GameStop beats video game slump with diversification

Although GameStop's (NYSE:GME) core business was built upon the foundation of video games, the company has turned to diversification in the last few years as physical retail sales in the video game industry overall fell 15 percent in 2015.

The four key categories for the brand's diversification include physical game products, mobile and digital gaming, collectibles, and technology brands, reported Fortune in an interview with the company's CEO Paul Raines. In 2015 alone, GameStop saw 25 percent of its earnings coming from non-physical gaming, a number that is expected to reach 50 percent by 2019.

       Paul Raines

On the technology front, the company has added a $850 million business by partnering in-store with brands such as Spring Mobile AT&T Wireless, Simply Mac and Spring Mobile Cricket Wireless. This branch of the business is expected to bring in $1.6 billion in revenues by 2019.

GameStop rolled out a ship from store option last month, allowing shoppers a look at inventory and using brick-and-mortar locations as distribution centers.

The company continues to grow and average profit contribution at GameStop branded stores increased 23 percent in 2015. The retailer's video game business alone grow 14 percent. Today, more than 60 percent of all GameStop purchases involve both web and in-store transactions.

In 2016, the traditional games business is expected to reach $8 billion, Raines said.

"If you look at our results last year, we may be at an all-time high on profit contribution from our core GameStop branded stores," Raines told Fortune. "People want to say we're going the way of the physical gaming dinosaurs and all that. The truth is we're overtaking with market share gains through omnichannel sales – over 60 percent of customer purchases involve both the Web and stores – and new businesses like digital and collectibles, a lot of the loss of physical gaming."

For more:
- see this Fortune article