Downfall Era

• Failure to adapt to digital trends – GameStop struggled to transition from a physical retail model to the growing digital gaming industry. As more consumers shifted to downloading games and purchasing subscriptions like Xbox Game Pass and PlayStation Now, GameStop failed to establish a strong digital presence.
• Excessive brick-and-mortar presence – The company had far too many physical stores, leading to high operational costs. Many of these locations were competing with each other, and declining foot traffic meant they were no longer profitable.
• Overpriced leases draining resources – GameStop was locked into long-term, high-cost leases on stores that were underperforming. These financial commitments made it difficult for the company to pivot or close unprofitable locations quickly enough to stop the bleeding.
• Outdated business model – The company relied heavily on used game sales and trade-ins, but this business model was becoming obsolete as game publishers pushed digital sales and subscriptions, reducing the need for physical discs. GameStop failed to innovate or create new revenue streams to compensate.
• Overpaid executives, poor leadership – While the company was struggling, its executives were being paid millions in compensation despite failing to turn the business around. Leadership decisions lacked vision, and GameStop cycled through multiple CEOs in a short period, further contributing to instability and a lack of clear strategy.

Prior to 2021, GameStop operated primarily as a brick-and-mortar retailer, relying heavily on physical game sales and a well-established trade-in model. While this approach had long been a cornerstone of its success and identity, the company’s digital presence remained relatively weak. As consumers increasingly embraced online shopping and digital downloads, GameStop struggled to adapt its traditional business model to a rapidly shifting marketplace.

Over time, these changes contributed to steadily eroding sales. The billions in revenue generated by a previously reliable network of stores began to decline as both customers and the industry at large moved toward digital platforms, subscription services, and direct-to-consumer game distribution.

The COVID-19 pandemic in 2020 further compounded these challenges. Mandatory store closures, reduced foot traffic, and widespread economic uncertainty put intense pressure on the company. As more people turned to digital purchases, GameStop’s limited e-commerce capabilities prevented it from fully capitalizing on the surge in gaming interest, ultimately deepening the difficulties it faced leading into its 2021 transformation efforts.