There's always been a market for used products. Previously owned clothing, consumer electronics and other products all have a market with consumers on the lookout for bargains. One retailer, GameStop, has found that it can sell both new and used items and generate greater sales and profits as a result.
A recent article on The Wall Street Journal's website pointed to GameStop's most recent monthly financial report, which showed the chain's same-store sales up 10 percent for the period ending Jan. 3. According to the report, used games are expected to account for 23 percent of GameStop's revenue for its fiscal year.
The ability to trade-in old games for credits on the purchase of new or used titles has helped set GameStop apart from the competition and drive incremental sales especially in a period where consumers are reluctant to spend at all.
"Nobody else has that used-games draw," Joseph Feldman, a retail analyst with Telsey Advisory Group, told The Journal. "Once you have played a game awhile and it loses its value, GameStop is pretty much the only place where you can get something for it, and that's a big deal in this economy."
The used game and console business is also profitable. GameStop generates about 42 percent of its gross profits from used items. "When you consider that most retailers operate on single-digit margins, it's astronomical," said Evan Wilson, an industry analyst with Pacific Crest.
Discussion Question: What do you think of GameStop's approach when it comes to the sale of both new and used products? Are there opportunities for retailers in categories outside of video games to drive sales with less expensive, previously used products in addition to new items? What are the repercussions for manufacturers and new product pricing?