Wal-Mart and Best Buy Bail on Used Video Games

Obviously they couldn't make money. Whether it's games, DVDs, clothing, or cars, the retailer needs to be all in or all out.

David Livingston, Principal, DJL Research

You need volume to succeed in this area. Perhaps there is a stigma associated with this category in that smaller stores may offer up more credits than the big bad faceless corporation? Who can you haggle more with? Comic Book Guy from The Simpsons or a manager who was probably filling the dairy cooler before talking to you? It's a tight culture that is better served by places like GameStop and EB or dare I say, an independent.

Doron Levy, President, TheMortgageMachine.ca

I'm having a bit of a "Which came first?" moment on this one. The early accounts that I read on this yesterday framed the story as e-Play ceasing operations THUS Walmart and Best Buy getting out of the used gaming business. That would seem more likely than these two major retailers simultaneously deciding to exit the used gaming business via kiosks. Can you hear the call? "Hey, Best Buy, it's me, Walmart. What say we ditch on the kiosks and cut a break for GameStop?" "Yeah, sure, why not?" Hmmmm.

Carol Spieckerman, President, newmarketbuilders

The video game category is ripe for competition; it may take a number of tries, but there will be competition to GameStop. The competition could come from cloud-based gaming, which is still in its infancy. Just as more consumers are streaming films from the Internet, so, too, will they be able to play games without buying the physical disc.

Max Goldberg, Founding Partner, The Radical Clarity Group

There just no room in huge retail inns for products that don't produce sales and profits. Those are the games that both Walmart and Best Buy play.

Gene Hoffman, President/CEO, Corporate Strategies International

I agree with Carol, but David is also right. For whatever reason, there just wasn't enough money in it.

Ryan Mathews, Founder, ceo, Black Monk Consulting

I'm not sure if we're asking the right question here.

Look at the DVD business. The old model was--go to Block Buster, rent DVD in 480 dpi, view movie, return to store. New model emerging is turn on laptop/HDTV, scroll menu of cable pay per view and/or VUDU/RUKU, find movie in 1080 dpi, press button, view movie, go to bed. Same discussion with books and e-readers.

My sense is that WMT and BB were on the wrong side of the technology curve on this one, figured that out, and decided to get out.

Bill Emerson, President, Emerson Advisors

Buying and selling of used goods is a whole different process and mind set than buying and selling of new merchandise. Both the way things are acquired and sold takes a completely different mindset.

Look at pawn shops and resell-it shops. Even in the car business, used cars are a whole different world.

Mel Kleiman, President, Humetrics

Walmart and Best Buy are both by a huge margin the leaders in their field. And if either or both want to re-enter the field they should sell video games the way they sell other electronic products. And they likely will just do that. One idea--give away, say, six games with the purchase of a major product.

Sandy Miller, President, Miller Zell

Walmart and Best Buy are in the business of buying and distributing products to many shoppers, not buying products from a few shoppers for resale. The former depends on a massive and consistent supply of goods and a mass buying discipline. The latter is fundamentally a customer service with no supply chain consistency.

Then there's the matter of delivering this service using an in-store kiosk. Even under the best of circumstances, the number of potential daily users is limited by simple physics: one user at a time per machine; so many minutes per user. You can do the math--the productivity is limited. It's just a poor fit for mass retailers like these.

James Tenser, Principal, VSN Strategies

This was a move motivated by 1) defensive strategy vs. Gamestop and 2) hope for profits. As it turns out, this is a difficult thing to do. Gamestop has staff that can look at and know the value of the used games. This is not a good option within Best Buy or Walmart. Too hard to do, too hard to be consistent and too disruptive to sales floor flow. So, they tried self service with a kiosk, and the results were low as noted by others.

Of course, the background is that it was a poor year for video games and neither company really sells the core gamer like Gamestop. This can and will be revisited over time depending on how these factors change. The fact that these retailers can and do test and can and do kill programs is what is impressive.

Robert Heiblim, Principal, RH Associates

This is the heart of testing--you've got to be trying some things that don't work. While I agree with the other panelists on the reasons this didn't work (need scale, new vs. used mindset, gaming-oriented branding, etc.), one can always look back and find reasons something doesn't work. With new concepts, if you aren't testing a few losers, you aren't going to find the out-of-the-box winners either.

Jonathan Marek, Senior Vice President, Applied Predictive Technologies

We are dealing with two different customers. The general public goes to WMT and BB. Everything they do is geared to the mass. Yes, the mass buys games, but the mass does not buy/sell games. Gamers do. Gamers go to specialty stores such as Gamestop. They not only trade games but stories and information, what's cool, what's not and playing secrets. Both WMT and BB are smart retailers. While they should be commended for trying new angles, they should have understood this would not work.

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

You need employees who know what is hot, what systems the games will and won't work on PS, PS2 or PS3??? The Gamestop & Replay folks know when to start/stop buying Pokemon or Batman and the going rate. Walmart and Best Buy can't put that level of knowledge in their stores.

'OscarSmith'

Gene makes a great point. If it's about customer experience and requires deep associate knowledge and involvement to succeed, Walmart, et al need not apply.

Marge Laney, President, Alert Technologies, Inc.

I think this is a terrible mistake, and both WM and BB will be in Chapter 11 by year's end...well, OK, maybe not. But I suppose at least some of us are smiling inside to (finally) see the behemoths in retreat on something.

'notcom'

In my limited exposure to the used game business I learned that there are great difficulties navigating the supplier landscape and securing product. It seems a difficult world to step into but Gamestop has proven it to be extremely profitable.

I don't know exactly why WMT and BBY couldn't make money. It may be because of the supplier challenges. Or it could be because kiosks never, ever work. Everyone seems to chase kiosks as a selling tool and I've seen dozens attempted but none successful. I am genuinely interested if anyone has seen a successful selling kiosk (as opposed to checkout/check-in, plan selection, etc.).

'atdrake'

It's interesting that Redbox is successful while e-Play was not. I never saw or used one of these kiosks so I can't comment on the user experience. Redbox is piloting video game rentals, which makes a lot of sense to me.

David Drain, Executive Director, Digital Signage Association