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Analyst: GameStop Lost Holiday Traffic To Big-Box Discounters Like Wal-Mart
by Eric Caoili
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January 6, 2009
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Janco Partners analyst Mike Hickey says that GameStop stores likely lost traffic during the holidays to big box retailers like Wal-Mart.
Hickey suggests that highly discounted pricing on consumer products attracted shoppers away from the video game retail chain, speculating, "We think low price retailers like Wal-Mart, arguably the largest domestic video game retailer, likely took market share this holiday."
Take-Two Board chairman Strauss Zelnick also recently said he believed that foot traffic was down at game stores during the months leading up to Christmas.
"I can’t say that, because I can’t actually quantify it," GameStop CEO Dan DeMatteo said at the time. "But... October was strong, and [in] the first two weeks of November, our comps [year over year comparisons] are up 20 percent -- so that implies there's foot traffic... so, at least the new titles are bringing out the buyers."
DeMatteo added that GameStop has an advantage as a specialty retailer, and so any evolutions in how it handles game inventory is lessened, compared to a big-box outfit where games are just a section.
Hickey forecasts that despite reduced holiday traffic and economic malaise, GameStop will report in its January 6 sales results announcement that holiday sales performance met its recently-reduced fiscal Q4 2008 guidance.
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I can understand a lot of the argument that games should be able to be resold by the owner, but Gamestop is really the wrong venue for this. They give the consumer a pitiful amount of money (say, 10-15%?) and resell the game at 90% the price of a new game. Then they get the 80% difference FOR FREE while the developers don't get the revenue from selling a new game, even though the difference to the consumer was $10 or fewer. Highway robbery for the middle man from BOTH ENDS of the spectrum.
If you want to support used games, buy direct through eBay or Amazon. Maybe that way gamers will get enough money from their old games to buy new ones from the developer.
Of course, when I read anonymous posts in gaming forums where they say employees were asked to open sealed games and put them in the used bin to sell $10-15 above MSRP just because they were on high demand, it makes me wonder about the system as a whole.
More DLC for console games and services like Steam, in addition to free-to-play games, are step in the right direction. I think we're going to see a lot more of this in 2009, with the secondary market being a significant motivation for doing so.
I do see more ways of monetizing games after the initial sale coming in the next couple of years. Each console and the PC is now equipped to handle DLC and expansions, so it will be happening more frequently than it currently is.
I too agree that GS is a bit unfair in its pricing of used games. I like the idea of Amazon and ebay and other venues that allow for gamers to sell directly to other gamers.