Wal-Mart to buy and sell used video games

The king of retail will sell games, hardware and even used DVDs at 5 test locations.

By InvestorPlace May 12, 2010 7:00AM

video game stocksWal-Mart (WMT) is looking to jump back into the used PlayStation, Wii and Xbox business.

 

Specifically, Wal-Mart has entered into a lease agreement with a small retailer called Game Trade to test used-video-game sales, buybacks and trade-ins in five stores.

This isn’t the retail king’s first foray into the used video-game business -- but there are a few reasons to think this venture may succeed where others failed.

 

First, Wal-Mart kind of halfheartedly jumped into used game retailing in early 2009. The store stuck 77 kiosks in its stores that scanned a used video game's bar code and then added a credit to the customer's credit card. The problems with that are obvious -- not the least of which is the fact that many gamers trash their original packaging and are left with just a software disc and no bar code.

Second, Wal-Mart is going whole hog with the resale of hardware as well as software, and is even going to offer the resale of DVDs and Blu-Ray discs. Post continues after video:

 And third, the recent death of Movie Gallery and its related Game Crazy locations creates a void in the marketplace that Wal-Mart could help fill. Just as the company saw an uptick in electronics sales after Circuit City’s collapse, the retail behemoth could benefit greatly from the lack of competition in this market.

A recent Newzoo Games Market Report estimates that a full 46% of video-game sales involve used software, meaning this is an incredibly lucrative segment of the $25 billion market.

 

There are, of course, a few obstacles. Gamestop (GME) is a clear leader in the industry and won’t be unseated easily. Another difficulty is that video game sales in general aren’t as strong as they once were.

In a recent conference call to discuss the company’s fiscal fourth-quarter earnings, Electronics Arts (ERTS) top brass estimated sales would be down 3% year-over-year in April for the video game industry. That's not inspiring, considering the dearth of spending in spring 2009.

 

But who knows -- Wal-Mart may have learned from its previous venture and see success in test markets. If so, expect to see used video games on sale at a Supercenter near you later this year.

 

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