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March 2014 Retro Gaming Article

March 20, 2014 Retro Gaming Blog Article:

WalMart gets out the big guns to oust GameStop from the used video game throne

WalMart is a large powerful force and GameStop will need a strong lan to not be obliterated Hailing from the days when I had a Funcoland near my house, I value the used game market tremendously. Through used games I've discovered many IPs & franchises I've gone on to collect.

I love indie game stores, but my area is pretty sparse on that front, so I rely on GameStop for used games. I'll buy new titles now and then, but I love buying a stack of cheap games and racing home to play!

GameStop has long been the leader in used game sales in both sales quantity and margin. Used games make up nearly 30% of their total sales. That isn't too surprising - what other chains exist that are dedicated to games? They're sort of in their own category, but they are not alone. WalMart is looking to seriously get into the used game market. They tried a pilot program in 2009, but shut it down. They're back and rolling it out across 31,000 US stores.

WalMart vs GameStop

WalMart games Let it be known - there is no versus. WalMart isn't re-entering the used game market to take a sliver of the business from GameStop and assorted indie shops. They're in it to dominate. Behind the smiley-faced rollback signs and happy greeters is a visceral management team that divide and conquer. Their best weapon is their size. Think about the buying power of an indie game shop vs GameStop vs WalMart.

That indie shop might buy 40 copies of a new game. GameStop might by 80,000 and WalMart has the resources and customer base to buy 400,000 units. Who do you think gets the best volume discount? The conglomerate that can afford to knock a few bucks off enough products to have massive traffic on any given day. GameStop and WalMart have online stores that may be able to take sales from Amazon, but they lack the backend infrastructure and experience Amazon commands.

A gaming store would seem to have an edge by being exclusive in the industry, however, WalMart can extend credit from a used game and allow the customer to use that credit against an unrelated product with a higher margin. At GameStop, the margins have less range unless you're talking about a PS4 game versus a Star Wars plush toy. But Walmart can up-sell the credit in a much broader sense. Mom doesn't want to go to GameStop, but the family always needs something from WalMart's inventory.

From a recent New York Times article: J. Paul Raines, chief executive of GameStop, predicted that Walmart's entry into the category would bring more attention to the used-game business. "We've been at this for 15 years," he said. "It's in our DNA. We are a very strong competitor in this space.

GameStop games Experience isn't really the key ingredient here. Knowing how to do something in a superior manner has little effect when the competition stomps you flat before your plan launches. WalMart is a powerful entity. Their purchasing department doesn't negotiate terms and pricing, they dictate them. Don't be fooled.

WalMart is huge and that size enables them to get their way. If a manufacturer is prone to sell 10 million units to WalMart, but WalMart won't meet their price... that company stands to be stuck with those 10 million unsold units while WalMat gets them elsewhere. Most purchasing agreements are small enough so these differences don't have lasting effects. WalMart is huge and these deals are not paramount to their existence, but can severely cripple a smaller manufacturer or distributor to whom large deals can make or break.

That $60 price I complain about is an MSRP value that most retailers adhere to. I suspect WalMart honor it as well. Where they win is the credit they can offer versus that of GameStop. In the used market, you can play your own numbers to suit your needs. WalMart can give more credit and have it impact them less if they can flip that credit to a different department. GameStop has games and the flips tend to rely on the value of the credit - which is generally ridiculous. Most pricing I've seen from GameStop can be bested via a yard sale. On the sales end, GameStop only discounts used games a buck or two if they are actively selling the same title as new. WaMart is definitely large enough to trump that!

WalMart has stated that they will only take in games from Wii, PS3, Xbox, and current gen games - no hardware. GameStop has discussed selling "retro games" via the website. This means they'll likely be selling off the PS2 and GameCube discs that haven't yet been sent to the landfill. This separation in tact won't likely save GameStop from the overbearing massiveness of WalMart. WalMart will almost certainly give better credit for trade-ins and Mom's will always opt to go to WalMart over GameStop.

I have plenty of reservations about GameStop, but would hate to see them fall to WalMart, however, I don't think they have the market or power to survive WalMart invading their turf.

walMart

Box-Stores

Here's why I don't like box-stores. Ignoring their large size and incessant need to sell everything to everyone without having a staff to match, they hold no value to the communities in which they exist. They use no local goods or services. All money goes back to headquarters. This pulls money out of your community which is a bad thing in the long run. These massive stores may save you a few bucks here and there, but they slowly ruin your community's economy. Towns are microcosms of larger systems. When goods and services are locally exchanged, there is a greater good in that area. When money is funneled out of the local economy, everyone suffers.

These stores don't care about customers. They care about money. If you buy games at WalMart, they'll only take your money. Compare that experience with your local indie game shop. The difference is stark. The indie shop offers information, advice and friendship. Box-stores offer a self-checkout lane. They are all about money. For me, the shopping experience holds value in the way in which I spend my time. Saving a few bucks to bask in the florescent chill of anonymity at a stadium-sized store defeats the reason I left my house in the first place.

Shop local. Know your merchants. Being friends with the guy at the indie game shop has perks that Walmart will never grasp.

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