New Visionary Chairman of the GameStop Board
All about the GameStop transformation process
Ryan Cohen took a 10% stake in GameStop in 2020 when the company was struggling to keep its head above water after the impact of COVID. He wanted to turn the failing brick-and-mortar company into an e-commerce and gaming giant. Since then, he has increased his stake in the company to 12.9%.
Image: Harvard Business Review
In 2011, he co-founded Chewy and grew the company into the #1 online pet retailer by 2017. After selling the company to PetsMart for $3.35 billion, he remained the CEO through 2018. He then became the largest individual shareholder of Apple with 6.2 million shares as of August 31, 2020.
Cohen was elected as GameStop’s chairman of the board in the summer of 2021, and the transformation story began to take shape. He was ready to put his plan into effect to turn the dying brick-and-mortar store into the premier online retailer of the $200 billion dollar gaming industry. You may ask, who is the billionaire boy wonder that is molding the retail and gaming industries?
Image: Volition Capital
Founder of Chewy
Cohen founded Chewy in 2011, and cites his inspiration for the company out of his experience shopping for his own dog, Tylee. Motivated by the enthusiasm of a pet store worker helping him pick out dog food, Ryan knew there was a niche here to fill, and he wanted to do it better than anyone. The secret ingredient to his business model was simple: delight customers. Their subscription base continued to grow and he later sold the company to PetSmart in 2017.
What’s the best way to delight a pet parent? Make it about the pet! Anyone who’s been a Chewy customer knows the care and thoughtfulness the company shows. They send cards for your pets’ birthdays, flowers for their passing. They’re quick to work with you no matter what the issue is and you always leave feeling you’ve been helped by someone who cares.
When Chewy was sold to PetSmart, it was the largest ever acquisition of an e-commerce business. Cohen left the company satisfied with the work he had done. When asked about his success there, he replied that it wasn’t the niche the company filled, it was about pleasing the customers. “I think we would have been successful in any category,” he said. He is now putting that philosophy to the test as GameStop’s chairman.
Letter to the GameStop Board of Directors
As GameStop’s largest individual investor, Cohen sent a letter to the Board of Directors laying out what needed to be done for the company to transform into a technology-driven sector leader in the gaming industry. Too young to retire, Cohen started looking for his next project and GameStop fit the bill. He was attracted to its brand recognition and customer base of an avid and growing community of gamers. So in the summer of 2020, he bought a 9.98% ownership stake of the company and sent a letter to the management board (found here) urging them to reconsider their plan for the company, and share that plan with investors.
The bottom line is clear: GameStop needed to come into the 21st century if it was going to survive, and Cohen knew how to do it. He recommended cutting down on excessive real estate costs, hiring new talent, and building a “powerful e-commerce platform.” Throughout were references to his previous work at Chewy, emphasizing the need to create an all-encompassing experience that delights customers as part of the world-class infrastructure that was constructed at Chewy.
Long-term Value and Growth
After writing the letter, Cohen was formally asked to join the board and has been busy ever since. He only spoke for a few minutes during the shareholder’s meeting in 2021 but he told investors that the board had clear goals: delighting customers, and driving shareholder value for the long term. These are consistent values that he’s shown through his business leadership, that he learned from his father.
Cohen wrote in a letter that “My father showed me how building lifelong relationships with customers was far more valuable than optimizing for short-term profits. As we scaled Chewy, many advised us to slow down and raise prices. We disagreed. Key to our success was obsessing over customers and market leadership. Over the long term, customers and profits intersect.”
It’s unheard of, and even shocking for a large company these days to be willing to sacrifice short-term profits to go the extra mile (Amazon won’t even let their workers go to the bathroom on company time). Yet, the human element here is Ryan Cohen’s X-factor, and he knows it. As he said at Chewy’s IPO, “Our customers realize that we truly care - we care about them, and we care about their pets, and we’re bringing a human element to e-commerce.”
Multiple people that have first-hand knowledge of his strategy with GameStop, have said he plans to breathe life into the stores by investing in what customers want, and improving how employees can serve them.
Part of the business model at Chewy was for their customer base to spread by word of mouth. More and more subscribers were delighted by the service that included the free toys for their pets and personalized notes. Pet owners were even sent customized paintings of their furry friends and condolence letters along with flowers after the passing of a pet. Customers were always told not to ship their remaining pet food back, but that they would be refunded in full and could donate the food to a local shelter.
This business model and customer centric approach has already taken root at GameStop, where customers regularly find jelly beans mixed in with their orders and other fun notes from staff about the games they purchased. Cohen’s influence can already clearly be seen on the company in its drastic turnaround since his letter to the board.
Ryan Cohen isn’t the only impressive name at GameStop these days. Many highly talented and skilled individuals have quit their jobs at tech & e-commerce leaders like Amazon, Chewy, and Microsoft for the chance to join the GameStop roster.