EB Games to shutter 19 stores as digital competition bites

Veteran video game retailer EB Games has announced it will shutter 19 stores before the end of the month in an ongoing effort to boost the profitability of its Australian business.

The Gamestop-owned chain confirmed the move after Kotaku Australia was made aware of pending closures earlier this week, saying the decision has come after “careful consideration”.

“Like all businesses, we are constantly evaluating our property portfolio to ensure that our stores mix is in-line with the ever changing retail landscape,” a company spokesperson said.

EB Games becomes just the latest national retailer to announce store closures in the weeks after the Christmas trading period, following similar moves at collapsed businesses Bardot and Harris Scarfe.

The business, which has more than 300 stores in Australia, is running fire sales in closing locations to clear stock before February.

Gamestop has been struggling financially in the United States for some time, but the financial performance of the Australian EB Games business is not reported in detail by the American parent.

The local business said it will be opening more big-box format stores in 2020, which combine the traditional EB Games brand with its lifestyle offering Zing Pop Culture.

Why is EB Games struggling in Australia?

Well, apart from broader disruption across the entire retail sector, there are some category-specific trends at play. While online shopping has disrupted most traditional specialty retailers around the world, the issue is particularly pronounced for video game retailers, primarily because e-commerce vendors such as Steam, Microsoft, Sony and Epic Games are making mega-bucks from direct video game downloads.

This trend has only magnified over the last 18 months, with players such as Fortnite-maker Epic Games joining the fray to disrupt Steam.

Queensland University of Technology professor and retail expert Gary Mortimer explains EB Games has been disrupted in a way similar to that of suburban video stores and music retailers over the last decade, as services such as Spotify and iTunes have become more popular.

“While EB Games has its own direct competitors, like JB Hi-Fi, who sell the same products and brands, it also has indirect threats in the form of increasing broadband speeds and the rollout of the NBN and 5G.

“These external factors allow consumers (gamers) to download games; hence no real need to purchase a physical product, in a physical store,” Mortimer said.

“Retailers in this space really need to be looking five to 10 years ahead, seeking to identify emerging trends and putting in place strategies to mitigate commercial damage,” he added.

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