not made plans to close down any stores in the Brockport area, but stores in Buffalo, Henrietta, and Syracuse have all permanently shut their lights off- a worrying sentiment for Whitley and many employees like him. In a year with the highest recorded national unemployment rate in American history, losing a large retail chain would be a significant economic hit. GameStop workers can only hope that this recent surge in stock value enables the company to make those necessary structural changes to stay afloat.