Monday, October 03, 2005

More Info on Best Buy and Used Games

Here's an excerpt from a CNN/Money article that a bunch of you guys sent to me
The retailer confirmed it has quietly started testing the sale of used video games in select markets, but declined to give details. An analyst note said four stores in Illinois and California are currently involved in the test.

Best Buy doesn't appear to be wading into this half-hearted, though. One of the test stores has over 5,000 used games available, according to Piper Jaffray's Anthony Gikas. Credits earned from traded-in games can be used for other Best Buy merchandise, he wrote.

Ouch. Five thousand games. That's, um, a lot. And credit toward other Best Buy Merchandise if the customer so chooses. Ouch again.

That's why I was saying it was going to be a very, very tough business environment for gaming in the next generation. EB/Gamestop had this nice little used game model going, but it was so profitable that companies five times their combined size (like Best Buy) started sniffing around.

Gaming is big boy business now. I don't think it's inconceivable at all to see a future where Gamestop/EB don't exist. I'm not sure they would have survived this long if it hadn't been for used games, and now their legs are being cut out from under them on that.

I won't be happy to see them go, but I think that's definitely a possibility. This has been a pretty standard evolution in America the last twenty years. It's not exactly Elizabeth K├╝bler-Ross, but it's fairly predictable.
1. Specialty stores with high margins and knowledgeable salespeople sell something.
2. Broadline retailers get interested in those margins and start stocking the same product and sell it for less
3. Specialty stores try to adapt to lower margins
4. R.I.P. specialty stores

That doesn't mean that specialty stores have vanished, but their numbers have continued to shrink, and I think "endangered species" is a fair designation.

I know that a few of you guys manage gaming stores, and I'd like to hear from you about this Best Buy pilot program as well as the EB pilot program running in Canada.

There are tremendous implications for developers as well, and I'm trying to sort them out, but I got a wicked sinus infection or something last weekend, so my brain (erratic on it's best days) is working even more poorly than usual. I'm going to think about it for a couple of days and write about it then.

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