Best Buy Price Matches Gamestop Used Games

[duffmanth]

I don't know where you are getting your numbers from. The retail margin for large chains on video games and other consumer media is 30%. That applies to Toys R Us, Amazon, Target, Walmart and Best Buy. That's the same deal Gamestop gets on their new games. Obviously, on used sales their margin is whatever they pay for the game versus what they can sell it for. A smaller game store buying from a distributor usually only gets the 10%-15% margin you are talking about. If you spend a little time looking at the annual reports for Best Buy, game sales are less than 10% of their total sales and a little over a third of their recorded media sales. They make their money on appliances, computers, cell phones, cameras, electronics, etc....

Best Buy doesn't have to compete with Gamestop, but they are an easy target and frankly, if they even steal 5% of Gamestop's used sales, it will do significant damage. Gamestop has massive overhead with 4,000 stores and no other product lines to fall back on. They are under incredible pressure to keep delivering rising profits and any damage to that trend is going to create massive problems for them on the corporate level.

Personally, I buy most of my games from Amazon, but I know lots of people who buy from Gamestop and the only reason they do so is price. If a consumer can get the exact same game, sealed and perfect from Best Buy which is in every major area in the country today, for the same exact price as a used game from Gamestop, they are going to do it. Gamestop's only response will have to be to reduce prices further which means lower trade-in values which will have a direct impact on the number of people willing to sell to them and continue getting stuck in their circle of low TIV, store credit and the perpetual trading of games for far less than they are worth only to get another used game in poor shape.

The profit margin on games ISN"T 30%, not even close (unless profit margins have really gone up in the last few years?). I worked at a gaming retailer for almost 4 years and at a Best Buy for 1 Christmas, and can I tell you the average profit margin on new games is about $5-10, diddo for accessories, and maybe a few dollars on consoles.

[Bojay1997]

The profit margin on games ISN"T 30%, not even close (unless profit margins have really gone up in the last few years?). I worked at a gaming retailer for almost 4 years and at a Best Buy for 1 Christmas, and can I tell you the average profit margin on new games is about $5-10, diddo for accessories, and maybe a few dollars on consoles.

You are confusing your employee discount amount with the profit margin. Unless you worked in corporate, you have no idea what you are talking about. The profit margin for new games to a small local shop is $5-$10 depending on the game which is 10-15%. For larger retail chains it is 30% because they are buying at hundreds of times the volume. That's why Toys R Us is able to to the B2G1 sale every year and other retailers like Target have followed suit. I know from discussions with one distributor that services Amazon that on some bigger ticket items like Rock Band, etc..., they actually get a 40% margin. Of course, profit margin is not the same as profit. There are lots of costs which both Gamestop and Best Buy have that a smaller retailer and Amazon do not.

[duffmanth]

Maybe corporate and retail employees get diff. discounts, cuz mine sure wasn't 30%, it was maybe $5 at best.

[Bojay1997]

Maybe corporate and retail employees get diff. discounts, cuz mine sure wasn't 30%, it was maybe $5 at best.

Exactly, that's the point. Nobody gives their line employees items at cost. It would cause way too much fraud. Heck, if you have a resellers permit, you can buy from distributors directly and get $5 to $10 off MSRP for a single unit of a game. To get 20% or 30%, you need to buy in large chain retail quantities of thousands of units.

[Oobgarm]

They're saying discount is 5% over cost, which put my copy of Wii Sports Resort($50) close to $42.

That's only a 15% difference, which would indicate(roughly) a margin of 20%. Unless, of course, their cost is actually lower than that, which would not surprise me. But after looking at sales charts which detail margin, I don't see a larger margin in software.

I think this is a fabulous idea. Keep in mind that they're not actively targeting hardcore gamers, but just your average folks. Some hardcores will get in on the deal, sure, but you'd be surprised at how much difference a $5 discount can make to the typical Best Buy shopper. I don't think they're looking to really outdo GameStop, because that would be foolish. They're using the "sale" to increase volume and increase loylaty of those thrifty buyers.

If my store is any indication, outside major releases like Madden, NCAA, and Wii Sports, the gaming department has really stagnated and is in need of something to rejuvenate it a bit. A deal like this could do precisely that. It's one little store in Utah, and here we are, talking about it.

[garagesaleking!!]

Gamestop's used prices are so high anyways that it doesnt even matter. Selling used games for $55 is just wrong, who doesnt pay the extra $5 to get a new game. And anything gamestop sells for $39 or less used is probably already about the same price new at best buy. I dont see the big deal here.