GameStop's used games business is "nearly bulletproof" - analyst
Despite "a widespread onslaught" of kiosks selling used games set to spread across US, says Greenwald
Wal-Mart's entry into the used games business with dedicated kiosks is no threat to specialist retailer GameStop, according to Todd Greenwald, analyst at Signal Hill.
GameStop customers want immediate gratification by trading in their titles for another game, said Greenwald, while Wal-Mart's kiosks will only offer credit days after the initial trade-in.
"While new competition in the used game business is never a good thing for GameStop, we don't believe this proposition poses much of a near-term threat," he said in his latest note to investors.
"This is more of a traffic driver to Wal-Mart's stores and an alternative for cash-strapped consumers, than something that will take meaningful share from Gamestop's core consumers. Within this program, consumers must wait at least 2-3 days to get credit. It doesn't seem like there's any compelling reason for a Gamestop customer to switch to Wal-Mart's kiosks rather than one of Gamestop's 6000 retail stores."
"We continue to believe that its used game business is nearly bulletproof," he added.
Greenwald did warn that kiosks selling, renting and trading games and movies are likely to go nationwide in the US "wherever consumers are, from convenient stores to hotels to airports to retailers and more," and that more retailers will continue to grab market share in pre-owned sales.
"We still expect more competitive threats to emerge; Toys R Us has been in testing mode and is readying a nationwide launch of used game sales. Best Buy, which has tried several times in the past is likely to make another attempt to crack the used game business," he detailed.
"In addition to retailers, we believe that Wal-Mart's kiosk test is just the beginning of a widespread onslaught of kiosks covering many categories, showing up in many locations. Driven by companies like Redbox, e-Play, NCR, Blockbuster, and more, we expect to see kiosks show up everywhere selling and renting DVDs, videogames, and more. Furthermore, they will have the functionality to not only sell but trade DVDs and videogames," he added.