EB Games has been at the forefront of pop culture and video game retail primarily across Australia and New Zealand for the better part of two decades now. Not just limited to video games, they sell consumer electronics merchandise and, to an extent, music products. They have an established presence across the Australian and NZ markets, employing about 2000-5000 employees across the above-mentioned territories.
EB Games Closures in NZ and What it could mean for Australia
EB Games’ closure in New Zealand may serve as a warning for the Australian market, suggesting that brick‑and‑mortar pop‑culture and merchandise retailers are entering a period of decline. The company has faced persistent challenges, having already closed 20 stores across Australia, and that number could rise given its current financial pressures. Since its $1.4 billion acquisition by GameStop in 2005, the business has struggled to deliver returns that match the parent company’s expectations, raising further questions about its long‑term viability in the region.
Reasons for shutting shop in New Zealand
The company’s struggles have been public knowledge for some time. Revenue fell by $174 million from the previous year. It also reported a total loss of $8.67 million. Despite this, it paid $12.8 million in royalties to GameStop. Management said no viable proposals existed to keep the New Zealand arm sustainable. This signalled a business that could not cover its costs or return to profitability. Cash‑flow issues were clear, as most inventory was bought on credit. Several sources said Australian suppliers waited over three months for payments. All signs indicate a significant pullback from GameStop.
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What’s next for GameStop & EB Games?
GameStop has had their income statement quality deteriorating over the past decade; the above graph tells us just that. In spite of receiving royalty payments from EB Games, their numbers still aren’t the best. This has put more undue pressure on EB Games. Commercial real estate prices in Australia have also not done the company any favors. Another massive problem EB Games faces is that the physical game retail space is shrinking at a drastic rate. Digital downloadable content is continuing to dominate, and online subscriptions reduce the need to enter a physical store. Finally, the costs are just too high for the number of SKUs they sell. Making the business model unsustainable. Owing to all of the above factors, we can definitely expect EB Games to close down more than just a few outlets in Australia in the coming years. What could GameStop potentially do? Well, they could probably consider GameStop being acquired by a dominant player in the Australian market such as JB Hi-Fi. Exploring the same revenue model. That, or try to establish a stronger online presence and pivot. For now, EB Games, presence in Australia is definitely uncertain.