Batuhan: GameStops of the future

Allan S. Batuhan
·3 min read

ONE of the breaking news stories in the world of business during recent weeks has been the successful fightback of individual investors, who took the fight back to Wall Street short sellers, and forced the latter — albeit temporarily — to lick their wounds and count their losses.

Wall Street operators have always been suspect in some of their business practices. Certainly, a coordinated short on someone’s stock, even if justified in terms of the business’ fundamentals, can sometimes accelerate a company’s demise, far quicker than what would otherwise have been if the company would have had time to react and restructure. Indeed, this is the market function of short-selling, to signal to companies what the market thinks of their prospects, and hopefully, to prompt companies to arrest the decline of their businesses.

To be sure, betting that GameStop would continually decline as a business was probably not going to take much of a brilliant insight from Wall Street short sellers. After all, the switch to online purchasing, as well as the advent of games based on cloud rather than disk platforms was already well underway. What gave it an extra kick, however, was the 2020 Covid-19 global pandemic, which made almost the entire retail economy switch to online in quite a spectacular fashion. Traditional brick and mortar establishments, already reeling from the online juggernaut, were literally knocked down for the count, floored by a combination of changing consumer preferences, turbo-charged by a black swan event courtesy of mother nature.

And so, wherever one’s moral compass may be pointing to as far as the big short of GameStop and related businesses, there was incontrovertible logic as to why it was happening, although arguably not at the speed which it was had short-sellers not swarmed en masse to deliver the coup de grace.

Which leads one to imagine, what would business look like in a post-2020 new normal? What should we expect to see as the features of an economy that has learned from the unforgettable lessons of Covid-19?

Blindingly obvious, of course, will be the continuing switch to the online marketplace. Speaking personally, I never caught on, prior to 2020, how much of what you need to buy in retail outlets you could actually get online, often at prices better than what you find in your erstwhile favorite retail outlet. So for the many thousands or even millions of consumers like me who think that shopping is a necessity instead of an experience, online is potentially going to be the preferred mode of purchasing post-pandemic.

So what does this bode for the GameStops of the future? Not inconceivably, it could be something along the lines of the cinema industry’s playbook that they could take a leaf, or more, from.

Back in the day, just about the only way one could watch your favorite Hollywood blockbuster was by going to the cinema. So movie theatres were the kings of the cinema distribution chain, with consumers having no choice but to patronize their establishments for lack of any other choice.

Then came the video cassette recorder, followed in short order by the DVD and now the cloud-based online platforms, and suddenly the consumer is spoilt for choice. Now, the cinema was not the only place to catch the latest instalment of “Star Wars,” where it was pretty much the only venue when the movie franchise was first introduced.

But the movie theatres reinvented themselves, and experience, rather than just presence, became the product that they were now selling. Going to the movies suddenly became a destination activity, rather than just a venue for content consumption.

More next week...