Sympathy for the Dealer
I first worked for the company now known as GameStop in 1995. At the time, of course, that name wasn’t even a glimmer in some marketing go-getter’s eye, and most consumers thought of the store, if they thought of it at all, as Software Etc. or Babbage’s. These were the days before digital distribution, before warranties against disc scratches, before money down for reservations, before PC titles were at best relegated to a back corner kiosk, before multiple-SKU transactions were a priority, before return policies were lobotomized, and before hiring priorities rejected the idea of gaming enthusiasts as salespeople.
These were also the days before the company was particularly profitable.
For an early twenty-something with a penchant for video games, Software Etc. was a pretty good place to work. There were, of course, sales initiatives and metrics to be tracked, but by and large the mandate was simple: Sell video games to make customers happy. There was a culture of customer service and product knowledge that was encouraged from the top down, because the leadership of the company believed supremely in two things. First, that video games were the entertainment media of the future. Second, that the best way to succeed was to aggressively pursue customer satisfaction and convenience for gamers.
By 1996 the parent company of Software Etc., NeoStar Retail Group, was filing for Chapter 11 and seeking to liquidate assets and sell off more than 600 stores. It became painfully evident in the days following and over the long, slow restructuring to become the monolithic retail force known today as GameStop that the company’s leadership had been right in exactly one of its core beliefs.
If there is one fact I want to stress about GameStop and understanding its modern motivations, it is this. Many if not most of the key executives and board members that drive the direction of the company today are the same ones that watched the Babbage’s of old get burned and stepped in at the eleventh hour. It’s not that these individuals have no concept of a conscience for customer issues; it’s just that they have empirical data that ties noble idealism in the gaming retail space to insolvency and collapse.
Like a lot of people, I don’t really shop at GameStop anymore. I don’t really like how they do business. That’s not a grand gesture, so much as an individual choice about how and where I make my purchases. That also doesn’t mean I automatically uninstalled Impulse upon learning of their acquisition, or that I won’t haunt the doorway of some strip-mall Gamestop sometime in the future. It just means I’ve found generally better buying options for me.
However, in the modern gaming retail environment, GameStop’s actions and decisions deeply impact the course and policies of the industry and market at large. They are virtually unchallenged in North America as a gaming boutique shop, and even much larger companies are impacted by and in some cases driven to try to match their policies. Where goes GameStop, so goes video gaming retail.
It is then at least useful to understand what motivates the company, and I think a lot of that answer can be charted back to the rocky waters of the late ‘90s. The company some of us remember fondly as a cool place to buy our games is remembered in GameStop’s board room as a catastrophically failed model — the dark days to which they shall never be returned.
When you remember being able to bring back incompatible PC games for a refund, they remember a distribution warehouse with mountains of inventory rejected by vendors as a physical reminder of lost revenue. When you remember being able to simply walk into the store and buy the latest game without having to go through the silly process of a reservation, they remember backrooms stacked high with dozens of copies of games that would never sell because they’d stocked far too much. When you remember hanging out chatting with the local Software Etc. assistant manager, they remember overpaying a directionless and undisciplined staff with limited sales experience and misplaced priorities.
When I take a moment and think about GameStop’s choices in the days since thousands were laid off and the business almost collapsed, it is no wonder to me that the company charts the course it does. Put simply, were I a board member on this company and responding to the complaints of gaming’s elite, I might say, “We tried it your way, and you guys ran us out of business.” This modern incarnation of the retailer may be a lot of things, but you can’t say that they aren’t disciplined or didn’t learn from their mistakes.
For example, I fundamentally agree that they made the wrong choice in telling employees to break into a new product to remove offending promotions from competitors, as was done with PC versions of Deus Ex Human Revolution. But I also understand why it happened. If somehow a competitor snuck a small piece of promotional material into something I was selling, I would end that as quickly and thoroughly as I could. The old Software Etc. wouldn’t have done that, and it was that kind of tepid response to clear threats that lead them straight into bankruptcy.
There were, of course, a lot of things that led to Neostar’s Chapter 11 filing in 1996, and I don’t mean to imply that a customer-friendly approach to retail directly caused the company’s collapse. On the contrary, a reckless phase of over-expansion, squandering of financial reserves, and the expansion of market forces aligned against Neostar in 1996 all played a role. This was an age where Best Buy, Target, Wal-Mart, Toys R Us and other major retailers had finally decided to take a big bite out of the gaming revenue apple, leaving the specialty retailer struggling to keep up in a market that they had, until recently, nearly owned.
I remember being the manager of my store in the Christmas season of ‘96, when we couldn’t put stock on the shelves. A new game would come out, and it would be days and weeks before the company could scrap together the money to put games like Master of Orion II, Diablo, Shadows of the Empire and Red Alert on the shelves. Customers walked in my front door and were greeted with depressingly bare walls and empty promises. Some of those practices you may dislike so much these days — specifically putting down money for reservations and refusing returns on opened games — were a result of the cash-strapped company scrambling to infuse capital into the business so it could make payroll and have enough left over to pay vendors.
It was a devastatingly depressing time, and I was there at the Annual Manager’s Meeting in Dallas when then head of Barnes & Noble, Leonard Riggio, showed up like a white knight to restructure, realign and rebuild the company from the ground up as a smarter, leaner, meaner competitor in the market. We greeted his vision of the future of the company with a standing ovation.
The GameStop you know now was, for all intents and purposes, conceived if not born that day. There was one mandate: Make sure we do whatever is necessary to never get back into this position of near-collapse. The result is 15 years of growth, profitability and laser-focused discipline that has earned both the ire of gamers and several billion dollars.
Admittedly, by the time I returned to working for the games retailer a few years later, all of those practices and policies that are so commonly complained about now were solidified as standard industry practice. It was an entirely different culture, and though I only worked at the retailer for a couple more years in both a sales and management capacity, I found not unexpectedly that I was no longer a part of a specialty organization that catered to enthusiasts, but was instead a cog in the prototypical soulless, corporate construction. It is fair to say that to make its money, GameStop had to lose its soul.
Which brings us to the modern day, and a business that really has very little to do with or interest in the kind of people likely to read this. Despite what may or may not be the truth, GameStop’s executives and board members see catering exclusively to gamers as a good way to go out of business. The company isn’t looking for forgiveness, and that’s not meant to be an excuse. It’s just meant to be a sketch of the truth from someone who lived in the dark times that turned an idealistically naive company into a cynical profit machine.