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Why GameStop Wants Your Used Smartphone

By Demitri Kalogeropoulos - Apr 5, 2013 at 10:59PM

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What's a video game retailer want with old mobile devices?

GameStop (GME 6.81%) wants your old smartphone -- really.

The company just expanded the list of devices that it accepts for trade-in cash or store credit. New names from Samsung, BlackBerry, and Motorola have all been added to the list, which already includes the Apple iPhone 5, and tablets like the Galaxy Tab. And to add icing to the cake, GameStop is even offering a bonus for shoppers who give up their old devices within the next few weeks.

Photo courtesy of GameStop.

Don't call it "junk"
It's part of a push by the company to get deeper into the used electronics business. That was actually one of the few bright spots in an otherwise dreadful 2012 for the retailer. While sales shrunk in its core businesses of used and new video game hardware and software, GameStop's mobile business thrived. It added $100 million of revenue in just the fourth quarter.

It turns out that hawking devices can be profitable, too. The company's mobile sales logged a 29% profit margin last year. Sure, that's much less than the 48% mint that GameStop makes off of used video games. But it still beats the margin it earned from new video game hardware and software, and it pulled GameStop's overall gross profit up for the year.

And mobile device trade-ins are a good way to boost GameStop's other businesses, as well. They increase traffic at the company's locations. By promoting store credit, mobile trades also give shoppers more reasons to shell out for a new console or a used video game while they're in a GameStop.

Trading up
The company managed to handle over 1 million electronic device trades in 2012, its first year in the business. But it thinks there's much more where that came from. With major product refreshes expected from Apple, Amazon, and others, GameStop sees used electronics growing into a $1.6 billion market in 2013. And in an effort to grab more of that growing industry, it's planning to double the number of stores it has set up to hawk mobile devices this year.

Editor's note: A previous version of this article referred to the Galaxy S3 instead of the Galaxy Tab. The Fool regrets the error.

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