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Circuit City dabbles in used games

Analyst points out preowned games on retailer's Web site, says it's not a significant near-term threat to used specialist GameStop.

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Used-game sales can be an exceptionally lucrative business for retailers. A recently released $60 game can be purchased from a customer for around $25 and then resold at a slight discount from the original retail price, something that hasn't been lost on the major big-box retailers.

Last year Best Buy tried selling used games in at least four of its stores, and Circuit City has begun its own voyage into secondhand sales on its Web site. Currently the electronics store has an assortment of listings for "pre-owned" games like Resistance: Fall of Man for the PlayStation 3 ($54.99), Guitar Hero II with guitar for the PlayStation 2 ($74.99), The Elder Scrolls IV: Oblivion for the Xbox 360 ($45.99), and Halo: Combat Evolved on the original Xbox ($13.99).

Lazard Capital Markets analyst Colin Sebastian today sent a note to investors tipping them off to Circuit City's used-game sales but said he doesn't see the retailer as a significant near-term threat to GameStop's bottom line.

"We view the barriers to establish a liquid and profitable used video game business as fairly high," Sebastian wrote, "including dedicated systems to track and manage used product inventory and pricing, the ability to refurbish products and restock stores to balance supply and demand, as well as a sales force trained to evaluate trade-ins. We also believe that a successful used business requires a significant inventory of both new and used video games."

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