Black Friday seems to start sooner with each passing year. And that trend is kicking into overdrive in 2014, particularly for video game shoppers. GameStop (NYSE:GME) recently announced that it is holding a big promotion on the weekend before the traditional Black Friday and Cyber Monday rush.
The sale is aimed mostly at families who want to get their shopping out of the way early. But it should help the retailer on its way to securing a huge share of the fast-growing video game market. Here's how.
GameStop's single biggest draw for shoppers, and what keeps it on top of the video game retailing world, is price. The company's buy-sell-trade model works because it lowers the effective cost to gamers on a wide range of products either through trade-in credit or pre-owned purchases. That can make a huge difference, particularly as new devices like next-generation consoles from Sony and Microsoft cost hundreds of dollars, even before counting all the accessories and games.
The average holiday shopper this year will spend about $800 through the season, according to the National Retail Foundation, and just a few gaming purchases can quickly remove a huge portion of that budget. That's why GameStop is stressing affordability for its promotion this year. "Holiday shopping can be quite expensive for parents and gift-givers," a company executive said in the press release announcing the sale.
Some of the weekend deals include:
- $15 off Disney's Infinity 2.0 game
- $20 off Disney's Infinity Marvel Starter pack
- $25 rebate on a new PlayStation 3 Disney Infinity bundle
- Discounts on a range of Samsung Galaxy Tabs
Stressing the trade-ins
Pre-owned sales are another major part of GameStop's holiday strategy. The company has added used toy figures, from both Disney's Infinity and Activision Blizzard's Skylanders franchises, to its product catalog. That's in addition to the over 2,500 pre-owned video games that it stocks for less than $20.
It's no secret why the retailer favors its used video game business. After all, pre-owned sales are by far the most profitable for GameStop. Last quarter that business carried a 47% profit margin, as compared to 23% for new video game software and just 9.5% for new hardware.
The company's profitability has dipped this year because it's selling more hardware devices like popular PlayStation 4 and Xbox One consoles and comparatively less in pre-owned merchandise. Of course, GameStop is happy to make those console sales, but management is also doing everything it can to boost the pre-owned business to a higher proportion of overall revenue.
GameStop counts 28 million members of its PowerUp rewards loyalty program and it is targeting those highly engaged customers with special deals this weekend and through the holiday season. For example, loyalty members can get $25 off any pre-owned tablet through Monday.
Members also receive 10% off the purchase of any pre-owned games or accessories, plus a bonus on trade credit when they sell something of their own to GameStop. And through the holiday season PowerUp members can get a free pre-owned game or accessory when they buy two at the regular price.
Besides the extra sales that it generates through more engaged shoppers, GameStop's loyalty program generates valuable insight into the video game market. A recent poll of its members found that over half still hadn't purchased a next-generation console, but were planning on doing so. That points to a continuing wave of hardware sales for GameStop, and the more profitable trade-ins and resales that should follow soon afterwards.
Demitrios Kalogeropoulos owns shares of Activision Blizzard and Walt Disney. The Motley Fool recommends Activision Blizzard and Walt Disney. The Motley Fool owns shares of Activision Blizzard, GameStop, Microsoft, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.