Wal-Mart Stores Inc. (WMT) has announced that it will begin selling used video games at a reduced cost in around 1,700 of its 4,800 U.S. stores starting from Nov 3.
In Mar 2014, this retail giant had announced that its customers could sell their used video games at its stores. Accordingly, Walmart accepted popular video game consoles, including Sony Corp.’s (SNE) PlayStation3 and Microsoft Corp.'s (MSFT) Xbox 360, provided they were in working condition and in their original packaging. In return, Walmart offered them in-store credit, which could be used to purchase anything at Walmart and Sam’s Club stores.
These trade-in games were refurbished and labeled as ‘Certified Pre-owned’ by Walmart for sale in stores and on its website at relatively lower prices.
The retailer has also announced a special promotion with the release of Call of Duty: Advanced Warfare, one of the most anticipated games of the year. Walmart has also planned a series of midnight launch parties starting from Nov 2, where customers will be able to buy the game 24 hours before it goes on sale.
In addition, on Nov 3 and 4, Walmart customers can get double trade-in value for their used games if they also purchase a Playstation 4. However, this deal does not apply to Xbox One video games.
The move to sell certified pre-owned video games at reduced costs is an effort to compete with retailers like GameStop Corp. (GME) which has a lion’s share of the gaming market. GameStop is a Texas-based video game retailer, which currently operates 6,457 retail stores throughout the U.S., Canada, Australia, New Zealand and Europe.
Walmart seeks to gain market share in the $2 billion pre-owned video game market through its trade-in program as gaming is the fastest-growing form of entertainment. Walmart started its trade-in program late last year when the company offered credits for used tablets and smartphones that could be used to purchase new devices. Apart from smartphones, tablets and video games, customers can receive credit for a wide range of products such as MP3 players, cameras and laptops through these trade-in programs.
Walmart has been struggling of late with disappointing earnings results. The company delivered in-line earnings and better-than-expected revenues in the second quarter fiscal 2015 after reporting five weak quarters in a row, but again disappointed its investors by lowering its fiscal 2015 earnings guidance.
Thus, this Zacks Rank #3 (Hold) company is seeking new ways to boost revenue amid macro-economic headwinds like budget-strained customers, reductions in government benefits, higher taxes, tighter credit and higher group health care costs. The sale of used video games will not only help the company combat slowing store traffic, but will also give an opportunity to tap the growing gaming market with more than 110 million video game users.
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