GameStop makes mobile personal with new digitized markets

EVANSTON, Ill.—GameStop (NYSE:GME) is defying the odds. Its shopper base is young and tech-savvy, and its product category has shifted from a physical product sold in a brick-and-mortar location to a digital one, delivered in streaming bits and bytes from the cloud.

But as the business has shifted, so too has GameStop's strategy. Today it is increasingly digital and mobile.

"As consumption shifts, you want to gratify customers as they shift in their consumption of media," said Jeff Donaldson, senior VP, GameStop Technology Institute. "We've got a thriving digital business, as our customer shifts to digital consumption, we shift with them."

It's a lesson that some of GameStop's competitors like Blockbuster learned the hard way. "We don't want that happen to us," Donaldson told attendees at the Retail Analytics Council's first Executive Development Program at Northwestern University earlier this month.

It hasn't been smooth sailing, but GameStop has managed change far better than many of its brethren. The retailer recorded sales of $9.3 billion for fiscal year 2014, a 2.8 percent increase over the prior year. And for it's first quarter of 2015, it even posted comparable store gains of 8.6 percent.  

This is largely credited to GameStop's roughly 41 million PowerUp Rewards members. Engaging these digitally savvy heavy gamers is priority No. 1 for GameStop and mobile is increasingly the tool to do so.

Close to 40 percent of GameStop's online traffic is mobile, and that number is growing fast. Nearly 30 percent of total online traffic is coming from the retailer's app.

And while engagement is high—32.1 percent of those who begin a shopping trip online buy—13.2 million of those don't convert within 48 hours.

The goal for GameStop, according to Donaldson, is to engage these shoppers in a more personalized way. This is the primary task of the GameStop Technology Institute.

GameStop opened the GTI in April 2014 in partnership with IBM and the Center for Retailing Studies at Texas A&M University's Mays Business School.

The stated focus at the time was on enhancing consumer interaction technologies and developing business solutions that help drive traffic to all retail channels. Donaldson was tasked with chairing the direction and efforts of the GTI.

It wasn't long before GameStop announced plans to deploy beacons throughout the chain and began testing location-based services.

In January 2015, GameStop took center stage as President Tony Bartel showed off some early results from the GTI, including the geo-fence pilot and beacon test. That test is now being expanded from the initial 36 stores.

GTI's efforts in personalization lie in reaching shoppers that exhibit digital engagement readiness by creating digitized markets, according to Donaldson. GTI did so by using a separate app in a single central Texas test market. But because it was not part of the GameStop parent app, getting a sample size was problematic, according to Donaldson.

The goal was to create a digital market that tracked customer engagement across channels. An entry beacon reveals behavior occurring in stores following an online interaction. GameStop can identify popular search terms in a specific area, then buy them on Google.

The goal is to measure what drives conversion and traffic productivity, not to just count sales, said Donaldson.

GameStop will get more answers by the end of the year. Components of the separate GTI app will be added to the parent app later this summer in three additional markets and will likely be rolled out by the holiday season.

Related stories:
GameStop makes personalization omnichannel
GameStop acquires Geeknet for $140M
GameStop to shrink core business as gaming consoles go digital
GameStop picks up 160 RadioShack stores
GameStop promotes SVP to president of US stores