Last Updated Aug 30, 2010 6:29 PM EDT
First, heavy-hitters Best Buy and Target (TGT) are attacking the very foundation of GameStop's success. As my BNET colleague Erik Sherman predicted, Best Buy is aggressively courting used game purchasing at 600 of its stores, while Target will have a used game program at more than 850 of its national outlets by year's end. According to Paul Miller of Engadget, Target is going beyond just video games with "all sorts of electronics trade-ins" like DVDs. If Target and Best Buy are able to carry a comparable used game program, why would customers go to a one-trick pony like GameStop?
Second, unlike comparable digital dinosaur Blockbuster, GameStop seems intent on expanding its physical stores. As Dean Takahasi notes on Venture Beat, "The digital strategy strikes me as wise and measured. But I'm still surprised that GameStop continues to open lots of stores. In the first half of the year, it opened 99 net new stores, adding some and closing older stores." Physical stores are a necessity as long as video games continue to be on physical formats, but expanding stores seems fool-hearty as Best Buy and Target get involved and digital gaming grows -- the latter shown, ironically, by GameStop's purchase of Kongregate.
Third, GameStop wants people to come into its stores to purchase digital goods -- which makes no sense. According to Venture Beat, GameStop has set up in-store kiosks so gamers can purchase expansion packs, digital downloads and other goods with a credit card swipe. The kiosks are a nice touch if someone happens to be there to buy a physical game, but aside from, perhaps, game recommendations, there is little a GameStop kiosk can offer that the website itself doesn't already give.
Expanding stores, heavy competition and redundant in-store experiences don't bode well for GameStop's holiday 2010 outlook. The physical video game market isn't done yet, of course, but there's no reason to think that Best Buy and Target won't gobble up GameStop's likely shrinking slice of the used-game pie.