Photo: Nerd St Gamers
Have esports become more than a game for Five Below?
Management at Five Below, the discount chain focused on teens and tweens known for its eclectic mix of merchandise priced at (you guessed it) $5 or less, has long believed that the in-store experience is what drives the chain’s growth. Now, the chain pushing that experience in a new and different direction. Five Below says it will connect 3,000-square-foot esports facilities to five test stores beginning next year.
Five Below has teamed with Nerd Street Gamers, an esports infrastructure company that builds facilities known as Localhost that enable gamers to play in live, in-person events using professional level equipment. Nerd Street announced last week that it raised $12 million in Series A financing led by Five Below.
Should the test between the two companies prove successful, Five Below may co-locate 70 or more stores with Localhost facilities over the next several years. The chain has been on a rapid new store growth path in recent years, opening 44 locations in the second quarter. It currently has 850 stores in 36 states.
Five Below has been able to continue growing its top and bottom lines by getting in on trends such as fidget spinners and make-your-own slime. It also encourages shoppers to engage with products on store floors in a variety of ways.
“Gaming is a trend our younger customers are actively enjoying and working with Nerd Street Gamers will help us to provide an exciting gaming experience that appeals to our core customers and beyond, while also showcasing our extreme value technology-related products and accessories,” said Five Below CEO Joel Anderson. “We look forward to providing more experiences for our customers to ‘Let Go & Have Fun!’ while engaging with our communities at a deeper level.”
Discussion Questions
DISCUSSION QUESTIONS: Where do you expect Five Below’s investment in Nerd Street Gamers to take it? Do you see esports as a means to growth for other retailers, as well?
Poll
BrainTrust
Brian Cluster
Director of Industry Strategy - CPG & Retail, Stibo Systems
Ed Rosenbaum
CEO, The Customer Service Rainmaker, Rainmaker Solutions
This could be great for Five Below and their bottom line. Gaming has become so popular that it is becoming more difficult to get young teens off their devices (as if it were ever easy). I am told those who become extremely proficient can make significant money playing certain games. So Five Below teaming with a gaming company can reap the rewards if they can find ways to get the teens out of the house and in the stores.
Five Below has made an excellent move here with their investment into and test of esports. With their under $5 price point, their margins and prices have likely been impacted by the tariffs and this entry into esports is a service so it balances their revenue.
This will likely be a success in some stores and less so in others. But they will learn what works and what doesn’t and improve from there. More importantly, they will likely gain better understanding of their core consumer — the tweens and teens that love gaming.
Five Below really understands its constituency and they are always on message. This looks like a slam dunk.
Five Below is not the first retailer to see promise in eSports gaming events. Chipotle is sponsoring eSports tournaments with DreamHack. GameStop is opening its own gaming facilities as online gaming steals share from console gaming.
The shift to cloud gaming epitomized by Stadia (from Alphabet), and all-digital consoles from Microsoft and Sony may spell the end of selling software at retail for GameStop So GameStop is retrofitting stores for survival.
Five Below, on the other hand, is investing for growth with Nerd Street Gamers. With a reach into the teen and tween market, Five Below can attract a key demographic and generate revenue for years to come as they age up. This gives Five Below an advantage, but it’s not likely to be a winner-take-all market.