Amazon.com has launched a video games trade-in website that lets gamers trade-in used video games for store credit. Reuters reports that analysts believe Amazon's latest launch is a challenge to GameStop. Used games have helped boost GameStop's bottom line.
Credit Suisse analyst Gary Balter called the Amazon development "disconcerting," suggesting that it chips into a kind of monopoly that GameStop has on used games, albeit one too small for game trade-in competition from Amazon to have much impact on the specialty retailer's profits.
GameStop profit margins have benefited from an active trade-in system in which shoppers return used games for a fraction of the purchase price or store credit. The returned games are sold at a higher profit margin than new games.
Balter suggested that GameStop can withstand near-term encroachment from physical retailers.
"That (Toys R Us testing) in many ways is less of a threat, as GameStop's advantage of 10 times as many locations and selection seem to make them less vulnerable," he said. "Best Buy and others have tested it for some time but have not been as successful."
Amazon.com notes that traded in games must be in good condition. Amazon.com's strategy for used goods in the past has been to allow sellers to sell used video games so having people send in games directly to Amazon.com is a new strategy. Whether or not they can challenge GameStop will depend on the quality and quantity of games that Amazon is able to obtain from gamers.
