GameStop: Was it really a surprise?

You have seen it all over the news…

Suddenly everyone is in a frenzy because a swarm in Reddit went contrarian the hedge funds that were shorting GameStop (GME), the video game retailer. But, was that really a contrarian bet by the guys at r/wallstreetbets, or were the professional investors actually discounting the wisdom of the street? —after all, the guys from Reddit must be arguably better at all video game things.

Hedge funds called GME dead partly because of is brick and mortar business model, supposedly less competitive in a digital distribution environment. But according to recent surveys, GameStop is among the preferred online (and physical) retailers:

Statista Global Consumer Survey conducted in the United States in 2020 (target group: Number of respondents 1,695 respondents, Age group 18-64 years, respondents who play video games and spent money on digital video games). Some 29 percent of respondents answered the question "Where have you spent money online on digital video games in the past 12 months (downloads, in-app purchases, subscriptions)?" with "GameStop". Note that the responses here are people who actually spend money on video games.

Statista Global Consumer Survey conducted in the United States in 2020. Some 56 percent of respondents answered the question "Where have you purchased video games on a data medium / hard copy in the past 12 months (in-store or website)?" with "GameStop". The number of respondents 672, Age group 18-64 years, respondents who bought video games on a data medium.

Similar surveys across the world (Germany, Italy, Finland, Russia, Austria), put GameStop in the top 10 of gamer preference.

But even the general public favored GameStop.

According to a survey carried out in September 2020 by Drive Research (2,000 respondents, 18 years and older), GameStop was among the top Black Friday shopping destination of choice for U.S. consumers. Close to 22% of respondents stated that they planned to shop in-person in Game Stop stores for Black Friday in 2020 (roughly the same as in Home Depot!).

And to the question “When purchasing holiday gifts this year, which retailers will probably receive most of your spending?” Field Agent’s Holiday Insights Report 2020 survey reports 5% of preference for GameStop. This is not a small thing for a US-focused survey of 1,999 respondents, 18 years and older, who are adults who celebrate Christmas in part by purchasing gifts, and could choose only up to three retailers.

“So, the signals were there: people like to buy physical video games at a physical store — even amidst a pandemic.”

But what else the guys at their analyst desk missed? Well, the Reddit crowd of course. As we know, by the time the news is on the news (CNN, FOX) it is already too late to act for value. This is why at Edge Seekers we monitor the whole eSports and video games market, and capture these alerts in real-time to share with our community —as the snowball is forming, before they appear on the news.

Edge Seekers is an educational project. This article is not financial advice.