Amazon begins game trade-ins

Online megaretailer now offering gift-card credit for used games; analyst suggests it could spur GameStop to pay more in buyback values.

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Everyone wants a slice of GameStop's lucrative used-gaming pie. Toys "R" Us recently joined Best Buy and the late Circuit City on the list of big-time chain retailers who have trafficked in used games, and today yet another competitor has entered the field.

Coming soon: Used car sales.
Coming soon: Used car sales.

Online retailer Amazon.com today launched its Video Games Trade-In beta program, offering customers gift-card credit in exchange for their used games. Once customers have selected a list of games to trade in (all trades must be in good condition with original packaging), they can print out shipping labels for free and send them in. Once the games are received and inspected, Amazon.com will deposit the gift-card credit into the user's account.

For those who give the program a try before March 19, Amazon is also offering a coupon code for 10 percent off a single game or accessory. Although all of the transactions take place through Amazon's online storefront, the trade-in program is actually being run by a third party, NorAm International.

Despite the encroaching competition in the used-game business, Lazard Capital Markets analyst Colin Sebastian told investors that he does not expect the Amazon program to have a significant impact on GameStop's bottom line.

"We believe the primary risk to GameStop from Amazon's initiative is greater competition for inventory of used games, and the potential for trade-in values to increase," Sebastian said.

To make his point, Sebastian compared a selection of 10 games' buyback prices at both GameStop and Amazon, and found that Amazon offered 8 percent more credit on average. Similarly, Amazon was asking an average of 25 percent less than GameStop when selling the used games.

"Importantly, we believe GameStop still offers a unique in-store value proposition for core gamers, and believe that its preowned business should continue to thrive," Sebastian said. "In addition, the Amazon initiative does not appear to include hardware or accessories, which is a meaningful portion of GameStop's used business."

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