Best Buy Testing Used Games Market
By Tom Ryan
In stores in
Georgia and Texas, Best Buy is testing the use of kiosks to allow customers
to trade in used video games in exchange for store credit. Customers can
buy, rent or trade in games as well as movies in some stores for a gift
card redeemable for anything in the store.
On his blog,
the chain’s chief marketing officer, Barry Judge, said customers can insert
their used game into a kiosk that will scan it for functionality. If acceptable,
the kiosk will immediately issue a voucher that is redeemable for a Best Buy
gift card.
"It’s a pretty
slick system and one of the few trade-in programs to provide instant gratification;
you get the gift card on the spot and can redeem it on anything in the
store — not just another game," Mr. Judge wrote. "We’ll also be testing
the sale of used games in those stores, and some of the kiosks will even
rent games and movies."
About 17 percent
of Best Buy’s revenue comes from entertainment software and the move is
seen as an attempt to gain market share from gaming leader, GameStop. Sales
of video games and consoles grew 20 percent in 2008 to $18.8 billion but
are expected to be flat to down slightly this year amid the downturn, David
Magee, an analyst with SunTrust Robinson Humphrey, told the Atlanta
Journal-Constitution.
But Mr. Magee questioned whether Best Buy’s kiosks will be able
to compete with GameStop’s personable service and expertise.
GameStore has been buying, selling and trading used games for more than 15 years.
"Best Buy is
a great company and will get some slice of share from somebody, but they’ll
have a hard time getting a meaningful share from GameStop," he said.
The AJC found
a Best Buy kiosk
offering a $3.20 credit on the game "Into the Inferno" from the Avatar:
The Last Air Bender series. GameStop’s trade-in price for that game was
$5, excluding any frequent buyer cards or other discounts.
Mr. Judge concluded
in his blog, "We’re
excited about this test, especially because we know how deeply passionate
our customers and our employees are about gaming, movies and entertainment
overall. And the trade-in and used value propositions will give those passionate
customers even more choice and value at Best Buy."
Discussion
Questions: What do you think of Best Buy moving into the used video games
market? Are kiosks the right approach? What do you think of Best Buy
testing the kiosks for buying, selling and trading for movies as well?
Best Buy has the reach and credibility to test all sorts of concepts, and this is another good one. There is no reason why they should cede the trade-in business to GameStop or any other competitor, if they have a chance to recapture dollars in their own store. Best Buy also has the leverage to develop an effective technology to make this happen, and can drive sales throughout the store by putting gift cards into its traders’ hands.
Time will tell, but if the main goal is to take market share from GameStop, it is unlikely that it will be successful. If the game plan is to position Best Buy as the electronic media “be all, end all” then it’s a step in the right direction.
Smart play–increases store trips, builds/rewards loyalty from best customers, takes older goods out of play/introduces new product, attacks competitor with limited capital investment, bandwidth to test in a couple of major markets provides new learnings/opportunity to roll out concept (and others similar to it) across the country. Good example of how well run retailers can enhance the use of their box in an efficient manner.
I like Best Buy’s trade-in pilot. While obviously not a new form of customer interaction, it makes plenty of sense given the recession. Consumers are more savvy and practical about buying, and the trade-in fits this new spending mindset.
It also makes perfect sense to enlist kiosks for the trade-ins, renting DVDs and selling games/videos. Today’s consumers are well-versed in consumer-facing tech across their lifestyles, including retail (e.g., self-checkouts, DVD rental, coin exchange, deli ordering, and photo kiosks).
The kiosks can’t replicate the GameStop experience, but that isn’t necessary. Rather, the kiosks offer shoppers another buying channel and Best Buy another way to keep consumers inside the store. As long as Best Buy provides clear kiosk directions and has staff readily available to assist shoppers and address any issues, then kiosks are OK.
The used game market is huge and from what I understand, is constantly growing in double digits. EB and Blockbuster realize the importance of this segment and have used game credit programs. This end of the category has also allowed independent video game retailers to flourish. My only question to BB is: What took you so long? I want to take a trip down to a test market. I’m actually very curious to see how they execute this in kiosk form.
This is a smart move and completely in line with Best Buy’s goal to reach out to a younger crowd. Consumers have gotten used to movie vending (I routinely see lines in front of redbox machines) so kiosks are a non-issue.
Why should Best Buy let GameStop have all the fun (and games)?
Hard to tell about the profitability of this move, but it is sure to drive increased customer satisfaction and category loyalty with gamers. Like others, I doubt this will switch a lot of the GameStop loyalists from the personal trading experience. That is a gratifying experience in and of itself for serious hobbyists and enthusiasts of all sorts–not just gamers. But it is one more good reason to stop developing gaming enthusiasts who currently shop at Best Buy to delay their evolution toward GameStop.
Seems like a great idea and the benefit that Best Buy will get over GameStop is the ability to use that store credit on anything in the Best Buy store. If you are selling your games and have other games that you want then it’s a push, but if you don’t know what you want and just want to sell those games that are sitting around, why not sell them to Best Buy where you can use the credit on just about anything?
One of my investments a few years back was in a three store franchisee owner of Toronto based gaming company called Microplay with locations in Canada and the United States. One thing that became very apparent was that gamers like to share their experiences with the game, learn “cheats” from other players and will wholeheartedly endorse the game or not.
Growth in this industry is not about advertising, it’s about the gamers sharing their experiences with each other and that includes the sales people who are gamers themselves. Think of it as a community. In order to create such a community it takes personal service from the retailer and a strategy to hire gamers to represent the brand. Specialized retailers such as GameStop and EB Games have mastered that.
I believe there will be some users of the kiosks and buyers of the used games but the GameStop and EB Games have nothing to fear from Best Buy’s latest move.
It’s hard for me to understand how Best Buy has done so well considering some of its current strategy. From the comments it sounds like BB is giving smaller credits and not offering the gamer’s touch like GameStop does. Even with BB’s store traffic, it doesn’t sound like a runaway success formula to me. And BB’s return policy is getting slammed in the local media this Christmas season, and for good reason. You only have 14 days to return computers and then be subjected to a 15% or higher restocking fee. I wrote to them as both a former customer and a stockholder and they told me they would forward it to management for their review.
It’s very hard to get to be number one in a category and even harder to stay there.
I think this is a great idea. Increased store trips is always a good idea. They may even tap into a new market that doesn’t typically go to GameStop. A lot of kids are familiar with GameStop but more parents shop at Best Buy. This will attract the kids that Best Buy is targeting but it will also attract parents who may want to use that store credit for a higher ticket item or who just want to “clean house.”
Best Buy continues to explore concepts that attract their best customers. Trading in a used game for a gift card is a solid strategy. These shoppers usually want to trade up–this is a real incentive to come into the store and buy something new. Kiosks focus this option, a good approach if they decide to expand into other trade-ins.
This is a great move by Best Buy. They are looking to establish themselves as all things electronic, and offering a used game strategy is simply another part of the equation. Makes a tremendous amount of sense.
I also find it interesting to hear that so many people are against the kiosk idea. Personal service? Tell that to the Blockbuster people who have lost all of their revenues to redbox. People like the convenience of a kiosk, and they will be happy to give up a $1 on a trade-in for the convenience of a one-stop solution.
I predict we will see this roll out to all stores within 6 months, with Walmart to follow within the year.
Best Buy seems to be jumping into all sorts of areas in which they have little experience. Since their main competitor went out of business, they seem to think they can do no wrong. They are not Walmart and had better worry more about shoring up their flanks against competition from the blue beast.
With regard to GameStop, Best Buy doesn’t have the expertise to hang with them. Why the huge difference in the example given for the trade in value. Gamers aren’t dummies and when they find that they can get 56% more for their used game at GameStop they will return to GameStop and lose all faith in Best Buy.
If Best Buy wants to get into this business, then why don’t they simply buy GameStop?
Smart move by Best Buy to increase footfall and loyalty. This was something long needed by the customers and a kiosk is the right approach for it, saving valuable store labor hours.