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The Used Games Stew Simmers On
by Kim Pallister on 05/20/09 03:05:00 am   Expert Blogs   Featured Blogs

The following blog post, unless otherwise noted, was written by a member of Gamasutra’s community.
The thoughts and opinions expressed are those of the writer and not Gamasutra or its parent company.

 

A while back I posted some thoughts on the entry of other retailers into the used-games biz (both here and on Gamasutra) after Best Buy, Amazon and Toys R Us all announced they were jumping into the controversial yet attractive-margin business.

The topic popped into headlines again this week as Walmart floated a test balloon of used-game kiosks in 77 of it's US stores. Walmart isn't running the business itself, but renting retail space to E-Play, the company that runs the kiosks.
 
The Walmart name prompted some press calls to analysts, I guess, because we saw quotes from Todd Greenwald ("we don't beleive this proposition poses much of a near-term threat") and Michael Pachter ("I can't see this having tremendous appeal to hardcore gamers, unless the credits are substantially higher than those offered at GameStop"), both citing it as sort of a non-issue.

If you cut through the analyst speak though, you can paraphrase to 'not a threat until they get it right', and 'not competitive until they make it so'. 

Does anyone really beleive that won't happen? Walmart is a company that put itself on the map through ruthless attention to efficiency improvement. I think they'll clue in to any customer sentiment that payment terms matter, that buy-back pricing is uncompetitive, that used-game pricing is uncompetitive, or any other metric that matters.

To posit that GameStop won't see a credible assault on their attractive used-game business seems naive to me. It will certainly happen.

And as I claimed last time, I believe this is a good thing for the industry.
 
Lowering the margins on used game distribution will make games a better value for consumers by increasing the buy-back price or lowering the used game price, and/or make new-game promotion more attractive to retailers because of less incentive to move used games. 

At the end of the day it means more money in either the industry's pockets or consumers, or both, and that's a good thing.
 
[Cross-posted from my personal blog

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Comments


steve roger
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Does anyone really beleive that won't happen?



Well, at some point somebody is going to make a run at Gamestop's used game market, but Walmart's Kiosk isn't it. The biggest problem, aside from the fact they are using a Kiosk, the three day waiting period before credit is given.



The beauty of the Gamestop system is that it preys on the impulse buy aspects of buying games. Both in the fact that people want to buy new releases on release day and you get to walk in and turn your used copy of Wanted into in cash immediately. Secondly, you can simply trade in and buy anytime you want.



Walmart requires you to take two trips to the store. Stupid.



And will Walmart pay more than Gamestop? I doubt it. First, they are Walmart and they are cheap. They aren't going to part with copious amounts of cash. Second, the three day turnaround means that they know the impulse buy is diminished.



The reasoning behind the Kiosks is that they would be able to reduce the impact to their bottom line in having to pay actual employees to service used games. But that was a stupid move. The Kiosks are going to drive people away when they realize that they put their games into the machine and get nothing in return.



Most people are just not going to do that.

Hayden Dawson
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More importantly, requiring a credit card cuts deep into your possible customer base. It's not something that the kiddies will be able to do during the families Sunday ritual trip to wallyworld.



Then there's legal hurdles. In many states, CA, NY, FL all come to mind, such transactions fall under 'pawn' law which have various age, residency and documentation requirements. Plus I wonder how long walmart will allow titles 'creatively aquired' from their locations to magically show up in the kiosk outside.

Michael Rivera
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The kiosk system is pretty flawed, yes, but I believe that the point of the article is that it would be foolish for competitors to completely dismiss the threat.

Kim Pallister
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@Hayden: Good point. I wonder if the credit card requirement for hte kiosks gets them around that? Hmm... Either way I'm guessing their pilot is not in those states?



@Steve: Actually, I think Walmart's main reason for the kiosk isn't the headcount savings. It's that they don't have to run it. They get to dabble in a used-game experiment by using a 3rd party and renting a small amount of floor space to them.



However, I'm sure as part of that they'll survey customers as to what's working and what's not, and improve the immediate-gratification problem, etc. The point of my post was that no one iterates like they do.



They don't have to "part with copious amounts of cash". They just need to tell gamers they can get a better deal for their titles than at gamestop. That could be a better buy-back rate or better price on used games.



I dropped by a gamestop today and looked at a couple titles prices and asked about the used-game purchase price, just to see. On the example of a premium title: Gears of War 2 sells for 60$ new, and $55 used. The 'buy' price for a used GoW2 was $18 - or a margin of 67%. Now this is a best case for GS, and they have to sit on inventory, etc, but still the attraction of the business is clear. Walmart or anyone else competing with GS can either tell potential sellers "We pay $5 more than Gamestop will for your GoW2!", or "Our used GoW2 is $5 less than Gamestop's" and still make ~60% margin on the same title.



And then someone comes along and decides to trump them both by living off an even thinner margin, etc.



The premise of my original post was that competition will take some fat out of the margins of the used games business, which will in turn drive retailers back to putting new games on equal or better footing. Also, more money in gamers pockets should mean games being perceived as better value and thus more money poured back into games. Both of these in turn are good for developers & publishers.

Adam Bishop
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The $60 new/$55 used example is one that people often bring up, but even more striking is the fact that Gamestop sells some used games at a *higher* cost than a new copy. Lost Odyssey retails for $30 brand new, but when I was in Gamestop the other day I saw that they were selling used copies for $55 - nearly twice as expensive! And it's not the first time I've seen that sort of thing.

Steve Roger
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Kim, you work too hard trying to refute my points. Trouble is that my points are correct. I trade games and the Kiosk is stupid. Sure I would love someone to level the playing field, but Walmart is trying to do it on the cheap. Why are you defending it just because you like the idea of competition? That makes no sense. The Kiosk system is just a waste of time and money. My advice is, that gamers should just buy used games anyway in the first place and then trade those in if you want. That is the only way you will limit the amount of loss.



Mark my words. Walmart is not going to make the trade price much better. Nobody is going to give you 30 bucks for a used Gears of War 2. There are just too many copies of that game out there.



Gamespot knows it so we get the shaft.



What is the real issue here? The 60 price point is just too high in the first place.



I know the developers won't agree but I can tell you that the price point is killing my ability to buy your games. If I buy one game for 60, I can't buy another one for a long while. And I know you want me to buy more games.



If you screw me out of the re-sale money I get to buy even less games.



Instead, I end up renting, which I hate.


none
 
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