Used as Good or Better Than New for Retailers

Practical solutions focused on the consumer segment they serve...hmmmm...this is SPOT ON, and totally relevant to the target customer they serve. I don't think they have to reduce prices on new games, because new and cool drives this consumer...who they are is sometimes very linked to what they have that's new and cool, regardless of price. I have seen 100 of these guys in my house since my 19 year old son was about twelve. Game budgets trump books, food, dates, you name it!

Anne Howe, Founder, Anne Howe Associates

Game Stop's strategy makes perfect sense, from every angle. Games get boring, so consumers want to sell them fast and Game Stop quickly offers up cash. Win one for the consumer, and one for Game Stop's inventory supply. Plus, irrespective of the current economy, a lot of 'wise' parents would rather buy a used game and save some money on an item that has a limited life expectancy in the home. Finally, the margin for Game Stop is incredible on these used items.

The car business has made a fortune on used cars for years. A lot of other categories work this angle too. Sporting goods (Play it Again Sports), used office furniture, and even clothing (my office is in a rather affluent area and there are at least 5 consignment shops downtown). Look at how eBay and Amazon make a bundle on used items of every description.

There will always be customers looking to sell stuff for cash, customers looking to save money on used items, and retailers ready to make extended margins on the whole thing.

Kevin Graff, President, Graff Retail

Selling used products works well for certain categories like games, music, and movies; the categories that are also profitable to rent. What makes these products work well is that they tend not to wear, are easy to stock, and turn-over fast. If Home Depot were to sell used tools, for example, they'd have issues with quality, shelf space, and slow turn-over. So I just don't see much momentum beyond GameStop.

I also don't see much impact on new product pricing. There will always be a group of early adopters that is willing to pay a premium in this area. The next group will wait for sales, and the third group will buy used.

David Dorf, Sr. Director of Technology Strategy, Oracle Retail

The only interesting part of this story is that it's taken so long for someone to think of this. Here in Toronto, a number for games retailers have offered buy-backs for used games for years. Even with a lower retail price, the margins are huge as the amount paid back for the game is often less than 5% of the game's original value. A friend of mind was offered two dollars for a game he purchased for over 60 dollars just a couple years a go. The game would be resold for at least fifteen. Do the math, these are better margins than for new games.

And during a recession, it's a great way to keep the till ringing.

Now if only I can get more than 5 bucks for my Colecovision....

Marc Gordon, President, Fourword Marketing

In New England, Newbury Comics has been able to survive the contraction in the music and video business with used product (as well as building businesses in other ancillary categories). My sense is that any given time used product in both CDs and DVDs may make up as much as 35-40% of their stock.

There's no question that this product impacts the sales of new product, and keeps a lid on the prices of new product. But in these categories, GameStop and Newbury Comics are merely mining the retail opportunities in used products that are clearly evident on eBay and Amazon Marketplace.

Ted Hurlbut, Principal, Hurlbut & Associates

In the face of a culture that has grown increasingly disposable, retailers incorporating the resale of used items is a brilliant strategy. Not only are you recycling product, saving resources, reducing trash...the margins are usually stronger on used items.

'mikeb22'

There is no controversy here. BMW, Mercedes and Lexus have sent the "used car salesman" the way of Richard Nixon. Computers are refurbished. Videos are rented. There various trading sites on the internet. GameStop not only provides a service for its customers and adds incremental revenue all the way to the bottom line, but most of all keeps its customers' focused on and loyal to GameStop.

Gene Detroyer, Entrepreneur, Advisor, Consultant, Professor, Independent

There is a huge opportunity here for combining the virtual reach of eBay with the physical presence of brick and mortar retailers. The biggest concern would be the fear of cannibalizing the sale of new products. One easy way to avoid this would be to limit the product categories. Supermarkets could offer an eBay consignment area for clothing, furniture, etc. Buyers would be able to shop the area online, maybe even reserve items. The shop would offer photography and display services to sellers so they could offer their items in the best possible view. It would also screen items for general condition, offer pickup and delivery service, and provide shipping services for items that are bought unseen.

Bill Bittner, Principal, BWH Consulting

GameStop's model does have its detractors (and not just among game makers). Some gamers take issue with GameStop's pricing on used games; after all, they know the profit margins as well, and on the chain's practices around packaging removal and the resulting barriers to gift-giving. I do think that the current economic climate has helped GameStop overcome the grousing and mitigate yet another obstacle; the fact that moms and casual gamers traditionally haven't felt comfortable purchasing from their stores. Price is a powerful lure!

Carol Spieckerman, President, newmarketbuilders

Used product works. However, it is a TOTALLY different business proposition in that the BUY is key, as it is in regular retail, but much of the purchase process (people coming into your store with quality goods) is completely out of your control, and what you pay for those unpredictable walk ins depends on local market factors.

However tough the used product is to get and control, the sales of these items rarely bump into new. The used customer understands that the hottest product just isn't there yet, so the search is for old favs or, by pure chance, a newer game for a bargain. Totally different decision and visit ladder by the customer.

Used is the way to go though...think how great it'd be if Apple did that.

Lee Peterson, EVP Creative Services, WD Partners

It's no coincidence that the same folks who brought you GameStop also brought you Barnes & Noble College Bookstores (not part of the Barnes & Noble public company) and a huge used textbook wholesaler, MBS Textbook. New college textbooks aren't profitable for bookstores because the margins are terrible. The profits are in the used books and the clothing. Same with video games.

Mark Lilien, Consultant, Retail Technology Group