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Walmart expands video game trade-in deals to its stores

March 19, 2014

Walmart has its sights set on GameStop and its dominant share of the $2 billion used video gaming market. That's the conclusion that one might draw from the retailer's announcement that it is expanding its video game trade-in program from its website to include Walmart stores and Sam's Club locations.

Customers interested in the trade-in program will bring their working video games in its original packaging to a Walmart or Sam's. Associates will evaluate the condition of the game and then provide a trade-in value. If the customer accepts, the store will provide the amount in an eGift card that will work in the chain's locations and on its websites.

"When we disrupt markets and compete, our customer wins," wrote Justin Williamson, director, entertainment, Walmart, on the company's blog. "Our strategy is to pay more for used games, sell new and used games for less, and give our customers the flexibility to spend their money how they want."

Walmart intends to begin selling "Certified Pre-Owned" games by the summer.

[Image: Walmart Games

Walmart and Gamestop are not the only retailers offering trade-ins on video games. Amazon, Best Buy, eBay and Target are also pursuing the opportunity.

Anthony Chukumba of BB&T Capital Markets, per CNBC, wrote in a note to investors, "We do not believe Wal-Mart will have a material impact on GameStop's dominant used video-game market share."

FINANCIALS:     [NYSE:WMT] [ NYSE:GME] [ ]

Discussion Questions:

Will Walmart's expansion of its video game trade-in offer be a game changer in the used game market? What advantages might Walmart have in going up against GameStop in this segment of the business?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Walmart to achieve significant market share gains in the video game market as the result of its trade-in offer?

Comments:

It seems there are three major issues that will impact how this strategy will play out. First, GameStop is an environment that focuses on "Gamers." Walmart is not. Second, the extent of the selection (new and previously owned) available at Walmart and GameStop. Admittedly not a "gamer" so I am not familiar with either. Third, the price points established for trade in and new by both. Other factors that will influence a customer will certainly be convenience, i.e., location of the store, and the ease of shopping for games in each.

Not sure of the impact on either company, but it will impact the game market. The increased competition will lower margins. All the retailers who sell games will have to up their game (pun intended).

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Steve Montgomery, President, b2b Solutions, LLC

Walmart has a large consumer base. Keeping those consumers at Walmart for exchanging video games and purchasing certified pre-owned games keeps those consumers at their store. The strategy has the advantage of creating loyalty with a young consumer base which is an advantage for Walmart or any other company. And with a large loyal audience, the variety of pre-owned games available for sale could be quite large.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

The game changer in video might be the death of physical games. We've seen the market for physical music, books and films erode. Can games be far behind?

So, the question really ought to address the short run and in the short run, one has to ask if Walmart is a place most gamers go and feel comfortable in. Sure, Walmart can pay more for games, and that will clearly impact the market, but will it provide a "gamer friendly" retail environment, i.e., encourage hanging out, staff the section with other gamers, etc.?

Walmart's advantages are clear -- number of units and depth of pocket. Is that going to be enough for gamers to overlook the obvious cultural disconnects? I don't think so.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Yes, it could be a game changer because of the number of locations, and the demographics of their shoppers. No, because of their staffing model and potential pricing strategy.

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Mel Kleiman, President, Humetrics

Sure, this could be a game changer for GameStop. The one thing they don't need is more competition, given the intrinsic challenges of the market they are in. From Walmart's standpoint, this is a no-brainer. Why not try going after this relatively uncompetitive space with all the advantages of broad customer reach, economic scale, and operating efficiency that Walmart brings to everything they do?

Now, had Blockbuster pursued this space much more aggressively 10 years ago... that could have really been a game changer for all involved!

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Jonathan Marek, Senior Vice President, Applied Predictive Technologies

Anything that Walmart does has the potential to change consumer habits at retail. However, I am not so sure that Walmart has the "gamer" expertise to go up against GameStop.

Gamers have a culture that GameStop understands. I am not sure that Walmart associates can compete. Can this be an example of customer service overcoming retail power? Will Walmart offer better trade-ins? If so how, considering GameStop and eBay pretty much set the prices, I think Walmart may be marching into battle against a bunch of gorilla warriors who know their customers, know their games and know the market. I don't think Walmart can compete. Time will tell.

Ed Dennis, Sales, Dennis Enterprises

The changer here is that it doesn't pay in a card that can only be used to purchase more games! Kid at college needs food money — ditch a couple of games at Walmart. Mom and dad need some diapers — sell off the games, get the diapers. Billy needs the new game for his birthday — 25% less used at Walmart. (No one knows the difference, especially little Billy.) This is expanding beyond the gamer and their world. GameStop will hang on to the gamer, Walmart will pick off the rest.

'Stanaggie'

This is a great way for Walmart to engage with a desirable demographic and get them used to spending in Walmart stores or online. The big bonus will come when gamers spend over the limit on the gift card, which will happen more often than not. As I've said before, Walmart never does anything with a singular payoff in mind and this game-changer is no exception.

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Carol Spieckerman, President, newmarketbuilders

I was surprised to learn the video game market was larger than movies; just another sign of aging.

This seems like a bad idea for Walmart. From observing GameStop, it requires a very knowledgeable staff and is very labor intensive -- two elements Walmart is not known for. Without the knowledgeable staff, I don't think is a game changer at all. The advantage Walmart has is greater geographic coverage than GameStop. Gaming, like every other technology, is moving to the cloud. Within a few years, Walmart will leave this used video business.

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W. Frank Dell II, CMC, President, Dellmart & Company

This will be a real problem for GameStop when moms become the key purchasers of videogames...!

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Cathy Hotka, Principal, Cathy Hotka & Associates

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