Pachter Predicts Doom For Best Buy's New Games/Used Prices Gig
Best Buy's little experiment in West Jordan, Utah has big blue price-matching new games with their used counterparts at GameStop and Game Crazy. While used new titles don't usually cut more than $5-8 off the top, any edge is a competitive edge - but game uberanalyst Michael Pachter can't help but see the test's failure as a foregone conclusion:
I don't think it will do well. The price match means that Best Buy either cuts their profit per game in half, or wipes it out altogether. I don't think that they can afford to sell $60 games for $50, and don't think that it will be effective in the long run. If it does well, then GameStop will cut used game prices to the point where Best Buy can't match without losing money.
Selling new games at used prices might not sound like a recipe for success, but the same mechanism is at work when you receive a discount for a pre-order. Maybe Best Buy's hope is to hurt GameStop's bottom line enough to shoulder them off the road entirely - after all, Best Buy has a lot more (and more diverse) revenue streams feeding it than GameStop. Relatively speaking, it should be able to afford to attenuate its profit from each game sold if it detracts from GameStop and/or increases Best Buy's own game sales margins. Right?
Pachter: Best Buy's New Games at Used Prices Experiment Destined to Fail [GamePolitics]
tiny dancer
Posted to on 11 August 2009
· Comments (2)
Other stuff like this: best buy, experiment, used game prices, utah
I feel like your analysis is the closer one to the reality. As mentioned, Best Buy has plenty of other ways to make money and in actuality, game software already has an extremely low margin and wasn't a big source of profit for them or any other store to begin with. In addition, like most price matching guarantees, only a small percentage of customers will actually do their homework and follow through on taking advantage of the deal, so they're not exactly giving the farm away.
On the other hand, if it cuts into Gamestop's market share and gets customers in the store to buy the things they do want to sell you, Best Buy wins for "losing." It's just a different version of a pretty common strategy that they (and most big retailers) already successfully employ.
whoa whoa whoa there chief. a $60 game for $50? what Gamestop is hacking around 15% off of their titles. try 10%, sure, that is only a difference of $4, but if they are getting more people in their store to buy software, they might also buy other things while they are in there. as it stands, video games are not a huge profit margin for them, and neither are systems.
further, Best Buy stands to win here by getting more customers in store who may be trying to get a better price through other means. (ie web stores. I have no doubt this promotion is in store only.)