Update: GameStop Announces New Gift Card Exchange

Jul.23.14 | About: GameStop Corp. (GME)


GameStop, through a partnership with Cardpool, will allow customers to exchange gift cards for e-gift cards.

This new initiative is evidence that GameStop's brick and mortar sales are in jeopardy.

In my original article, I outlined a looming industry shift to digital sales.

Yesterday, GameStop (NYSE:GME) announced that it will allow customers to convert physical gift cards for e-gift cards. A consumer will just have to fill out their gift card info and once verified, an email receipt will be sent to them. GameStop is finally realizing that its 4,400 store locations face a serious threat.

In a previous article on GameStop, I discussed how the changing industry landscape was a threat to GameStop's business model. The industry shift to digital downloads and an influx of purchases through the web will cut GameStop out of the equation. As of last quarter, digital sales represented a miniscule 5.7% of gross profit. With such a reliance on brick and mortar, GME is set to for a tough future ahead.

With GME trading its highest level since January, investors should sell their shares and consider the negative long-term outlook. The shift to digital and online gaming sales is apparent. GME does not have an advantage in this domain and will suffer. Management is trying to spur online sales, but with no way to offer advantages to sites such as Amazon (NASDAQ:AMZN), it will eventually falter. High costs of their retail locations coupled with the threat of declining sales will prove to be vexing.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.