BENTONVILLE, AR – Walmart has announced plans to start buying used video games from shoppers in stores as well as expand its current online trade in program by allowing customers to trade their used video games at 3,100 Walmart stores in exchange for store credit.
It’s a business that’s dominated by GameStop Corp., the world’s biggest dedicated seller of video games with the largest and most-established video game trade-in program.
Amazon and Best Buy also offer used video game trade-in programs. But Wal-Mart’s new program is the biggest threat to GameStop, which for the last three years has drawn roughly half of its profits from buying and selling, used video games.
“When we disrupt markets and compete, our customer wins,” said Duncan Mac Naughton, chief merchandising and marketing officer of its US stores. “They’ll save money on video games and have the flexibility to spend it however they want.”
Investors appeared to think Wal-Mart’s move spells trouble for GameStop, sending its shares down 3.7 percent to $38.30, while Wal-Mart shares rose 14 cents to $74.82.
But analysts suggest the new program isn’t necessarily a death knell for GameStop. After all, other retailers have tried to take business in the used game market with “modest” success, said Baird Equity Research analyst Colin Sebastian, but GameStop has loyalty among video game customers and a broad inventory of new and used video games.
“History suggests the competition is unlikely to capture meaningful share,” he wrote in a client note.
However this news comes as another bit of bad news for GameStop and other brick-and-mortar video game retailers. In January, GameStop’s stock took a tumble on the news that PlayStation would provide online gaming options. Online-accessible games have taken a chunk of retailers’ game sales.
GameStop’s chief executive Paul Raines says the new player doesn’t intimidate him. “We win those market share battles because we’ve been at it a long time,” he said in an interview with the Wall Street Journal. “There are lots and lots of risks when you’re buying a pre-owned product.”