The Wall Street Journal reports that Best Buy (NASDAQ: BBY) is test piloting the sale of used video games at its Canadian stores, with an eye toward expanding the program into the United States. While the company says it's too early to say whether the plan will take off, Best Buy's head of international relations said on a conference call that "We're very, very, very hopeful that this will be another avenue of increasing our relationship with the consumer generally."What a nice way of saying "making more money." The used game business carries substantially better margins than retailing new games, and the frequency of trade-ins reduces inventory costs. Right now the leader in used games is GameStop (NYSE: GME), but you have to think a big push from Best Buy could take some market share in this profitable category. Alternative GameStop's small size and more knowledgeable staff could make it more appealing to consumers than Best Buy -- the two stores have locations in many of the same malls.
Even after its recent price decline, GameStop investors should be taking a hard look at the durability of the company's competitive advantage. The company has so far done exceptionally well competing with big box retailers, a testament to tremendous management and a strong concept. But it's a battle that's likely to continue and, looking further into the future, you have to wonder whether higher-quality digital delivery of games could hurt the company.
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Reader Comments (Page 1 of 1)
6-18-2008 @ 7:53PM
David said...
How does the gamer comunity hate Gamestop. You have to be out of your mind. Biggest selection, best return policy. No way is digital downloads going to happen. Here is why. The makers of the games whould loose BILLIONS of dollars in revenue. Gamestop stop allows you to use games as CASH. If a game sells for 50.00 and you use a game that you get 25.00 per say. The makers still get thier money. Instant loss to Nintendo, Sony, and Microsfoft whould be in the billions easily if Gamestop did not exsist. Think of it this way You go to a movie and pay 8.00 for 2 hours of entertainment, you want to see another movie, how much is the movie theatre going to give you for that ticket stub. Gamestop is replacing the Toy store, people want to go out and talk to people who play games and not just down load. Any investor whould be out of the mind to not jump on the GAMESTOP bandwagon.
6-18-2008 @ 7:54PM
Hector Acevedo said...
Best Buy tried the used games thing a few years ago in the US...and dropped it. So did Circuit City...the business has too many complexities that big box stores will find difficult to execute. No worries here...Gamestop will not lose any business with this.
6-18-2008 @ 7:54PM
Sean said...
You also probaly don't know that a huge portion of the gaming community hates Gamestop with a passion. If Best Buy were to enter the used game market it would indeed reduce Gamestop's virtual monopy in some areas for used games and reduce their revenues in the most lucrative part of their business quite dramatically.
6-18-2008 @ 7:55PM
David said...
I'd also like to add that this is like the oh umm third time best buy has tried this and failed. The don't have the formula for what works, Hollywood video and Blockbuster has failed misserably at it. Dick Fontaine won't be jumping ship to Best Buy. Come christmas every childs lips will be " get it at gamestop".