Best Buy Enters Used-Game Business

15 Jun, 2010 By: Erik Gruenwedel

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Best Buy Co. June 15 said it will later this summer begin accepting used video games from consumers in exchange for store gift cards as it enters the pre-owned game market.

Minneapolis-based Best Buy, which made the announcement the same week of the annual E3 gaming confab in Los Angeles, said game trade-ins factor heavily with consumers in the market.

“We know how important game trade-in is in that mix,” said Chris Homeister, SVP and GM for the home entertainment group at Best Buy.

Though frowned upon by the studios, sales of used packaged media generate significant incremental revenue for entertainment retailers while affording consumers an avenue to unload unwanted games and movies in exchange for store credit or cash.

Indeed, Hastings Entertainment said same-store sales of new and used DVD, Blu-rays and boxed sets increased 11.1% in the most recent quarter. Blockbuster reported revenue of more than $120 million from previously owned product in its most recent fiscal period.

Consumers with used games can bring them either to a customer service desk or to a dedicated trade-in desk within the gaming department. Gift cards are redeemable for any purchase in Best Buy.

The news sent shares of GameStop, the nation’s largest game retailer, down more than 5% in midday trading.

Best Buy hopes the gaming will help retain consumer foot traffic, which ebbed and flowed during the quarter. CEO Brian Dunn said the retailer experienced “variability” in store traffic resulting in same-store sales falling below expectations.

“Our data paints a picture of a consumer coming out to spend, and spend well, during important events, but taking pauses in between,” Dunn said in a call with analysts.

Indeed, net income during the first quarter (ended May 29) increased slightly more than 1% to $155 million, or 36 cents per share, on revenue of $10.8 billion. Analysts had projected 50 cents per share in earnings.

Sales of entertainment software, which includes DVD/Blu-ray Disc movies, music CDs and video games, declined 12.8% compared to a decline of 20.1% during the previous-year period.

Best Buy officials said it will rollout its previously announced digital entertainment service, which includes CinemaNow movie downloads, to portable media devices, Internet-enabled Blu-ray Disc players and HDTVs.

“This is a great opportunity for us to drive incremental margins by attaching connections to the millions of connectible devices we sell,” Dunn said, adding that sales of nascent 3DTV showed promise.

“Although 3DTV is still in the early days, we’ve already seen a great deal of interest in events like the World Cup, which will help drive consumer interest around the world,” he said.

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