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Can Rewards Revamp ‘Power Up’ GameStop Sales?

A lack of hit games, coupled with a decline of console purchases, plagued the retailer in Q1. To drive loyal customers back to its stores, it’s updating its discount membership PowerUp program. But does it go far enough to drive visits and engagement?

GameStop’s otherwise solid Q1 earnings showed that even its long-running beacon and omnichannel strategies can only do so much to protect it from the wider retail industry sales declines.

To reverse the trend and get customers making more in-store purchases, GameStop is overhauling its five-year-old loyalty membership program, PowerUp Rewards. The promise is to make it easier for shoppers to take advantage of the unique rewards and benefits its exclusive loyalty program, PowerUp Rewards, offers.

The PowerUp program, which is being launched at all 4,200 U.S. stores, lets members accrue purchase points and make selections from a special rewards catalog. Or, customers can instead choose to receive $5, $10 or $15 “reward certificates” that can be used to make purchases in any GameStop store.

Members can enroll at any GameStop store and manage their accounts online or within the GameStop mobile app. The newly added dashboard feature makes it easier for members to select their reward preferences. As they reach certain point thresholds, they will see the certificates added to their individual Active Offers, or they can stockpile their points to shop for great items in the Rewards Catalog.

“Many of our PowerUp Rewards members have asked us to send them their rewards automatically upon hitting a certificate reward threshold,” said Frank Hamlin, GameStop’s CMO said in a statement. “We listened to our customers and are now giving them the option to customize their reward experience, helping our customers track their accounts in real time while keeping more money in their pocket and offering a more personalized experience.”

Can Loyalty Reverse Retail Slump?

The poor performance of department store chains like Macy’s, Nordstrom, Kohl’s, and Sears Holdings during Q1 have led to speculation that there is a more general problem facing retail brick-and-mortar businesses.

Even though roughly 90 percent of all consumer purchases are made in a physical store, industry observers say that foot traffic mostly involves spending at supermarkets, restaurants, and hospitality services like hotels, as e-commerce (primarily in the form of Amazon) take a growing share of apparel and electronics products.

For the most part, retail industry observers like Ryan Craver, CEO of Trimfit and SVP of Lamour Group, cautioned against any overarching retail “gloom and doom” by noting that April sales haven’t been as dismal as expected.

“Home Improvement remains incredibly strong while the big box retailers like Target and Walmart continue to eke out gains whilst heavily investing in e-commerce fulfillment and offsetting minimum wage increases,” Craver recently wrote on his retail analysis blog.

GameStop has been something of a pioneer in omnichannel strategies for the past two years. It has embraced beacons as a way of providing in-store sales assistance and promoting greater engagement by blurring digital and physical marketing.

But loyalty programs have been a key component of that in-store engagement strategy, GameStop executives have told GeoMarketing over the past year.

Before the initial rollout of its PowerUp program, Jason Allen, GameStop’s VP of Multichannel, told us that the company “really did not have a good understanding about who our customer was, what they bought at what times, what channels they preferred to buy on, and what were the reasonings behind those purchases. We didn’t know who were the influencers.”

After 5 years, PowerUp signed up roughly 40 million loyalty members globally and about 31 million in the US.

“What we found when we started to dissect all the data we were getting about our customers is that they weren’t using mobile devices to purchase directly, but it was heavily influencing in-store purchasing,” Allen said. “We developed some attribution modeling so that we could take a look at what consumers were doing in a particular channel and see how that activity influenced a purchase in another channel.”

Gamestop storeGameStop’s Challenge: Balancing Foot-print And Foot Traffic

The underlying theme of all the in-store digital touchpoints was to make each GameStop “a place where everybody knows your name and your game.”

But that strategy clearly had its limits for GameStop, at least in Q1. During that period, GameStop posted a 6.6 percent decline in same-store US sales (internationally, that number was down 9.9 percent). For the most part, GameStop pinned that problem on the higher amount of big name gaming titles in Q1 2015 compared to this year.

GameStop’s attempts to use mobile marketing to create a one-to-one relationship at across its exceedingly large footprint is one that demands an intensive loyalty program. As loyalty platform provider Flok demonstrated this week, the meaning of loyalty hasn’t changed. But the practices have clearly evolved to suggest that simply giving someone a discount isn’t enough to keep consumers returning and engaged. There has to be a greater customer relationship management aspect to reflecting what different individuals want out of an in-store experience. The changes to PowerUp represent a recognition of that, at least in terms of offering diehard gaming fans access to special releases.

For one thing, like almost all consumer products in this on-demand world, people who play video games expect the same kind of immediacy as someone requesting a food order or a car-hailing service from their phone. GameStop has been able to satisfy gaming fans “gotta have it now” appetite for high-profile physical releases. Lines have often stretched around the block when anticipated titles go on sale.

A Cautionary Retail Tale

But GameStop can’t count on blockbuster releases for its everyday existence. And as downloadable games become more popular, the need for so many thousands of physical store locations becomes more of a challenge.

For GameStop’s PowerUp program to work, it’s going to have to go beyond general rewards to offering a connection between store sales reps and its mobile apps. One small thing that could make a difference: inventory information and in-store pickup of specific titles.

Here’s the kind of situation GameStop and other retailers will have to face up to order to ensure continued relevance for physical shoppers: a dad told us about a conversation he had with his son about whether to buy a video game at GameStop. The son asked if they could just get it online, rejecting a trip to the local GameStop, complaining, “They never have what I want when I’m there.”

In the end, the game, which cost $4 cheaper on Amazon, was ordered online Friday and arrived at their home that following Sunday.

About The Author
David Kaplan David Kaplan @davidakaplan

A New York City-based journalist for over 20 years, David Kaplan is managing editor of GeoMarketing.com. A former editor and reporter at AdExchanger, paidContent, Adweek and MediaPost.