Many of us have seen or experienced several things to complain about in regards to GameStop. For some, it's the fact that GameStop promotes used games over new, even if the difference is just a few dollars. Not that this shouldn't be expected — they make more money on the used copy than the new. For every new copy sold, GameStop makes roughly $2. For used, they make an average of $15 or more. In the case of Xenoblade Chronicles, they are making at least $42 profit per game sold. For others, it's the fact that unless you buy the game the first week it comes out, GameStop opens the case and takes the game out. While this does indeed devalue the game for people, at least there is a good explanation. As a teenager who has stolen games before, needless to say it's rather easy to slit open a case and steal the disc without notice. Thus, GameStop's best method to combat that is to keep the discs behind the counter.

However, I noticed something over in the Kotaku comment section in regards to GameStop, and I feel this needs to be addressed in a more public manner: The claim that GameStop is purposely holding on to new copies of games and selling them as used later to generate more profits for themselves.

"I used to work at both the GameStop warehouse and in a store. They do this quite often where they sit on a game, remove the original wrapping, and sell it as used. In the past, however, the game is cheaper than what it would be new. This seems like their way of cashing in on this rare item. Another issue with this is that if GameStop sells them "used" then GameStop receives all the profits. As of right now there is nothing to force payment to publisher or developer when they sells used copy of a game. This is one of the more dirty things I've seen GameStop do to not only a customer but a company that allowed them to sell the game exclusively." — Jason Shreler
"As a former GameStop manager, I can attest to this man's assertion." — Satan-Touched-My-Tummy

If this was just an isolated thought process in the comment section of one website, it really wouldn't be worth talking about, but I have seen remarks like this made numerous times by various fans at a copious amount of websites in the last eight years or so. You would figure with so many public claims by various former employees that there is some air of truth to the remarks. I mean, they must be true right? GameStop isn't exactly a hard employer to work for (this isn't some big exclusive club or anything). Certainly, former disgruntled employees must exist and likely can and will spill the beans of corporate practice on the internet. Why not? It's happened for many other companies out there.

The problem I have with claims like above is that it actually logically makes no sense. Doing as they say would only cost GameStop money, not make them any, except on really rare occasions. Did GameStop hold back on some Xenoblade Chronicles stock? Sure, it is definitely possible. With how quickly the first run sold out and how fast the used market prices for the game sky rocketed, logically when GameStop got their second run it would make sense to hold some copies back — that way they can sell them used now for $90 and make at least a $42 profit. That makes the game the most profitable used game they have, since any other used game that sells for even $45 they generally paid at least $10 or more for the copy; some they paid $20+ and if it's even newer, they paid $30+. It all depends too on if the user got in-store credit or cash value, but that's a debate for another time.

Either way, GameStop rakes in on used games in comparison to new games, but a $40+ profit margin is a rare sight in the market outside of rare games. Xenoblade Chronicles is one such rare game, maybe only matched in Gen 7 by the Metroid Prime Trilogy collection. I have no doubt GameStop held back copies of Xenoblade Chronicles to sell for an increased price later. Of course they cracked the games, repackaged them, and sold them used. It may seem shady to us consumers...but retailers can sell a product for any price they want. There is a reason that you always hear corporate folks — let's say Reggie Fils-Aime in this case — say that X product is being sold at a "suggested retail price of _____".

That's because retailers are allowed to adjust the price in any manner they want — but Nintendo's cut and all the charges that lead to the product getting to the store won't change. In most cases, the general price is set to equal that which the consumer can buy the product from them directly — so retail will follow suit or risk not generating enough sales to make it profitable. This is how Walmart can knock, say, 20 cents off a product and claim they are selling it cheaper than everywhere else. They didn't pay any less for that product than Shopko, but they are banking on the cheaper price leading to more sales. While Walmart cuts into their "per item" profit margin, they make it up by selling more of that product than another similar store. Sometimes you can even see price fluctuation of $5 or more, depending on what the profit level is for the retailer on a given product. If they make, let's say, $10 per "computer chair" sold, Walmart may mark it down $5 from everyone else to move more product and make up the margin via the back end sales numbers.

Of course, that is when a product is still being sold new. However, there is a fine line with consumers with new and used products, especially rarer products. The Wii after launch was going for $300+ on eBay and Amazon because retailers couldn't keep it in stock. Retailers weren't "upping" the price of the Wii due to demand, even though they could have; instead, they reserved some of their stock and bundled products with it, hoping to make more money that way. It worked well because it was such a hot commodity. GameStop is instead banking on inherent value of a rare game. Holding back stock and hoping the game is rare enough that its value rises above the $50 suggested retail price.

If they listed the games as new, they wouldn't be able to get away with a $90 price point even if the market demands that price. It doesn't look good for them at retail to have a "new" last gen game listed $40 above its original sale price just a year ago. However, they can justify it as a used product price because used product pricing is based upon consumer demand and rarity. Madden game prices drop in value fast because a new one is always coming out — but one off games tend to stay at a high value much longer.

I don't necessarily have an issue with GameStop doing this with Xenoblade Chronicles. If they didn't, I would have quickly run out to all 40 or so GameStop locations I can realistically drive to and bought every copy of Xenoblade Chronicles at $50, so I could resell them myself for $90. At least at that price, it ensures the person buying it will be playing the game — not reselling it for personal profit. If someone is going to make money on it, I have no problem with it being GameStop. I'd rather a person at retail buy it to play the game, not to resell it. The value on this game is too high to realistically expect anyone who wants the game to get their hands on it at $50. Too many people, like me, would want to make the profits from it. Kudos to GameStop for simply jumping the gun and planning ahead. Taking a calculated risk. ...This all assumes, of course, that this is what they did. They do relentlessly call people who bought the game to buy it back from them, so it is also possible they have just been stockpiling copies they bought back from consumers — but let's just assume for a moment that they didn't do that.

What is suggested in the above quotes points to GameStop regularly holding back stock on a game to sell later as used, as if selling that product used is going to make them more money. After all, GameStop gets all the money on used game sales... right? Right. Except for the fact that they still had to get that copy of the game from the publisher — meaning they already paid for the game. GameStop only makes about $2 or so per new game sold, and they obviously want to move that stock. When you see a retailer quickly drop the price of products not selling, it's not because it makes them any money to do so — it's because they don't think they are going to be moving that product at all, and it makes sense to recoup at least some of the costs they have already incurred by stocking that item than to lose out on all of it. For every new game not sold, GameStop is out that money. That is generally why GameStop — really, most retailers — only stock enough of a product that they expect to realistically sell. Nintendo has already made their money on the Wii U units in stores — the problem with it not selling is that retailers aren't ordering more, so Nintendo isn't making any more money until that happens.

GameStop selling a new game as used is too much of a risk. It relies solely on the value of the product in the used game market being higher than the value of the product new — because they still have to make money back for the initial cost on the game. If they hold back new copies and sell them used, they are cutting their own profits down without the value actually rising.

There are several reasons many of you may not like GameStop...but this is just a classic case of people piling on. GameStop wouldn't do this because it costs them money to do it. The profits don't automatically change to 100% GameStop just because the label is flipped from "new" to "used". GameStop already bought the product and must cover those costs before the profit levels happen. With a used game, they bought it from the consumer. With a new game, they bought it from the Publisher. Either way, they have to sell it above the price they paid for it to profit.

Obviously, this isn't true for every product on the market. Some are pure profit deals — no one makes any money until the end consumer makes a purchase — but that's not how it works in the current gaming industry.

Just my two cents. What do you think?

Tagged With: gamestop used games