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Earlier this week, Amazon.com, Inc. (NASDAQ: AMZN) announced a plan to allow its customers to trade in used video games for Amazon credit.
Now GameStop (NYSE: GME) CEO Dan DeMatteo is telling Edge that this plan won't work: "I give the probability of this working at zero."
GameStop attempted a trade-in offer a few years ago with poor results. "Electronics Boutique (which is now owned by GameStop) also tried it and failed. There's no consumer acceptance. With consumers, there is an immediacy for currency when they want to buy a new game. It didn't work for us, and I can't see it working for them."
DeMatteo better hope he's right. GameStop has produced extremely good results in spite of a business model that isn't particularly unique and will one day be made obsolete by technological progress. The company's trade-in business produces a large supply of used video games that generates high margins, and it's easy to understand why Amazon has decided it wants a piece of the action.
Amazon's used game business might not be a rousing success, but for a company of Amazon's size, it doesn't need to be in order to steal some serious market share from GameStop. Also working in Amazon's favor: the gift cards that are being offered. They are far more versatile than GameStop store credit.
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Reader Comments (Page 1 of 1)
3-07-2009 @ 11:12AM
j.frank.portillo said...
He's right, it won't work. If you think about the type of kids who buy games, they don't trade in games because they want to spend money to buy new games, they're usually bringing in games when they need cash to pay for rent, food, or some other bill for which they don't have savings.
The consumer will accumulate many, many games until he needs to get rid of them like a margin call. When this happens, he will not want a credit to buy crap from Amazon. He will want liquid currency to buy Wonder and Aquafina.