Best Buy Co. Inc. - the number one electronics retailer in the U.S. – is currently testing the sale of used video games in a few of its stores. With more than 870 stores in North America, Best Buy is trying to tap into the existing used video game market estimated at $800 million (10% of total video game sales) this year.
"The test is limited to relatively few stores. We think it is likely that (Best Buy) will test more broadly as the project takes hold," Piper Jaffray analyst Anthony Gikas said.
Best Buy has dominated the electronics front with Circuit City at a distant second, and now battles GameStop Corp. and Electronics Boutique Holdings Corp. (which will merge later this year) for competing video game sales. GameStop and Electronics already sell pre-owned video game software – with gross margins of 45% compared to 20% for new software.
This is a bold for Best Buy. Brick-and-mortar chain retailers typically don’t offer pre-owned merchandise, and leave that to smaller retail and independent stores.
There are mixed feelings about selling pre-owned merchandise between video game publishers, music executives and film studios. On one hand, selling a used game means that someone bought that game new at one point. On the other hand, buying a used game means someone isn’t buying that game new. With CD sales dropping – due to increasing legal and illegal downloading – the music industry has tried lowering the SRP (suggested retail price) to encourage more new item sales.
DVD sales, which once were always rising, has leveled off somewhat and the film studios have taken drastic measures to ensure more people are buying new DVDs than used ones from Blockbuster and Hollywood Video – these two video rental chains offer many used video discounts. Movie studios have aggressively lowered the SRP on many DVDs after only a few months (80% of most copies are sold during the first two weeks of a DVD’s initial release) to encourage more sales and retailers like Wal-Mart and Best Buy use DVDs as loss leaders to gain more foot traffic and hopefully sell more high-profit items.
Article comments
1 - Rich Powers
As an avid videogame player, let me be the first to say that it's not a cheap hobby. New games cost around $50 so us gamers are always looking for deals.
I've never had a problem with used games, as they often cost much less and work just as fine as the newer products. If you ask me, Best Buy is making a smart movie. I've come to notice that when shopping for used games, consumers will shell out $70-100 if it means them getting 4-7 games out of what they perceive as a bargain.
This translates into big profits for retailers.
2 - Matt Paprocki
I almost always buy used. I love the brilliant people who walk into EB and such and ask "Do these used games work?"
No, they purposely put out defective product. Ugh.
Anyway, most BB stores are already cramped for space. I can't imagine where they're going to put these in the scheme of things.
That said, I remember when Media Play dabbled in this, and how poorly run it was. It's bad enough when the dedicated game stores have people that know NOTHING about the games, but in stores like this, the employees rarely know enough to do this properly.
I'm also part of the group that beluieves game makers deserve a cut of the used stuff, at least for the first few months. Games don't have the "theatrical release" films do, one reason why DVDs are $10-$20. This would create the secondary revenue strain they need, and not makes games such a risk to produce. I see no reason why this isn't happening other than the greed of the retailers.