GameStop is looking to significantly increase the number of stores under its retail technology brands such as Simply Mac.

MAY 21, 2014 • Three years after GameStop Corp. acquired the Impulse digital game distribution service and streaming firm Spawn Labs, the retailer is taking a different approach to its digital sales. Starting this week, GameStop will no longer service nor deliver digital purchases of PC games via its own Impulse server infrastructure. Consumers who visit impulsedriven.com are now directed instead to gamestop.com/pcgames where they will receive a voucher to use with other digital distribution services such as Steam or Origin after making a purchase. The Impulse site remains operational for customers to access games they bought previously from the service. Registered users were notified of the changes during the last week of April. Last March, GameStop shuttered Spawn Labs noting that consumers were not ready for cloud gaming.

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Impact: For years now the chorus has been loudly singing that digital games sales are the future of retail. GameStop followed that siren song, but whether it was from conviction or covering its bets was hard to say. There is a strong demand for physical retailing of video games, yet consumers are getting a lot more comfortable about acquiring their content via digital distribution. What became clear at GameStop’s Investor Day presentation in April was that executive management has determined that the company’s future growth is tied directly to physical retail, not digital transactions. Not that there was not growth in digital distribution as revenue grew from $453 million in 2011 to $630 million in 2012 and $724 million last year. GameStop further estimates that its digital take will increase somewhere between 12% to 15% in 2014. Yet the retailer has calculated that it can attain this growth while curtailing its investment in digital infrastructure that it reportedly paid $40 million for back in 2011. Where GameStop is placing its bet on growth is on expanding its technology retail footprint. What may be surprising to some is this expansion is not directed at GameStop stores, where the company intends to close up to 130 locations by the end of 2014. The push will go behind GameStop’s other retail brands such as Spring Mobile an authorized dealer of ATT wireless services expected to increase its store count by up to 250 locations. Another mobile brand is Cricket Wireless that specializes in prepaid services and will grow by 100 to 150 stores. GameStop also operates the largest certified dealer of Apple products, Simply Mac, that will get up to 25 new locations by the end of the year. Additionally, GameStop has plans to expand its online consumer electronics trade-in platform, BuyMyTronics. Bottom line, GameStop saw its game revenue grow by 2.7% between 2008 and 2013. By comparison, the company sees its technology store brand increasing revenue from $63 million to $1 billion between 2013 and 2016. Clearly that is the growth area on which the company is betting.